Labour bid to block 50p tax cut fails in Commons vote

A Labour attempt to scupper government plans to cut the top rate of income tax from 50% to 45% has been defeated in the Commons.

The opposition amendment to the Finance Bill was defeated by 323 votes to 256.

It came after Ed Miliband called tax changes in the Budget a "shambles" during prime minister's questions.

But David Cameron defended moves to freeze age-related tax allowances for pensioners, curb relief on charitable donations and put VAT on pasties.

He claimed the effect of Labour's amendment would be to leave those earning more than £150,000 paying an even lower, 40p, rate.

Mr Miliband accused him of "talking rubbish" and a Labour source later accused the PM of having "deliberately misled" the public.

'Get a grip'

The prime minister faced a succession of questions from Labour and Liberal Democrat MPs about George Osborne's controversial package of tax proposals.

The Labour leader said the plan to cut the top rate of income tax would give a £40,000 tax cut for 14,000 millionaires, while changes to age-related tax allowances and working tax credits would leave the majority of pensioners and families with children hundreds of pounds worse off.

He also criticised plans to cap tax relief on charitable donations which he said were an "insult" to philanthropists and would make charities "worse off".

Referring to the Budget as an "omni-shambles", he said: "We have a prime minister who is unfair, out of touch and incompetent. Never mind 'we are all in it together', when is he going to get a grip on his government?"

Mr Cameron did admit it had been a "tough" time for the government since the Budget.

But he said it was a "competitive" package which would lift two million of the lowest-paid out of income tax, cut tax for business and give more than 20 million people a cut in income tax by raising their personal allowances.

On curbing tax reliefs, the PM said it was "not good enough" that 300 millionaires were only paying a 10% tax rate. On the 50p rate, he said the tax "had not raised anything" and pointed out that Labour had had a 40p top rate between 1997 and 2009 when it was in government.

'Tough month'

Mr Cameron also sought to contrast his government's problems over the Budget with the challenges facing the Labour leader.

"He talks about my last month, I accept a tough month, but let's have a look at his last month. He lost the Bradford by-election, he showed complete weakness when it came to the fuel strike... that is his last month, as ever completely hopeless."

The PM also defended plans to levy VAT on sales of freshly baked products such as pasties after Lib Dem MP Stephen Gilbert questioned its fairness, telling MPs there was no VAT levied on caviar.

Mr Cameron acknowledged "feelings were running high" on the issue in parts of the country but said existing rules on VAT on hot food were inconsistent and the "boundaries need to be redrawn".

The two leaders also clashed over last month's fuel strike dispute, with Mr Miliband accusing ministers of "irresponsibility" and "causing panic at the pumps". But Mr Cameron said the Labour leader could not condemn the actions of unions because he was "in their pockets".

In the debate on the Finance Bill later, Exchequer Secretary David Gauke said reducing the top rate of income tax was "understandably controversial", but MPs "should look at the evidence, not Labour's rhetoric".

"The 50p rate did not raise the revenues intended and what money it did raise came with a cost of damage to growth and competitiveness," he said.

"This is not a sustainable position so we are reducing the rate to 45p... This change is good for our long term tax revenues, it is good for our economy and it is good for the UK as a whole."

But shadow treasury minister Owen Smith said: "We don't think for a moment that the minister has justified this... nor do we think you have justified claims the 50p rate has raised practically nothing at all, as the prime minister slightly curiously told the House earlier today."

He said Mr Gauke had conceded in his address that it had raised £700 million - and accused the government of engaging in "voodoo economics".