Entrepreneurs still on strike

          Mr Brown left the Coalition government a nasty posion pill. He put Income tax (and NI) up to 52% on top rate payers, and he raised National Insurance, the tax on jobs.  The incoming goverment moved a little to take some of the sting out of the NI, but left the high top rate  of Income Tax in place. They then added to the problem by raising Mr Brown’s very competitive 18% rate of Capital Gains Tax to 28%.

           Throughout the Labour years they left the top rate of Income Tax at 40%. They cut the rate of Capital Gains Tax. This made the UK an attractive place for investment and enterprise relative to the continent, and gave people a reasonable chance of competing against the lower tax jurisdictions of Asia and the Americas.

          I agree with the aim of the main political parties to get more tax revenue from the rich to bring down the deficit. The question is how do you best achieve this?  The latest Income Tax receipts show these are now falling. The top one per cent of IncomeTax payers pay 30% of the total Income Tax collected. This is a steeply progressive tax system.  Some of them are relocating elsewhere. Some are taking their new ventures offshore. Some are sitting on their hands, unwilling to work harder and undertake a new venture given the tax levels that would hit any success.  There are still entreprenuers on strike, and entreprenuers who no longer like the UK tax and regulatory regime.

          Both Labour and the Coalition government have followed policies of dearer energy, with green taxes and subsidies pushing up the cost of energy. The current Treasury now seems to see the dangers of dear energy. It squeezes incomes , hitting demand. It raises industrial costs, and sends a strong message to anyone thinking of setting up an energy intensive business to do it elsewhere.

               Mr Osborne’s political antennae tell him cutting tax rates  on enterprising people is against the spirit of the times. His economic antennae should also waggle and tell him the way to tax the rich more is to make it more worthwhile for them to stay here and invest here. The UK is simply no longer competitive on tax. That was Mr Brown’s idea, his farewell present, his poison pill. 40% and 18% were good rates for Labour in power. In irresponsible opposition they will go the way of socialists not in government and send out a message that all we need to do is to soak the rich, even at the expense of less revenue from them . The priority today should be more jobs and more activity.

Falling Income Tax revenues:  January 2011 Total Income Tax receipts £22 billion, of which £10.9 bn was self assessment

January 2012 Total Income Tax receipts £21.8 billion, of which self assessment £10.3 billion.

 

 

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140 Comments

  1. lifelogic
    Posted March 2, 2012 at 6:57 am | Permalink

    Indeed tax rates at 52% and 28% capital gains (without any allowance for inflation) are absurd. They say very clearly “go somewhere else”. Any one wishing to preserve capital after inflation has to do very well just to stand still. Even then they will will be mugged for 40% on death.

    Someone with say £10million who does well and makes a 10% return for 20 years might expect it to “grow” to £8 million after 50% tax and 40% inheritance tax adjusted for inflation. Untaxed it would have grown to £33m perhaps creating many jobs and a large successful business in the process.

    The government message to the rich and hard working is come here with your money and have it all taken off you and wasted. If you are already here then best to leave unless you are non domiciled or have very good accountants.

    Thus we have lower tax receipts and no growth and only three years to the next election. We are led by fools determined to shoot themselves in the foot.

    • lifelogic
      Posted March 2, 2012 at 7:19 am | Permalink

      These sill tax rates also divert lots of intelligent people to work in pointless jobs in the tax avoidance industry and at HMRC to battle with them. Release them all to get a real and useful jobs for the country.

    • lifelogic
      Posted March 2, 2012 at 8:47 am | Permalink

      Well done the BBC for having two real conservative on the panel of Question time, for what must be nearly the first time, last night John Redwood and David Starkey. Needless to say Dimbleby thus felt he had to pull it back to the depressing, lefty BBC view of the world. As usual it seem a very lefty BBC audience too, where do they get them all from.

      • Englishman
        Posted March 2, 2012 at 8:37 pm | Permalink

        Yes I thought that Dr Starkey was refreshing–and very courageous. Anyone who responds to the knuckle scrapers in the QT audience so robustly and cogently is worthy of praise. Alas I cannot say the same for Mr Redwood, who in his comments on the’ ghettoisation’ of contemporary England repeated some of the dreary formulaic cliches about the supposed benefits of the alien invasion that we have endured for two or three decades,

        • zorro
          Posted March 2, 2012 at 11:22 pm | Permalink

          Yes, that was noted, and when I heard it, I thought that John might be on manoeuvres….

          Zorro

        • Bob
          Posted March 3, 2012 at 12:23 am | Permalink

          @Englishman
          “dreary formulaic cliches”

          What choice does JR or any other Tory have?
          They don’t have a cloak of invulnerability like the one that Diane Abbot seems to possess.

      • Bob
        Posted March 3, 2012 at 12:06 am | Permalink

        QT would be better if the audience selection was entirely random.

    • lifelogic
      Posted March 2, 2012 at 3:00 pm | Permalink

      The other thing killing business is lack of banking so that, even where the Entrepreneurs are not on strike, they are starved of funds. One example at know of a bank (not hard to guess which) was, five years ago, happy to advance about 75% of the value of a property now due to new “lending” restrictions want to advance a maximum of 40% leaving the business to some how find the 35% from its working capital (by putting developments on hold, redundancies & not hiring people and similar) the company has now problems other than a lack of sensible banking. Great for growth and the bank is even government owned. Cameron/Osbourne shooting themselves in the foot yet again.

    • uanime5
      Posted March 2, 2012 at 10:58 pm | Permalink

      Not sure how you’re calculating what happens to the £10 million. If you have £10 million you won’t be taxed at the 50% tax rate as this only applies to money earned, not savings. You also won’t be taxes at 40% inheritance tax unless you die and your children inherit your money.

      Also unsure why you’d think someone with a lot of money might start a business, rather than invest it which has fewer risks.

      • lifelogic
        Posted March 3, 2012 at 2:37 pm | Permalink

        You do indeed pay 50% on investment income and you do pay 40% IHT when you die (or 20% tax on putting it into trust while alive) and as you may have noticed every one does indeed die.

