Letter signed by 537 entrepreneurs urges Chancellor George Osborne to ditch 50p tax rate (Reuters)

More than 500 business leaders are urging Chancellor George Osborne to scrap the 50p top tax rate to help the economy.

The rate is populist politics, they said, that unfairly penalises high earners and puts them in an awkward position.

"The 50p tax is set to reduce government income and damages the economy, the public services and charitable giving," they said in a letter to the Daily Telegraph signed by 537 business owners.

"As business people, we want to see our industries, our economy and the third sector thrive. Repealing the 50p tax would demonstrate the chancellor's wish to celebrate British entrepreneurialism, stimulate industry and contribute to the government's growth agenda.

"The sooner the top rate of tax is repealed, the better."

A broad range of business types have put their names to the letter, from drain clearing companies to recruitment firms.

Osborne has asked HMRC to look into the effectiveness of the 50p tax rate as a revenue generator. He has always had his eye on a policy change and insists that the rate is a temporary measure, while he balances Britain's finances and attempts to reduce the budget deficit.

The rate was raised by Alistair Darling when he was chancellor during Labour's last term in office. It was lifted to 50p on earnings over £150,000 a year in 2009 in the early days of the financial crisis.

Labour's shadow chancellor, Rachel Reeves, said this is not the right time to cut the top tax rate.

"When millions of families and pensioners on middle and low incomes are being squeezed by the VAT rise and cuts to tax credits, cutting taxes only for the richest one percent cannot be the right priority now," she said.

"But these business owners are right to call on the government to take action to stimulate growth and jobs in our economy.

"That's why Labour is calling on the chancellor to use the almost £1bn unspent from his failed national insurance holiday to give a tax break to all small firms taking on extra workers."