DEBATE: Should Hammond keep the Tory promise and increase the higher-rate tax threshold to £50,000?

Should Philip Hammond keep the Tory promise and increase the higher-rate tax threshold to £50,000?

Ben Ramanauskas, researcher at the Taxpayers’ Alliance, says YES.

People earning £45,000 (the current threshold) can no longer be considered wealthy, particularly considering the high cost of living in our major cities.

There is a housing crisis in the UK, with many young professionals unable to afford to buy a home struggling with high rental prices, especially in London. As such, increasing the threshold for the higher-rate tax band will offer welcome relief to workers in the capital.

It’s also good news for the economy. High earners are often the most productive people in the country, but taxing their income discourages them from working. Research by the economists Piketty, Saez and Stantcheva found that high earners respond to lower taxes by doing more productive work.

Increasing the threshold will therefore lower the tax rate for some of the country’s most productive people. This will increase productivity, growing the economy and increasing living standards. The chancellor should commit to increasing the threshold, as was promised in past Tory manifestos.

Dr Victoria Bateman,lecturer and fellow in Economics at Gonville and Caius College, Cambridge, says NO.

No one likes tax, and the promise to raise the higher-rate threshold is now long anticipated, dating back to not just one but the last two general elections. It’s not hard to see why Conservatives are so deeply committed to it: it would boost the post-tax incomes of middle England, their key voter base.

The fly in the ointment is that we are still reeling from austerity, something from which middle England has been relatively protected. While the state’s coffers have recently performed better than expected, we face the headwinds of Brexit and an ageing population. The OBR forecasts that debt will reach nearly 300 per cent of GDP in 2067.

This giveaway not only seems fool-hardy, but would rub salt in the wounds of those hit hardest by years of cuts – which, as the Women’s Budget Group has noted, disproportionately affect not only the poor but also women.

If we want better public services and a fairer economy of the kind that Theresa May once promised, we need to get used to tax rises, not tax giveaways.