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I was live on CNBC when the 50 percent top tax rate was announced. Asked for an immediate reaction, I predicted emphatically that the new rate would raise less money, not more. Now The Times reports that the Treasury has “significantly reduced” (as Lord Myners puts it) its estimate of the revenue to be yielded. The increase, which publicly broke Labour’s solemn manifesto pledge not to raise tax rates, has led people to shelter income.

The ASI hears the same story from accountants and wealth managers who come to our Power Lunches. People were prepared to pay 40 percent, but the 50 percent rate has crossed a tipping point, and people regard it is unfair and unacceptable. Mike Warburton, senior tax adviser at Grant Thornton, says that, “People are taking obvious avoidance measures because they are not prepared to pay 50 per cent tax…. People were prepared to pay 40 per cent but the Treasury don’t seem to understand what drives people.”

He says that some are taking pay early, before the new rate cuts in, while others are deferring reward into the future. Still others are leaving the country, and some are giving it instead to the charity of their choice. Considering that those earning £100,000+ also lose their personal tax-free allowance, the new rate will hit some earners ever harder.

The Treasury had earmarked revenue from the increase of £1.13bn in 2010, and £2.5bn in 2011. Now they have “significantly reduced” these expectations, and will undoubtedly have to reduce them again. I predict once again that the actual yield will be below zero in both years, as the new rate will raise less money than the 40 percent rate did.

What, then, is gained? A few diehard class warriors will be pleased to see those with talent and enterprise suffer, and Lord Mandelson’s attempt to have Labour campaign as “the party of opportunity” will be undermined. George Osborne said at one stage that he, as Chancellor, would leave the 50 percent rate in place for the time being. It is time for that pledge to be revisited before this ill-conceived and foolish measure does any more damage.