        50% tax and inflation at say 4% means you need 8% in order to stand still.

        • lifelogic
          Posted March 3, 2012 at 6:58 pm | Permalink

          Since you ask my calculations are just compound interest with/and without tax for 20 years then 40% IHT.

      • Bazman
        Posted March 3, 2012 at 4:15 pm | Permalink

        Many businesses are avoiding investing at the moment to avoid a lowering of the share price which in turn is related to bonuses. The idea that the majority of the rich are dynamic entrepreneurs at great personal financial risk is lifelogics fantasy. Many are just the idle rich or ‘pointless’ and ‘absurd’ managers awarding themselves ever greater pay which nowhere else in the world they could get. If they are leaving in droves, why are London house prices not crashing? Maybe they are supported by absent rich who contribute nothing except a little handy man work and council tax?
        Sense about science. Do you know anything about the background and funding of this organisation lifelogic? Either you do not or if you do you have the audacity to say the BBC is a bias? Laughable.

  2. Julian
    Posted March 2, 2012 at 6:59 am | Permalink

    “The top one per cent of IncomeTax payers pay 30% of the total Income Tax collected. This is a steeply progressive tax system.”

    That is not the definition of a progressive tax system, unless the top 1% earn significantly less than 30% of the total income. As is well known, Warren Buffett pays a lower rate of tax than his secretary. Are things any different in the UK?

    • Adam5x5
      Posted March 2, 2012 at 5:45 pm | Permalink

      Who cares if Warren Buffett pays a lower rate of tax than his secretary?

      Surely the important thing is that he pays many many times what his secretary does in tax?

      I’d argue for a flat tax rate of 15% (or whatever), thus everyone contributes the same proportion, which is fair and you get to keep the majority of your earnings. It would also encourage advancement.

      • Gordon
        Posted March 2, 2012 at 7:35 pm | Permalink

        This myth was spread by comparing Warren Buffet paying CGT with the secretary paying income tax.

      • uanime5
        Posted March 2, 2012 at 10:59 pm | Permalink

        What you’re proposing doesn’t encourage advancement, it just encourages the wealthy to pay themselves even greater salaries. High taxes for high earners are one of the few things that temper these outrageous salaries.

      • Bob
        Posted March 3, 2012 at 11:45 am | Permalink

        “I’d argue for a flat tax rate of 15% (or whatever)”

        FWIW That is UKIP’s policy.

        They also want us to withdraw from the EU, control our own borders and expand grammar school provision.

        Nigel Farage is also campaigning to change the unequal extradition treaty that we now have with the USA

        – see this e-petition:

        +++ In light of Chris Tappin case, Cameron to debate Treaty with Obama +++
        http://epetitions.direct.gov.uk/petitions/30569

    • lifelogic
      Posted March 3, 2012 at 8:54 am | Permalink

      What is a progressive tax system? Surely we should all pay a fee to the government for services received. The rich usually use fewer public services (schools/health) so perhaps should pay a lower annual fee.

      You can therefore argue that even an annual fixed fee is “progressive” as the rich pay more than the poor relative to services received. A flat % tax rate certainly over taxes the rich and an increasing % tax rate rising to 52% and 40% IHT over taxes them, relative to services they receive, hugely.

      A flat rate is perhaps the best compromise, at say 20%, which is quite enough to provide decent essential services – were the state run efficiently rather than as a way of directing money to friends of the powers that be as is so often the case.

      The word “progressive” implies it is good and helps progress but does it in fact?

  3. Electro-Kevin
    Posted March 2, 2012 at 7:11 am | Permalink

    Tax relief for the number of UK citizens employed/trained ?

    Seeing as the entrepreneurs are seen as the only way to full employment and prosperity.

    Apropos a previous comment I made about it being iniquitous that 300,000 rich are paying £5bn extra of tax – I still think so but am aware that a good proportion of those now in that bracket work for the State and have never taken a risk nor created a job in their lives.

    Job creators should be exempted in some way.

    • JT
      Posted March 2, 2012 at 11:27 pm | Permalink

      Is that Job Creators in the A4e way or thr Southern Cross nursing homes way.
      Or John Prideaux or Christopher Hyman
      What are you talking about — job creators
      The UK is a mature economy … not many jobs are created .. for some very obvious reasons

      • Electro-Kevin
        Posted March 3, 2012 at 4:00 pm | Permalink

        Fair point.

      • lifelogic
        Posted March 3, 2012 at 6:21 pm | Permalink

        “not many jobs are created .. for some very obvious reasons” – yes because the government chooses to discourage it by over taxation, over regulation, an over large state sector and an absurd energy policy.

    • lifelogic
      Posted March 3, 2012 at 2:41 pm | Permalink

      Indeed perhaps a 100% tax on all state sector and BBC quango wages and pensions above say £80K would be a good tax and rather hard to avoid too.

  4. Mick Anderson
    Posted March 2, 2012 at 7:18 am | Permalink

    I make sure that I don’t earn enough to come close to the 52% rate. To be honest, by the time I have reached about half that threshold, I rather resent the size of the cheques I have to write for tax (income/NI and VAT) and do things that don’t attract tax. Those of us who have to fill in a tax form are shown more starkly how much Governments cost than those suffering the drip-drip-drip of PAYE. Everybody has a different Laffer Curve, but I know that I’m well to the right hand end of mine.

    Then there is the feeling that so many of the SMEs I deal with are feeling the pinch in one way or another. All of them suffer from hugh fuel prices, and many are not sure that all of their customers will be around for long enough to develop a relationship. Keeping output prices low isn’t enough to retain a market share if that market is uncertain, and even that’s hard with the current effective rate of inflation.

    Mr Brown left a legacy of very high, over-complicated taxes. Mr Osborne has managed to increase those taxes, and the simplification that was promised has (like all the other promises we were looking forward to) disappeared in the mist.

