Labour fails to block tax cut

Labour leader Ed Miliband today branded George Osborne's Budget an "omnishambles" but failed in a bid to block the Chancellor's keynote cut in the top rate of income tax from 50p to 45p.

MPs voted by a margin of 323 to 256 to preserve the 45p rate, shortly after Mr Miliband clashed with David Cameron over the Budget at Prime Minister's Questions in the Commons.

Four weeks after the March 21 statement, Mr Miliband said it was clear that Mr Osborne had "conned" pensioners and taken money from charities, churches and pasty-eaters while handing £40,000 each to Britain's millionaires.

But appearing before MPs for the first time since the Budget, Mr Cameron offered a staunch defence of the measures set out by his Chancellor, telling the Commons: "This Budget cut taxes for 24 million people, this Budget cut corporation tax, this Budget made Britain competitive."

The clash come on the day the influential Commons Treasury Committee released a report questioning the figures used by Mr Osborne to justify axing the 50p rate. and suggesting that ministers had failed to make the case for capping tax relief on charitable donations.

The report also called for action to protect pensioners against the damage done to their income from savings by the Bank of England's programme of quantitative easing.

After weeks of criticisms directed at different aspects of Mr Osborne's package, Mr Miliband said it was clear that the Budget had "comprehensively failed the test of fairness and spectacularly failed the test of competence".

"Over the last month we have seen the charity tax shambles, the churches tax shambles, the caravan tax shambles and the pasty tax shambles," said Mr Miliband.

"We are all keen to hear the Prime Minister's view as to why, four weeks on from the Budget, even people within Downing Street are calling it an omnishambles Budget."

Mr Cameron accepted he had had "a tough month".

But he insisted: "What this Budget is about is actually cutting taxes for 24 million working people, taking two million people out of tax, freezing the council tax, cutting corporation tax so we are competitive with the rest of the world.

"And for pensioners, we've increased the basic state pension this month by £5.30 a week. Far more than Labour ever would have done so."

He called on the Labour leader to condemn the "disgraceful" tax arrangements of his party's candidate for London mayor, which he said would see Ken Livingstone pay less tax than cleaners at City Hall.

There was a furious row between Labour and Tories over Mr Miliband's attempt to block the cut in income tax on earnings over £150,000.

Mr Cameron claimed that bungled wording in Labour's amendment to the Finance Bill meant it would have the effect of reducing the tax paid by the rich to 40p in the pound.

But Labour accused the PM of deliberately misleading the public, insisting that if they had won the vote the top rate would have been left "undecided" - forcing Mr Osborne to come forward with fresh proposals.

Defending the 45p rate, Treasury minister David Gauke told MPs: "Labour claim to want to raise taxes from the wealthy but the reality is the 50p rate was not succeeding in getting that money in.

"Under our plans, 27% of revenue from income tax will come from the top 1% with our reforms... whereas the top 1% paid between 20% and 25% under Labour.

"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. 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."

Labour Treasury spokesman Owen Smith described Mr Osborne's claim that reducing the 50p rate would cost the Exchequer just £100 million as "voodoo economics".

"We don't think for a moment the Government has justified it, nor do we think you have justified claims the 50p rate has raised practically nothing at all," said Mr Smith.

"I don't think the Government has persuaded anyone here it is anything other than voodoo economics to suggest the cost is only £100 million."

PA