Tuesday, November 25, 2008

Three reasons for 45%

Its been a while since I was in a position to worry about the new 45% tax rate. But it still makes me very cross - and its the reasons for it than so annoys. Today, the Government has admitted that this tax increase is expected to raise £670 million, which is entirely insignificant in the scale of Government borrowing. And even then, its on the assumption that no-one is going to make an effort to rearrange their affairs in order to avoid paying it. I always remember hearing Nigel Lawson, when he was Chancellor claiming that the Government suffered minimal loss of tax revenue when he cut the top rate from 60% to the current 40% way back in the 1980s, because of the relationship between the rate of tax and willingness to pay it.

No, there are other reasons for this tax increase - three of them. The first is that Gordon Brown wanted us to be talking about this, rather than the increase in NIC, which is in effect a rise in Income Tax - and is also widely perceived to be a tax on jobs. The second reason was to feed envy. Labour (at least under Gordon Brown) does not like to see people earning high salaries. They have never understood success. And the third reason is that they want David Cameron to launch a huge attack on this change, so that the Prime Minister can paint the Conservatives in a colour of his choice. Unfortunately for Gordon Brown, his ruse is so obvious and pathetic that we can all see what his little game is. David Cameron will choose his own colours.

And did you see Alistair Campbell on Newsnight tonight. He said (he really did, and with a straight face) that Tony Blair would have introduced the same tax increase if he'd been Prime Minister today. I don't think anyone, including the brutal diarist himself believed that one.


Pigeon Man said...

Superb insight Glyn.

Anonymous said...

thing is glyn a lot of people won't have a problem with this will they?
who will it hit, the bankers who got us into this mess, entertainers like ross and brand? sportsmens like ashley cole? or mr mailton if he'd care to stay in the country that gave him his opportunity?
the public want some restraint on some of the excess.
this will generally be welcomed. your blue chaps will have to play very careful for this.

Glyn Davies said...

Anon - My point was that this was about politics rather than economics. I don't disagree with uour comment. I'd be surprised if what you refer to as we 'blue chaps' will see reversing this as a priority. Actually, I'm not sure what the position will be, in that it will not have been introduced before the next election!!