    The problem is not lack of money but lack of confidence. Mr Osborne does not look like a confident Chancellor, so nobody else trusts the economy. QE and the EU have made things worse. There isn’t a “confidence” lever for him to pull, but reducing tax levels shows that he believes that the Economy is heading in the right direction – he has done the opposite.

    If he was clever, he would have started to rearrange the tax system so that it was more simple, less costly to administrate, and required lower tax take from Country. This could have given him both extra money to address the deficit properly, and made people (and the corporate world) feel confident.

    Also demonstrated by the dreadful Energy policies, Governments of the last couple of decades have forgotten about the merits of efficiency. They should remember Occams’ Razor.

    • alan jutson
      Posted March 4, 2012 at 11:27 am | Permalink

      Mick

      Agree totally with your post.

  5. Antisthenes
    Posted March 2, 2012 at 7:26 am | Permalink

    It was all so predictable. You would have thought a Conservative Chancellor and Prime Minister would know better. It is understandable that the left more often than not pursue policies and practices that are self defeating and quite often totally disastrous. In trying to stay popular by pandering to the misconceptions of the populace by taxing and regulating entrepreneurs out of existence will in the long run do far more damage to their standing in the polls. Without wealth creators then return to decent growth becomes evermore elusive with all that portends. It is probably too late now even if the government did start to deregulate, cut taxes, cut spending even more drastically and reduce the roles of government to have a major positive effect in time for the next general election.

    • uanime5
      Posted March 2, 2012 at 11:03 pm | Permalink

      This might surprise you but most entrepreneurs do not earn enough to pay the top rate of tax and most of those who do pay the top rate of tax have never been entrepreneurs.

      • lifelogic
        Posted March 3, 2012 at 2:43 pm | Permalink

        This may well be true because they either use good accountants and tax structures or leave the country. Better foe the country just to have a lower tax rate.

      • libertarian
        Posted March 3, 2012 at 8:08 pm | Permalink

        Have you got any evidence for this or is it just another made up “fact”

  6. Robert K
    Posted March 2, 2012 at 7:48 am | Permalink

    Also remember that the upper rate of tax starts, in effect, at £100,000, not £150,000, because of the erosion of the taxable allowance. Someone on £100,000 would pay £35,000 in tax and NI, someone on £115,000 would pay £44,000. This means that the marginal rate of tax when someone earns over £100,000 a year is actually 60%.
    This is an extremely uncompetitive rate of tax. Even in Sweden the top rate is 56%. That is far too high, but at least in Sweden they have public services that work well.
    What does our tax money get spent on here? Wars we shouldn’t be fighting, a dysfunctional national health system, a bureaucratic and uncompetitive state education system and, most egregious of all, a benefits system that incentivises people to be poor.

    • lifelogic
      Posted March 2, 2012 at 7:28 pm | Permalink

      You are quite right we have a combination of very high tax rates and very very poor services. Many services are not services at all just yet another way to get licence fees, fines, make us pay triple for energy or inconvenience us further

      • JT
        Posted March 2, 2012 at 11:29 pm | Permalink

        Sweden has massive natural resources relative to it’s population
        And has massive financial legacy, created because of it’s natural resources …
        These are at the heart of the welfare system in Sweden

        • lifelogic
          Posted March 3, 2012 at 6:23 pm | Permalink

          That and the fact that there, the state sector is is far better run than in the UK – which is not very hard.

      • Bazman
        Posted March 3, 2012 at 4:17 pm | Permalink

        Many of the very poor services are owned ‘privately’ owned like the utilities.

    • sm
      Posted March 2, 2012 at 11:44 pm | Permalink

      The marginal rate also falls back to 52% > 115,000? Also 44000/115000=38%.

      Note someone earning up to 42475 would be paying marginal rate of 32%. (20%+12%(NI)) above 42484 it would be marginal 40%+2% NI.

      Those on benefit withdrawal face similar if not higher marginal rates.

      The system does require simplification, so combine NI and PAYE, preferably eliminating NI,it is the most regressive of the taxes, it is not insurance ask anyone unemployed who has paid so called premiums.

      http://www.hmrc.gov.uk/rates/it.htm

      • Mark
        Posted March 3, 2012 at 12:07 pm | Permalink

        You should really add in employer’s NI as well.

  7. Paul Rivers
    Posted March 2, 2012 at 7:51 am | Permalink

    The “political ” way to reduce the top rate is to apply the expected increase in revenue raised to the immediate raising of personal allowances.

  8. lojolondon
    Posted March 2, 2012 at 8:03 am | Permalink

    Good performance on QT last night John. I have stopped watching it as a rule, but enjoyed seeing you and David Starkey.
    This is why our economy is not growing, tax. If you keep doing what you are doing then you keep getting the results you are getting. Whatever actions Osborne feels he should take, should be taken ASAP.
    It is the Tories own fault that your hands are tied, because you have had 18 months to manage the socialist messages of the BBC, and have failed to grasp those opportunities.

    Can you imagine if Osborne announced several tax cuts and had a supportive interview with Radio 4 and Newsnight, as Liebour always do? This country would be in a different place, but Conservatives fear of the BBC has held them back from ‘taking the tough decisions, the necessary steps’ (quoting Cameron).

    • lifelogic
      Posted March 2, 2012 at 7:33 pm | Permalink

      Indeed and of course Cameron would have won the election had he not put such a lefty, big state, pro EU message to the country and further allowed Clegg equal tv billing.

      A stuffed turkey should have beaten Gordon “some bigoted woman” Brown.

  9. A.Sedgwick
    Posted March 2, 2012 at 8:26 am | Permalink

    Quite simply Mr Osborne is out of his depth. His recent article in the DT saying no money for tax cuts brought a barrage of comments saying what about really cutting spending.

    If you have 10 minutes spare take a look at yesterday’s BBC Daily Politics an accountant was lauding the 50 pence tax rate saying it collected an extra £7 billion in revenue. Is there still a flat earth society?

