Gideon’s in a bit of a quandary. He wants to axe the 50% tax rate imposed on the 300,000 highest paid people in the UK by the last Government when he delivers his budget next week. He fears the vast majority of voters will be displeased if he does and that the Opposition will be very cross indeed. They may call him a ‘Tory Boy’ and accuse him of helping his old school chums, already rich, get richer.
Gideon has also grown fond of telling those old school chums that he’s the ‘Chancellor of the Exchequer’. He doesn’t want to lose the title or the powers it bestows come the next election. So Gideon is wondering if, perhaps, an interim rate of 45% might work?
Too much political policy-making is electioneering dressed up as decisions made in the best interests or the country or the economy. Gideon wants to axe a tax that has achieved little except pander to the upset and ballot paper-carrying majority. But he is worrying about how to message its death and how such a slaughter will be perceived.
I should start by declaring an interest but I don’t and have never agreed with the 50% tax rate for two key reasons.
My first issue is the inherent implication that anyone earning more than £150k must be, in some way, responsible for the state we’re in. Some of the highest earners in the country are absolutely responsible, and include bankers, lawyers and CEOs. Most, however, are not.
The cabinet ministers who singularly failed to keep the UK economy in balance during the boom? HM Opposition, who failed to keep a proper check on the Government? They are directly responsible. However, they earn less than £150k and are therefore exempt.
Secondly, the argument goes, the highest paid need to make higher contributions to ease life for the lower paid. The thing is, they already do. That’s how pay as you earn works – the more you earn, the more you pay.
In fact, the 1% highest earners in the UK contribute 30% of the country’s income tax receipts. Their disproportionate contribution to the public coffers goes wider than this – the highest paid typically spend more, including on private school fees and private medical insurance, neither of which attract taxable concessions.
Executives will always find ways to avoid higher tax rates. They will pay more into their pension funds to avoid tax, or exchange salary for dividend-paying shares that attract only 20% capital gains tax.
Some readers may object to this post. That’s OK, but the truth is I’ve never met a highly paid person who didn’t work harder than their peers, sacrifice more family time than their peers and weren’t more talented or smarter than their peers. Very few who get and keep the highest paid jobs are lazy or incompetent. To ask them to compensate others disproportionately is wrong. It might curry favour among the electorate, but it’s unfair.
Among the ranks that have disagreed, sometimes aggressively, with my point of view on this topic include some that have never worked because they’re happy on benefits and a few tradesmen who work as often as they can for cash in hand. For those reasons, I consider neither to have a valid vote in this particular debate.
As a teenager, Gideon feared this birth name lacked the strength or credibility to one day help him become Prime Minister, so he changed his name to “George” Osborne.
The country now, more than any time in living memory, needs a chancellor with the moral courage and insight to make the right decisions without hedging or fudging in the interests of future re-election.
What he or she is called is significantly less important.