Britain’s highest paid bankers are on course to receive an income tax cut of almost £100m this year following George Osborne’s decision to reduce the top rate from 50p to 45p.
Figures compiled by the Labour Party suggest that the 2,714 bankers who earn more than £800,000 will share a £98.5m windfall – an average tax cut of £36,303 each.
The calculations are based on the latest figures from the European Banking Authority (EBA), which relate to 2012. Taking account of more recent data, Labour has assumed that bankers’ incomes will be maintained at the same level this year. The top rate was cut for earnings over £150,000 in April this year.
The EBA figures showed that total remuneration for the highest earning bankers in Britain was £2,377m, an average of just under £1.6m each. They also showed that the amount paid in bonuses to UK bankers was almost four times more than that paid in fixed pay.
Cathy Jamieson, a Labour Treasury spokeswoman, said: “While ordinary families are facing a cost-of-living crisis, Britain’s highest paid bankers have received a multi-million pound tax cut.”
She added: “Thanks to this Government’s decision to cut the top rate of tax, 2,700 millionaire bankers have been given an income tax cut of almost £100m this year. It’s an early Christmas present from David Cameron and George Osborne who have shown time and again that they only stand up for a privileged few.”
Labour also criticised the Chancellor for spending £16,000 on external legal fees as the Treasury challenged European Union plans to cap bankers’ bonuses at the same level as their fixed salary, or twice as much with explicit shareholder approval. The legal fees were revealed in response to a Freedom of Information request. The Treasury confirmed that its own lawyers also worked on the case but said their costs were not recorded.
Mr Osborne believes the cut in the top tax rate will bring in more revenue to the Exchequer because rich people changed their behaviour to avoid the 50p rate introduced by Labour. HM Revenue & Customs has estimated that the 50p rate raised only £1.1bn extra in its first year – less than the £2.5bn Labour had predicted. The Chancellor has pointed out that the top rate stood at 40p for all but a month of Labour’s 13 years in power.
He has launched the case in the European Court of Justice on the grounds that the proposed bonus cap would put financial stability at risk. The City of London has warned that the plan would help rival financial centres compete with Europe.