    • uanime5
      Posted March 2, 2012 at 11:06 pm | Permalink

      The accountant was referring to figures from HMRC, who happen to know just how much tax is raised by each tax band.

      • lifelogic
        Posted March 3, 2012 at 6:25 pm | Permalink

        But they do not know how much is lost by the deterrent effect of huge over taxation.

    • Mark
      Posted March 3, 2012 at 12:52 am | Permalink

      I wonder which cookie jar he got his figures from. I don’t think even the strongest advocates thought is would raise more than about £2bn in extra revenue. Look at the budget projection in 2009 on p 17 here:

      http://downloads.bbc.co.uk/news/nol/shared/bsp/hi/pdfs/22_04_09bud09_completereport_2591.pdf

      £1.8bn was the forecast extra for this tax year, and £2.4bn for next year (see footnote) – all based on assumptions of massive growth.

    • lifelogic
      Posted March 3, 2012 at 2:46 pm | Permalink

      Is there still a flat earth society?

      I think it became the green “renewable” energy movement did it not?

    • Bazman
      Posted March 3, 2012 at 4:18 pm | Permalink

      The BBC was saying this? No they were not you silly man!

  10. Posted March 2, 2012 at 8:30 am | Permalink

    Are people only enterprising if they are very high earners?

    • JimF
      Posted March 2, 2012 at 6:07 pm | Permalink

      There has to be an incentive to take risks.

      • JT
        Posted March 2, 2012 at 11:31 pm | Permalink

        There is — it’s called profit
        But … money finds money
        Once you have a threshold, getting money becomes easier .. and more opportunities exist.
        It’s not easy — but there are rewards out there

    • lifelogic
      Posted March 2, 2012 at 7:38 pm | Permalink

      No but high earners already have what they need and often put any surplus money to good use, perhaps expanding businesses or investing and creating more jobs I certainly do. I do not eat more or drink more or waste more or go on more holiday. Governments usually do the wasting.

      • uanime5
        Posted March 2, 2012 at 11:08 pm | Permalink

        Perhaps these high earners should put more money into expanding their businesses than paying themselves a high salary. A higher tax rate on earnings will ensure they make the correct choice.

        • lifelogic
          Posted March 3, 2012 at 6:28 pm | Permalink

          Perhaps they want to put it into a new company or investment. Anyway even if it is left in it is taxed with corporation tax 26% and then capital gains later at up to 28%.

        • libertarian
          Posted March 3, 2012 at 8:17 pm | Permalink

          And pray tell us Mr Genius, how that works in practice.

          As an entrepreneur who doesn’t and won’t ever be paying the top rate of income tax, please enlighten us as to the effective way under our current tax system ( unlike say the German or Finnish corporate tax system) that I can invest even more money into expanding or growing a business and then also please explain why I should take on this enormous risk ( even if it were possible to do effectively), work even longer and harder and yet get less reward.

          Go on I’m all ears please let me know. Then you can also tell us how your plans to start a business and employ lots of people are progressing.

      • Bazman
        Posted March 3, 2012 at 4:19 pm | Permalink

        How many jobs have you created? Spending a couple of quid is not creating jobs.

    • Norman
      Posted March 2, 2012 at 11:24 pm | Permalink

      No, but all high (non trust fund) earners are and its the only way (outside of a public sector job) to enter that club. Money isn’t the driving motive for everyone but its nothing to be ashamed of if it is. Both groups should be encouraged

    • Mark
      Posted March 3, 2012 at 12:35 am | Permalink

      Low earning entrepreneurs tend to mean that a benefits bill is saved, but not much tax is paid. High earning entrepreneurs pay a lot of tax.

      Now, if you’d raised the point that benefit withdrawal rates are even more penal than the combination of income tax and national insurance on pay in the heaviest taxed band of just over £100,000 I’d agree with you: we need to remove the disincentives to work.

  11. James Reade
    Posted March 2, 2012 at 8:30 am | Permalink

    So your couple of final lines constitute your evidence that we’re to the right of the Laffer Curve then? How much has unemployment risen in the last year? Thus, how many people are paying less in income tax? I only ask because I’m sure you’ve already controlled for all these things in the numbers you report? I assume also this refers to just those paying income tax on their income above £150k so you can actually make an assessment of the impact of this supposedly henious, criminal, business-discouraging tax.

    Because yes, having 10p less on each pound above that 150,000th one they earn is really going to discourage business start ups. Perhaps instead of going on and on and on about this particular tax rate, you might focus on other ways to get business start-ups going? Like getting out of their way?

    • Mark
      Posted March 2, 2012 at 7:20 pm | Permalink

      The unemployment numbers are irrelevant to the calculation, since income tax is paid on income, not unemployment benefit. Employment numbers have been remarkably stable – and in line with the projections made at the last budget. Indeed, this fact makes it virtually a certainty that the shortfall in revenue is dominated by loss of revenue from the top rate payers. Add in the other taxes they aren’t paying out of the after tax income they aren’t generating in the UK, and you quickly realise that the result is a loss of tax revenues overall.

      • uanime5
        Posted March 2, 2012 at 11:13 pm | Permalink

        Even if the number of people who are employed is the same the amount of income tax collect may be lower because more people are on a lower salary, more people are working part time, or because the Lib Dem’s increased the personal tax allowance the majority of the population is paying less income tax.

        According to the HMRC revenue from the top rate tax payers has increased this year mainly because the most overpaid keep awarding themselves larger and larger salaries. The 50% tax rate is making money, not losing it.

        • Mark
          Posted March 3, 2012 at 12:09 pm | Permalink

          HMRC has made no such statement. You invent far too much and present it as fact when you have no backing at all.

        • libertarian
          Posted March 3, 2012 at 8:38 pm | Permalink

          Once again a made up “fact from you.

          Just so you know this is the real situation.

          30 million people are liable for income tax in UK

          In 1980 3% where on the top rate of tax

          In 2011-2012 14% where on the top rate of tax

          58% of ALL income tax/NI is paid by the top 10% of earners.

