Bring back 50% income tax rate - Lord Kinnock

A future Labour government should reintroduce the 50% top rate of income tax, Lord Kinnock has said.

The former Labour leader told the BBC that it would demonstrate the party's "unerring" commitment to fairness.

The last Labour government raised the upper tax band from 40% to 50% in 2010 in response to the recession but the coalition has since cut it to 45%.

But Lib Dem minister Danny Alexander said Labour could not be "trusted to deliver a stronger economy".

Lord Kinnock, who is close to party leader Ed Miliband, acknowledged a future Labour government would have to take tough decisions on tax and spending to deal with the deficit.

But he told the Andrew Marr show that any effort to balance the books - which the coalition has pledged to do by 2018-9 - must be done in a "rational" manner.

In a time of austerity, he said Labour's approach must be based on the desire for national "renewal and prosperity" not just an "ideological" predisposition towards reducing the size of the state.

While the coalition wanted to cut state spending back to a "rudimentary" level, he said his party must be "fair at every possible level" and based on the principle that "the broadest backs bear the heaviest burden".

'Not retreating'

Asked by Andrew Marr whether this meant higher income tax levels and whether Labour would face accusations from its opponents of a "tax bombshell" at the next election - as it did in 1992 - he said this "depended on who is required to pay the additional tax".

"What we have got is a country where the top rate of tax on people over £150,000 has been cut from a 50% rate to a 45% rate," he said.

"I am not saying they can pay for everything but... we should have a top rate of 50%. That is very clearly the Labour's party's unerring policy".

Labour has pledged to re-introduce the 10p lower tax band scrapped by Gordon Brown in 2009 as one of a number of specific measures but has made no commitment on the top rate of tax.

A party spokesman said the government "should not have cut the top rate of tax this year for people earning over £150,000 when millions of ordinary people are facing a cost-of-living crisis".

"We will set our plans on tax at the time of the election based on the economic circumstances at the time."

Speaking on Sunday, Shadow Chancellor Ed Balls said the cut in the top rate of income tax earlier this year contrasted this with Labour's plans to freeze energy prices and a tax on bankers' bonuses to fund youth employment and house building schemes, which he claimed were in tune with public concerns.

The shadow chancellor, criticised in some circles for his performance in responding to the government's Autumn Statement last week, said Labour were "winning the argument" on the economy.

He said he was not prepared to "retreat an inch" on what he claimed were the key questions of the cost of living and long-term growth in the economy, saying his party's goal was an economy that was "built to last".

'Can't deliver'

But Lib Dem Treasury minister Danny Alexander said the opposition could not be trusted and that Labour, "as you saw this week from Ed Balls, cannot deliver a stronger economy".

He said the wealthy could contribute more in tax in future, and re-iterated his party's support for a "mansion" tax on properties worth more than £2m, but he said his party had ruled out raising the top rate of tax.

"We had a set of proposals at our conference, which included a mansion tax and a proposal on capital gains tax to better align that with income tax. We have done a lot in this Autumn Statement on tax avoidance but there is more we could do, particularly for large corporations."

Chancellor George Osborne has faced calls from his own MPs to reduce the top rate of tax to 40%. They argue that higher rates damage competitiveness without bringing in significant revenues.

Defence Secretary Philip Hammond told BBC 5Live's Pienaar's Politics that the upturn in the economy's growth prospects was due to the government "sticking to its plan".

But he warned that there would not be "no quick and easy fixes" to recover the economic ground lost during the 2008 recession.

"What the government can do, in the short term, is some of the things we have been doing - like cutting income tax for 25 million taxpayers by increasing the tax free personal allowances, keeping mortgage rates low and keeping fuel prices down by taking 20p a litre off (of) what Labour were planning."