John Clark writes…
First published: September 2011 – Gazette & Herald
Most of the world is on the edge of a financial precipice. The banking tsunami will make every adult in the UK worse off by a £1,000. As part of the solution to this crisis the ConDem government increased VAT to 20%. This solution, which takes about £450 each year from the average family, aggravates the original problem.
It is not doom and gloom for all. The High Pay Commission has shown that in the past year the Chief Executives of Britain’s top 100 companies had an average pay package increase from just over £3m to nearly £4.5m per year. Wages for employees in the same year rose by about 2%. The backcloth of inflation at 5% results in a loss of real income. The Fat cats with their £1.3m plus increase will not have even noticed that petrol and food are dearer.
Another part of the solution by the ConDem government is to make draconian cuts in Local Government funding. According to the Institute of Fiscal Studies this is equal to a 6% cut in the income of the least well-off 20% of households. Again many of the very well-off households do not use Council services and certainly won’t notice the loss.
It is clear that the recklessness of the Bankers is to be paid by the least well-off. It is not to be paid by either the well-off or businesses (on the logic that the ConDem government has cut Corporation Tax). An increase in public sector pension contribution is causing Trade Union unrest. Possible strike action is being condemned by the Tories, Lib.Dems and Labour.
The real howl of complaint has come from 20 economists on behalf of the well-off. They claim that the 50% top rate of income tax will ‘punish wealth creation’; ‘drive people abroad’; ‘deter foreigners’ and thus be ‘against the interests of even ordinary workers’. The other claim is that it will not raise any money.
The problem is that none of this fits the facts. Wealth creation and entrepreneurs are among the self employed, small and medium businesses. The smaller ones do not receive pay of £150,000plus. The larger ones are companies where the tax rate has been cut. There is no evidence that someone on an income of £200,000 is going to emigrate because of an extra £5,000 a year tax bill. For it not to raise any money, one in five of the £150,000plus brigade would have to leave. I don’t believe it. There are however a lot of people who think ‘Britain is finished’ and who would like to leave. Not because of the 50% tax rate but because of the unfairness and inequality.
No, the people who don’t like this tax are the speculators, the bank gamblers, the Chief Executives of the largest companies who in effect set their own obscene income levels. They are the ones who have benefitted from the massive rise in the income and wealth gaps. If ‘we are all in it together’ this group should have an even higher rate of tax.