Budget 2012: Ministers 'considering 50p rate income tax cut'

Chancellor of the Exchequer George Osborne will present the Budget on 21 March

George Osborne is considering cutting the 50p top rate of income tax in next week's Budget, the BBC understands.

Prime Minister David Cameron will discuss the Budget with the chancellor and other senior ministers on Friday.

There is speculation the tax on earnings over £150,000 could be reduced to a 45p rate or scrapped entirely in return for tax cuts for low earners.

Labour leader Ed Miliband said it was the "wrong priority" and money should be spent on jobs for young people.

The coalition's "quad" of top ministers, Conservatives Mr Cameron and Mr Osborne and Lib Dems Nick Clegg and Danny Alexander are discussing the Budget by telephone on Friday.

Temporary tax

All budget decisions will have been made by the end of Friday so that the details can be sent to the Office for Budget Responsibility.

The government-appointed body will use these tax and spending decisions to make its economic forecasts.

The 50% income tax rate was introduced by the previous Labour government in 2010, to help pay for declining government revenues during the recession.

Mr Osborne has always said it was a temporary measure and has asked officials to assess how much extra it is raising.

But Lib Dem Deputy PM Nick Clegg warned last year that to axe it too early could "destroy" public support.

However Lib Dem Business Secretary Vince Cable said last week the party was not "ideologically wedded" to the 50p rate - but were it to be scrapped, it should be replaced by another tax on wealth.

The Lib Dems want to see the threshold at which people start paying income tax raised further and have floated the idea of taxes on properties above a certain value - the so-called "mansion tax" - and clamping down further on tax avoidance through a possible "tycoon tax".

'Fair share'

More than 100 Lib Dem council leaders and council group leaders have signed a letter to the chancellor insisting his focus should be on raising tax thresholds.

"One choice the government should make is to ensure the wealthy pay their fair share and speed up the plan for the burden to be lifted on the poorest," the letter states.

"This also means that if there is ever any reduction in the 50p top rate of income tax then new taxes that target the rich must be introduced so the wealthy pay their share."

In a speech to a Labour conference in Coventry, Mr Miliband remarked on the reports that tax cuts were being considered for "the richest people in the country" and said it said something about "Tory priorities".

"That's the wrong priority. We should be spending our resources helping young people who don't have jobs back into work. It's right for them and it's right for our country too."

In the past year there has been a concerted campaign by some economists and business people in favour of scrapping the 50p rate.

Tax revenues

They have claimed that it is a negative measure that deters entrepreneurship and investment, and that it would raise little extra tax anyway.

Last year the chancellor linked any decision on the matter to forthcoming HM Revenue and Customs figures, which will reveal how much extra tax has been raised in its first year of operation 2010-11.

When the 50% rate started, Her Majesty's Revenue and Customs estimated that it would raise more than £2bn a year.

Latestestimates from the Revenueshow that in the current tax year, 2011-12, there are likely to be 308,000 people paying the 50% rate (known as the additional rate).

Some 3.74 million currently pay tax at the 40% rate.