          Yet between 1979 – 2012 Income tax/NI receipts have been roughly flat !

          The vast increase in government money has come and continues to come in the form of corporate tax receipts and VAT

          So that means that companies making healthy profits and individuals earning large amounts of money are in fact making huge contributions to the exchequer and if you would like MORE government revenue then you need to ENCOURAGE people to make MORE profit and to get paid MORE. To do that lower the rate of income tax/ni.

          Simple really

          Unlike your posts, here’s a link to the data

          http://www.ifs.org.uk/bns/bn09.pdf

    • Norman
      Posted March 2, 2012 at 11:31 pm | Permalink

      GDP may be a better measure to look. Unemployment can go up but other factors eg immigration, can mitigate that effect. I’m sure we all know its not black and white but some shade of grey, from both sides

      Although one thing everyone can agree with, left and right, is your last sentence. This government is worse than Labour and thats saying something

  12. Matt
    Posted March 2, 2012 at 8:45 am | Permalink

    Add to this, another “Rock in the sack” the reluctance of banks to lend to small business.

    In the past companies have relied upon a combination of professional contacts (ie auditor or solicitor) to put them in contact with new lenders, in this climate contacts count for little.

    I come across established business’s making good profits, with interest covers of 3 x upwards, good security requiring re finance ( not some pie in the sky start up plan) and banks are instructing them to – find another lender.

    I just view this government as a lost opportunity – very disappointed in Mr Cameron.

    • lifelogic
      Posted March 2, 2012 at 7:40 pm | Permalink

      This is certainly the case it is hard to borrow even with a good plan and good security at the moment.

  13. A Different Simon
    Posted March 2, 2012 at 8:47 am | Permalink

    John , how about allowing AIM listed shares into an ISA and allowing companies to carry out a rights issue without the cost of a full prospectus ?

    Both these current restrictions are supposedly to protect “less sophisticated” investors investors but serve to starve entrepreneurs of investment and destroy private investors pre-emptive rights .

    Whilst we are on the subject of mollycoddling Govt has got to accept that it doesn’t know what is best for other people and does not have the right to try to protect them from themselves .

    RISK has got to be brought back to the table . From a very early age it is hammered into kids that risk is bad and they should look to the state to satisfy their every need .

    Embracing risk is part of growing up .

    By attempting to sanitise and make everything safe we have ended up creating an immature , institutionalised population which is scared of it’s own shadow and can’t cope with numbers with more than 6 digits .

  14. Brian Tomkinson
    Posted March 2, 2012 at 9:05 am | Permalink

    JR: “The current Treasury now seems to see the dangers of dear energy. ”

    Really? What have they done to reverse their policies and make energy cheaper? I can see no tangible evidence. What is clear is that the majority of politicians are wedded to the notion that they know how best to spend our money and prefer taxing more rather than spending less.

    • lifelogic
      Posted March 2, 2012 at 7:42 pm | Permalink

      Not much just cut a few subsidies and stopped the larger PV scheme (which are more efficient than the small ones) all should go.

  15. Bernard Otway
    Posted March 2, 2012 at 9:05 am | Permalink

    I despair,why? do most of the political class leave common sense in the ballot box [JR and a few honourable exceptions] after being elected,and the Left are “do as I say and NOT as I do”.
    On a radio talk station yesterday LBC, on the subject of education, callers stated that they are seriously thinking of Emmigrating to give their children a good start in life,that should show
    people are prepared to do this for any valid reason.In the last couple of days the business columns in reporting HSBC results showing how much of it’s business and profits comes from the developing world,which I think came in at OVER £10 billion [while RBS and Lloyds
    have made losses] ,said that they are considering moving BACK to Hong Kong for tax reasons.Has nobody in the political classes ever heard of “THE LAW OF DIMINISHING RETURNS”,I suggest that you all HARASS your MP like I do and I mean HARASS.

  16. alan jutson
    Posted March 2, 2012 at 9:11 am | Permalink

    All logical common sense really.

    Once the State takes more than half of your wages in stoppages it has crossed the line, your desire to work harder reduces if you do not have to.

    I am now retired and out of the competitive world, but some of my old contacts say that the black/alternative/barter economy is now growing fast.

    Soon we will be like Greece and other Southern European Countries, just wait and see what falling tax revenues will be like in a few years time, if we continue with the present punative high rates.

    The government simply has to cut its costs sooner rather than later, otherwise the debt will simply get larger, and the day of reckoning will be more damaging.

    John, You are right Brown left this government with a poison pill of high taxes, high expenditure and high debt.
    He was attemting to make sure this was a one term Government if he lost the election, problem is, too few people noticed or cared.
    For a deacde I said Brown was the most dangerous man in British politics, I am sorry I was proved to be right.
    He now seems to be treating his constituants with the same contempt he had for UK electorate, with his minimal appearances in the HOC.
    Still got his MP’s salary and Prime Ministers Pension though, even though he ruined most Private pension schemes with his tax raids.

    • uanime5
      Posted March 2, 2012 at 11:16 pm | Permalink

      “I am now retired and out of the competitive world, but some of my old contacts say that the black/alternative/barter economy is now growing fast.”

      I didn’t know there was a black/alternative/barter economy for those who want to earn over £150,000 but avoid paying the 50% tax rate. What are there main business areas?

      • alan jutson
        Posted March 4, 2012 at 11:56 am | Permalink

        Unanime5

        Clearly you do not realise how the black/alternative/barter economy works. although I somehow doubt it, given your business, industry and experience as a consumer.

        If you work for cash/payment in kind or some other reward you pay no tax, vat, national insurace (other than the very basic rate) at all, thus you do not need to earn a fortune to be far better off than someone who earns considerably more, and pays their dues in full.

        There are so many trades and professions where cash can be paid in lieu of the normal recorded payments in the form of cheques or credit cards.
        I am surprised that you are not aware it goes on !.

