Published on February 4th, 2014 |
by Eleanor Newis
Who Hates the 50p Tax Rate?
Recently, politicians have been getting their proverbial knickers in a twist over taxation: Labour’s announcement that they would raise the top rate of tax from the Tories’ 45p in the pound to 50p has become a symbol of the radical change they are supposed to represent. I say “supposed” because our memories here in the UK are very short. If you do just a tiny bit of typing, you can find out where this top tax rate has been since it was introduced. And the statistics are interesting. In 1973, the top band of earners paid 75%, before Denis Healey raised it to 83%. Of course, the next Conservative government weren’t keen on this, yet even Geoffrey Howe only reduced it to 60%. It was only cut to 40% in 1988 by Nigel Lawson – and promptly wacked back up to 50% by Alistair Darling. What do the numbers tell us? That the politicisation of the top rate of tax is actually very recent: years ago there was a consensus that the richest people in the UK should pay much more than the poorest.
Balls has said of Labour’s policy, “it’s a fair way to get the deficit down” and, in a rather snide piece of Tory-baiting rhetoric, “the phrase “we are all in this together” – that is part of the policy.” How much money would the Treasury make from a 50p tax rate? Ed? “We say it will raise revenue, it will raise a substantial amount of revenue.” Right… The correct answer is (estimated by HMRC) £100m a year. Just to remind everyone, the UK deficit is currently about £110bn. Now, I’m all for sensible, graded tax systems but it seems a bit (ironically) rich for Balls to sell this as a deficit-solving policy based on the numbers. And, based on the history of the top rate, it also seems even richer for the Miliband entourage to pass it off as a crucial piece of societal and economic change. Yet that is what the argument is about. Bizarrely, rather than just deconstructing the maths, the Conservatives have instead decided to simply stick to a chant that Labour are anti-business. Real mature approach, Dave.
Saying all this, the list of people queuing up to lynch the Labour party for this proposal is quite a motley crew. Aveva and Ocado chairmen, quite a few Lords, and generally people who – you guessed it – would pay the top rate. A sad reality is that the majority of people whose opinions filter through from the business world to us commoners are probably those people the Treasury is chasing after. So, whilst the 50p tax rate wouldn’t necessarily raise a massive amount of money, it would at least mark a welcome break from the car crash of avoidance and evasion that has become a recurring issue in Britain. Just going to go off on a slight tangent here; I’ve done a bit of digging, and I’d like to share with you the names of a few people you might want to take with a pinch of salt whenever the tax debate comes up. First off, Ocado chairman Sir Stuart Rose has been targeted by UK Uncut, who rather loudly (just so he could hear them obviously) inquired whether he could possibly pay his taxes please. Then, Lord Gulam Noon – a big donor to the Labour party – who until about 2010 was rumoured to have non dom status, meaning no one even asked him to pay up. Then, Lord Myners – former City Minister – who coincidentally was the guy who approved Fred Goodwin’s pension of £15 million, so is clearly a man who knows about correct distribution of wealth.
You’ll forgive me then, for being a little sceptical when they all start whining about another 5% of tax. When Noon next laments the “penalising of the business community” or Rose insists that a 50p tax rate would ruin the economic recovery, I just want you to remember that these people have, shall we say, vested interests. And their interests aren’t in the country. Of course, there is no easy answer to the taxation question. It’s been going on for years, and it will go on for a long time yet. As tax policy, and particularly the 50p tax rate, becomes more and more politicised and more symbolic, the arguments are probably going to get sillier. But, underneath it all there is something interesting. A return to the 50p top rate of tax would not curtail business (remember how the tax system works people – you only pay 50% of what you earn after £150, 000) but it would send a strong message. I would bet that even right-wing UK voters don’t have too much of a problem with an extra 5p. Maybe I’m jumping the gun here, but I would suggest the people most enraged by this policy are those are rich enough to choose between giving up a skiing holiday once every three years, and finding themselves a slippery accountant.
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