Treasury officials admitted last night that the Government would lose out on billions of pounds of revenue as they expected high earners to sidestep the 50 per cent tax rate (see Commentary, facing page).

Speaking to the Treasury Select Committee, Mike Williams, the director of personal tax at the Treasury, said that the Government expected to receive only 31 per cent of the possible total income from the tax increase announced in the Budget.

The Chancellor said last week that the 50p income tax rate for those earning more than £150,000 would raise £1.1 billion, but figures revealed yesterday suggest that he expects to lose £2.5 billion as many of the 350,000 higher earners take action to avoid, through legal means, paying the rate by working fewer hours or moving abroad.

Michael Fallon, the Conservative MP and senior Tory on the committee, said that that amounted to a 70 per cent “leakage rate”.

Treasury officials also said that although the £300 million car scrappage scheme would help the purchase of 300,000 new cars, only a third would involve new transactions because the rest could be expected to have taken place anyway.

Sir Peter Viggers, a Conservative member of the committee, said: “As only one in seven cars are made in the UK, the Government is effectively spending £7,000 for each new UK car sale.” He also queried officials on the number of non-domiciled residents who had left the UK in the wake of the £30,000 tax charge introduced last year but they were unable to answer the question.

The committee is to question Alistair Darling today on the 50 per cent tax rate, as well as his economic forecasts, which have been criticised for being overoptimistic about the UK’s recovery from recession.

Dave Ramsden, the chief macro- economist for the Treasury, defended those forecasts yesterday, telling MPs that, despite the biggest drop in GDP in 30 years in the first three months of the year, the Treasury still expected the economy to grow in the final quarter of the year, resulting in an annual contraction of 3.5 per cent.

“The forces which are underpinning the eventual recovery are in place in quarter four,” Mr Ramsden said.

Many City economists revised their forecasts to show an even bigger annual contraction in the economy after last week’s dismal figures, with some expecting GDP to fall by as much as 4.5 per cent.

Mr Ramsden was equally robust in his defence of Mr Darling’s Budget claim that actions taken by the Treasury and the Bank of England had saved up to half a million jobs. When he was unable to explain how the figure was calculated, he rejected the suggestion by Nick Ainger, a Labour member of the committee, that the figures were “more art than science”. Mr Ramsden said: “These things are always going to be estimates but it’s a defensible estimate.”

It emerged yesterday that HM Revenue & Customs was preparing to spend a quarter of its £4 billion budget to crack down on tax evasion, but accountants said that that would do little to validate the 50p tax rate. Angela Beech, a tax partner with Blick Rothenberg, the accountant, said: “Some of our clients are already talking about leaving the country, while others are looking to retire early or cut their hours to reduce their income.”

However, the Treasury expects the tax take to rise from 31 per cent to 38 per cent in 2011, when new rules will make pension contributions much less tax efficient.

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