        I list some possible examples for you:

        Gardeners, home helps, cleaners, builders, mini cab/taxi drivers, mobile hairdressers, personal trainers, window cleaners, waiters,
        In short it is any service or goods that the customer does not require a receipt for.
        John before you moderate the list, there are many, many more, and yes I am also aware that the majority of people who work in these types of businesses work completely legally and fully pay their dues.

        Can only suggest you go to the likes of Greece, Italy or indeed any of a number of other Southern European Countries or many parts of Africa for a greater list.

        Thus the higher normal taxes are, the greater the reward for avoiding paying them.

        The actions of the above in avoiding tax, means that tax rates for those who do pay, have to be higher still to make up for the shortfall.

        So higher taxes are self defeating, as it means even more then fall to the temptation to evade, thus once again forcing taxes up further yet again in a rising spiral. Hence the laffer curve efect.

        • Lindsay McDougall
          Posted March 5, 2012 at 10:58 am | Permalink

          Quite. We should all remember Nigel Lawson’s wise words: Taxes should be low and everybody should pay them. You have to make some exceptions in order to get elected but these should be kept to a minimum.

  17. Alison
    Posted March 2, 2012 at 9:34 am | Permalink

    Not surprised. I’d like to take on 2 people for my business but all the paperwork, regulation and legal risks make it entirely counter productive. If I was in a position to do so I’d move to either Asia or South America where business is welcome and not subject to the socialist, statist fantasies that dominate in the UK.

  18. Magnolia
    Posted March 2, 2012 at 9:50 am | Permalink

    Our coalition government hasn’t just swallowed Mr Brown’s tax poison pill, they’ve added a handfull of their own to gulp down as well. They’ve introduced an effective marginal rate of tax at 60% for those earning just over £100K by abolishing any tax free allowance for these earners, as part of a deal with the Lib Dems, so that such earners wouldn’t be able to gain any advantage when the tax free allowance rose. The 40% tax threshold was also lowered at the same time and for the same reasons. There will be people earning around £100K who are turning down extra work or who are reducing their hours in order to lessen this 60% tax burden. Many people who had considered themselves to be ‘ordinary’ might not like being put in to the ‘rich’ higher rate bracket particularly when they lose their child benefit, which will feel to them like they are losing an allowance against tax for children.
    I doubt they will all work better as a result.
    The extra tax burden for single income families, from a level of income equivalent to the benefit cap to one over £100K is about one months salary extra in tax and NI compared to a dual wage family on the same income each earning half and I see no sign of any government recognition (within the tax system) for those who look after dependent family members. Being able to ‘parent’ your own child rather than to get it ‘farmed’ should not be an unaffordable luxury because the tax man has to have his take first.
    Our government has increased taxes for most people while removing the very poorest from paying any income tax at all while all the time state spending is still going up.
    It’s been the ‘politics of envy’ dressed up as ‘we’re all in it together’.
    It’s not a good long term recipe for helping the poorest members of society who really need jobs with good wages and a country which can live within it’s means in a society made up of strong and resilient families of all types.
    I don’t remember voting for socialism in 2010.

    • uanime5
      Posted March 2, 2012 at 11:22 pm | Permalink

      “There will be people earning around £100K who are turning down extra work or who are reducing their hours in order to lessen this 60% tax burden.”

      Good, this will create some more jobs.

      “Many people who had considered themselves to be ‘ordinary’ might not like being put in to the ‘rich’ higher rate bracket particularly when they lose their child benefit, which will feel to them like they are losing an allowance against tax for children.”

      Given that the median salary is £26,000 anyone who earns over £100,000 should not consider themselves ‘ordinary’.

      “It’s not a good long term recipe for helping the poorest members of society who really need jobs with good wages and a country which can live within it’s means in a society made up of strong and resilient families of all types.”

      By paying less taxes poor families can survive on lower wages. Of course if you want more jobs with good wages then the minimum wage will have to be raised to a living wage. Don’t expect this to happen any time soon as the outcry from businesses will always prevent the workers getting a decent wage.

      • Magnolia
        Posted March 3, 2012 at 2:57 pm | Permalink

        The person on £100K who gives up some work might be a senior NHS cancer specialist whose expertise could not be easily replaced. Expect lots more early retirements. Already some hospitals struggle to find medical staff for their vacant positions. Or it might be someone who’s set up a successful small business who decides to work less hard and not bother to grow the business or take on an employee because there’s only the 50 pence rate further on to bite them if they do.
        By ‘ordinary families’ I meant those in the 40% higher rate tax bracket (which is now anything above the first £35,000 of taxed income) but whose wage might be supporting a standard family of four people. This group is to lose child benefit.
        I detest Labour’s idea of a living wage and would prefer that it be defined as an aspiration single wage which is good enough to support a whole family without depending on state handouts. As I said, the poor need good paying jobs as do we all.
        The gap between rich and poor grew under the last Labour government.

      • libertarian
        Posted March 3, 2012 at 9:20 pm | Permalink

        You are talking the most deluded tripe ( nothing new for a socialist)
        Just so you know wages form a significant part of the cost of a product or service so the more you agitate for higher base salaries and higher taxes the higher you drive prices ( thereby affecting the poorest most) and the more you reduce employment prospects for the poorest. Its the problem with socialism it ignores one half of the equation.

        There is one sure fire way to improve the lot of vast numbers of the less well off as well as the poorer members of society and that is simply to let people keep and spend far more of their own money than is currently wasted by politicians, government, quangos and unions.

        It has always been so and will continue to always be so. EVERYWHERE that the socialism has been tried it has failed. It has failed the poorest and most vulnerable the hardest too.

