LABOUR should raise the top rate of income tax to 65 per cent if it takes power next week, respected economist Howard Reed urged yesterday. 

The party has already pledged to raise taxes on Britain’s richest from 45 per cent to 50 per cent in its first budget. 

But in a new policy paper for think tank Class, Mr Reed said that any “progressive government” should eventually tax earnings over £250,000 at 65 per cent. 

The Landman Economics director argued that the 20 percentage point hike was needed to stop the underfunding of public services. 

“Successive increases in the tax-free personal allowance and cuts to corporation tax under the coalition government have meant that the tax system no longer raises enough revenue to fund high-quality public services,” said Mr Reed.

The shortfall facing services did not stop David Cameron promising yesterday to pass a law to ban tax rises in the next Parliament. 

He guaranteed that he would not raise tax rates, VAT or national insurance before 2020 if the Tories retained power, instead proposing further cuts to welfare. 

“I know what needs to be done without reaching into the wallets of hard-working people and taking their money,” said the right-wing Prime Minister.

But Mr Reed argued that the burden on working people should be eased by increasing taxes for high earners. 

He said the move to a 65 per cent top rate of tax should be part of a redesign of personal tax that would see income tax combined with national insurance.

This would ensure that investments were taxed at the same rate as earnings and secure extra income for the Treasury, the expert explained. 

Mr Reed also called for council tax to be abolished and replaced with a progressive property tax, along with the introduction of a land value tax.

And on corporation tax, the economist said there should be “higher rates for less competitive sectors of the economy to discourage profiteering.”

The Class paper, which is entitled The First 100 Days, also includes demands for diversity quotas in public-sector jobs, the abolition of academy schools and the ­construction of a million homes in five years.