Tony Blair urges top income tax rate cut as Labour signals increases ahead

Sir Tony Blair has called for the United Kingdom’s highest rate of income tax to be cut below 40 per cent, placing him in direct opposition to Sir Keir Starmer and Shadow Chancellor Rachel Reeves. As the government prepares for another round of tax hikes in the forthcoming Budget, the former Labour Prime Minister argues that a different approach is necessary—one that puts tax reductions at the centre of economic growth strategies.

In his remarks to the authors of a new economic policy book, Sir Tony described current levels of direct taxation—both income tax and National Insurance—as “extremely high in historical terms.” He contended the state fails to deliver good value for this tax burden, and that ongoing high taxes risk undermining incentives to work. Lowering taxes, he believes, would encourage higher employment and productivity, especially in tandem with welfare reforms to make benefit claims more stringent.

In sharp contrast, Rachel Reeves is preparing to raise wealth taxes on the country’s most asset-rich, arguing that “those with the broadest shoulders” should pay more. Nevertheless, the government’s public messaging remains focused on boosting economic growth, even as many fear that increasing taxes may dampen enterprise and investment.

Sir Tony’s views echo those of economist Arthur Laffer, whose theory suggests lowering tax rates can, under certain circumstances, increase revenue by expanding the economic base. Blair’s assessment aligns with this perspective, stating that lower personal taxes are key to breaking the cycle of high spending and poor outcomes. He maintains that strong economic incentives are pivotal in growing a prosperous, dynamic labour market.

Reflecting on historical context, the top rate of income tax has seen dramatic changes in recent decades—from a high of 83 per cent under previous Labour governments, down to 40 per cent under Margaret Thatcher. Tony Blair himself retained the 40 per cent top rate during his premiership, upholding a centrist position despite internal party pressure to increase it. The rate briefly jumped to 50 per cent under Gordon Brown, before settling at 45 per cent under David Cameron, where it remains today.

While some senior Conservatives, including Lord David Cameron and Liz Truss, considered reinstating the lower 40 per cent top rate, political considerations and opposition within their coalitions halted such moves. With the next Budget imminent, the debate intensifies between advocates of tax rises to bolster public finances and voices like Tony Blair’s, who warn that excessive taxation stifles growth and ambition.