        Socialism like yours is purely the politics of inadequate envy

      • Daisy
        Posted March 4, 2012 at 3:40 pm | Permalink

        Don’t talk to me about the minimum wage. When I was unemployed and desperate for work I would have accepted half that – I would still have taken home double the amount I was getting in JSA. What is wrong with minimum wage fanatics that they can’t or won’t recognise that some of us would rather work than rely on JSA, and that an increase in small employers who could only offer £3-£5 an hour would make a massive difference to the childless, the middle-aged or indeed the very young jobseeker who just needs a start somewhere? Not every worker has a family to support or a mortgage to pay, so why not let us earn whatever we can wherever we choose?

  19. Shade
    Posted March 2, 2012 at 9:53 am | Permalink

    “I agree with the aim of the main political parties to get more tax revenue from the rich to bring down the deficit”

    Sorry John but, intentional or not, your comment shows you are barking up the wrong tree. Tax is not the problem. Government spending (50% of GDP) is the problem.

    Toodlepip

    • lifelogic
      Posted March 2, 2012 at 7:44 pm | Permalink

      Both are the problem the 50% spending (wasting) is the main one.

  20. stred
    Posted March 2, 2012 at 10:27 am | Permalink

    The removal of indexing for capital gains has doubled or more the real tax rate for assets held over 20 years to over 56%. Indexing was easy to calculate as set up by Nigel Lawson. Gordon Brown first messed it up by introducing tapered rates and then abolished it becuse it was supposed to be complicated.

    CG tax is now fine for bonus share gains over a few years but penalises long term savers who have kept a nest egg for retirement. I would sell my rental property tommorow if taxes were lowered to a reasonable real rate because the return has dropped to 3% and regulation has made it too difficult to contemplate in retirement.

    • lifelogic
      Posted March 2, 2012 at 7:47 pm | Permalink

      You can role the gain over into and enterprise investment scheme perhaps or go abroad for five years somewhere with sensible tax rates like Monoco, BV islands or the isle of Man if you like it wet and cold.

      • stred
        Posted March 3, 2012 at 10:30 am | Permalink

        Not for gains made personally through property improvements. The removal of indexing was a retrospective tax that ruins many peoples private savings plan for retirement. Many people cannot leave the UK for family reasons. Why should exile be necessary to avoid losing ones savings? Families are separated for financial reasons. I could not even send a birthday card to my relation who has exiled himself.

        • Bazman
          Posted March 3, 2012 at 4:23 pm | Permalink

          Wow! It must be being made destitute! Five years hard labour in Monaco must be like being sent to Siberia under Stalin’s purges. A strange place like many of the worlds tax havens, full of rich old people. Ram it.

        • lifelogic
          Posted March 3, 2012 at 6:44 pm | Permalink

          You can use the Enterprise Investment Scheme to defer the capital gain (defer for a very long time if needed), and indeed for any capital gain I believe, but the rules are, as usual, absurdly complex. Lots more pointless jobs for accountants and lawyer.

          Or keep for ever and borrow against it – no CGT on death just IHT over the threshold. The threshold that the Tories, George Osborne “promised” to increase to £1 million as I recall.

  21. Timaction
    Posted March 2, 2012 at 10:30 am | Permalink

    Mr Redwood we’ve been here before. It was I believe Nigel Lawson under Margaret Thatcher (a true leader and patriot) who dropped income tax rates and revenue went up! Of course people don’t want to pay more tax but the system where the Government takes 62% from the highest earners is NOT fair. Of course they will avoid paying it or move away as Governments only waste money.
    I’m at a loss to understand how this and the previous Governements applied greener policies at huge expense based on unproven science. Over the next few years this will be exposed more and more. Then they’ll say its not global warming (as there hasn’t been any) not climate change as there has always been, but maybe making us energy self sufficient. Meanwhile the BRIC nations, USA and Canada will be laughing at us and the declining nations in the EU.

    • uanime5
      Posted March 2, 2012 at 11:37 pm | Permalink

      The 50% tax rate + 2% NI is 52%, not 62%. Also the HMRC figures show that the 50% tax rate has raised over £5 billion, so it seems that the rich are willing to bear this tax rate.

      Regarding Nigel Lawson all he did was create a period of high but unsustainable growth by deregulation of the financial sector and keeping interest rates low. This resulted in high inflation (15%), an excess of imports over exports which ruined the UK’s manufacturing industry, a long recession in the 1990’s, ‘Black Wednesday’, and over 3 million people unemployed. Not something that should be repeated.

      • Mark
        Posted March 3, 2012 at 12:14 pm | Permalink

        The 62% rate applies to incomes between £100,000 and £115,000. Anyone who earns over £100,000 thus pays that rate on some portion of their income.

        HMRC has produced no figures that show what the 50% rate has actually raised. They have produced forecasts of income tax revenue that have turned out to be wrong: these include optimistic assumptions about high income earners that are the most likely reason the forecast has proved inaccurate.

      • lifelogic
        Posted March 3, 2012 at 6:47 pm | Permalink

        He did make a mess through his absurd shadowing the Euro and Major’s idiotic ERM, I agree, but at least he is now sound on climate change.

      • libertarian
        Posted March 3, 2012 at 9:40 pm | Permalink

        Once again uanime5 i have to introduce you to the facts not your socialist myths, made up data and lets face it lies.

        Uk interest rates in 1979 When Thatcher came to power where 17%

        between 1979-89 rates fluctuated between 8% ( lowest) and 14% ( highest)

        Since Gordon Brown took over interest rates were manipulated down to the present 0.5% So that’s myth 1 exploded

        His tax cuts, beginning in 1986, resulted in the “Lawson Boom” of the British economy, which had halved unemployment from more than 3,000,000 by the end of 1989. At this time interest rates were NOT low being as they where touching 15%.

        Under the Thatcher government manufacturing business in the UK GREW 12% from where Labour had left the shambles of British industry at the end of the 1970’s. Myth 2 exploded

        Black Wednesday and the recession was 1) Not Thatcher or lawson but Major and was as a result of entering the ERM ( the forerunner of the Euro) and on exiting it the UK went into a long sustained period of growth, thereby showing that 3) Your facts are not correct.

        In fact large parts of SOME of the things implemented at that time very definitely should be repeated.

      • Lindsay McDougall
        Posted March 7, 2012 at 1:38 pm | Permalink

        If people have to pay a marginal rate of 52% on their income AND have to pay VAT on most of their purchases AND have to pay stamp duty AND are in a high council tax band AND have to pay capital gains tax AND lose their child benefit, that is more than enough, don’t you think?

        What do you want – blood?

      • Lindsay McDougall
        Posted March 7, 2012 at 1:39 pm | Permalink

        And it wasn’t Black Wednesday, it was White Wednesday.

  22. Lindsay McDougall
    Posted March 2, 2012 at 11:02 am | Permalink

    Linkage is the answer. Tell the LibDems that they will get their accelerated implementation of the £10,000 income tax threshold if and only if the 50% top rate is phased out. While we are on the subject of income tax, the group that has been hardest hit are families with one bread winner earning about £50,000. The threshold for the 40% rate is LOWER in real terms than it was in 1992. It hasn’t even kept pace with price inflation, let alone salary inflation.

    We must though follow George Osborne’s rule of no tax cuts without offsetting rises in other taxes or reductions in public expenditure. Naturally, Conservatives want the latter. However, if we look at offsetting tax rises, let us consider whether the tax free concession on ISAs is justifiable. In the 1970s, Labour taxed investment income more highly than earned income (right up to a 98% rate that nobody paid). The modern approach, via first PEPs then ISAs, has been in the other direction, to make some investment income tax free. I would make the case for neutrality – tax earned income and investment income the same by withdrawing the ISA concession.

    • uanime5
      Posted March 2, 2012 at 11:40 pm | Permalink

      I doubt that many people will vote for the Conservatives at the next election if the Conservatives prevent a tax cut for the poorest because they believe the rich should get a bigger tax cut.

      • Bazman
        Posted March 3, 2012 at 4:26 pm | Permalink

        It’s gonna be a whitewash. This is why they are trying to get as much regressive taxes and laws passed. Knowing that the next government will including labour be reluctant to repeal. At least at first.

      • Lindsay McDougall
        Posted March 5, 2012 at 10:49 am | Permalink

        I’m not proposing that we veto both measures, rather that we implement both of them.

  23. Posted March 2, 2012 at 11:12 am | Permalink

    I was interested to see that when you and Starkey and the footvaller made this argument on QT last night the audience, always selected acording to the BBC’s definition of balance & thus deeply leftist activist, seemed fairly receprive to the idea that raising this tax reduces the amount actually paid.

    If more quiet freemarketists were to be willing ro say what they know is true (& which all economically literate Lab/Lib MPs also know to be true)there would be greater public appreciation that raising such taxes is simply politicians striking a pose to gain popularity while deliberately damaging the people’s true interests.

    Of course the Beeboids rarely invite anybody who may be expected to tell such truths on air.

    May I also suggest that if you are going to be on QT or similar you mention it on here first. Don’t want to sound to much like a fan but I am.

  24. David John Wilson
    Posted March 2, 2012 at 12:04 pm | Permalink

    When revieing tax the government needs to consider the effect of any changes on the current economic environment.
    Thus while many changes such as reducing capital gains tax, corporation tax etc. would make the UK more attractive, they have very little direct effect. In contrast reducing employers’ NI contributions in addition to making the environment more attractive also has a potential positive effect as it improves cash flow, increases competitiveness for imports and exports and can reduce unemployment.
    Individual taxes can be approached in a similar manner. This leads to the view that reducing income tax is probably preferable to reducing VAT. However it would be much better to get rid of some of the charges made on individuals completely and thus remove the bureaucratic overheads involved. For example getting rid of television licences, replacing VED by an increase in fuel duty etc. would be much more effective use of any reductions. Removal of VED again improves cash flow for companies as well as removing overheads even if there is no change the actual tax raised.

  25. stuart
    Posted March 2, 2012 at 12:14 pm | Permalink

    Can we have a comment on this?

    http://www.dailymail.co.uk/news/article-2109008/Secret-EU-deals-forces-Britain-12-000-Indian-workers-despite-soaring-unemployment.html

    Why are we being compelled by the EU to import more Indian workers, when we have migrants from the sub-continent sleeping rough here, and plenty of unemployed people of our own.

    • Mark
      Posted March 2, 2012 at 7:22 pm | Permalink

      Ask Dr Cable – he’s been negotiating it I believe.

    • Alan Wheatley
      Posted March 2, 2012 at 7:41 pm | Permalink

      My comment is the Mail article reads like another stab in the back for Britain by an incompetent government.

    • zorro
      Posted March 2, 2012 at 8:16 pm | Permalink

      We’ve discussed issues around this on the blog before – it concerns Mode 4 of the EU-India Free Trade treaty. This summary from MigrationWatch is a useful summary…..http://www.migrationwatchuk.org/briefingPaper/document/207

      zorro

  26. Simon
    Posted March 2, 2012 at 12:34 pm | Permalink

    A single months receipts absolutely cannot be used as an indication of anything, and I really would not have thought that a responsible politician would try to do so.

    We need the whole trend line to make any conclusions from the data, and that trend line shows income tax receipts solidly up in 2010-2011. For instance the increase in receipts for November 2011 over November 2010 more than makes up for the January 11-to-12 drop.

    • Mark
      Posted March 3, 2012 at 12:25 am | Permalink

      See the HMRC spreadsheet I linked below.

      http://www.hmrc.gov.uk/stats/tax_receipts/tax-receipts-and-taxpayers.xls

      Income tax receipts over April 2011 to January 2012 total £126.3bn, compared with £126.7bn for the same period a year earlier. That’s lower by £0.4bn. The budget forecast – which took account of the revised allowances – reckoned that receipts would be £6.1bn higher. It assumed (correctly) that the numbers in employment would be little changed. It is impossible to square these facts without assuming that most of the shortfall is from much lower than projected revenues from the top rate taxpayers. Alternative ways of squaring the numbers would be assuming some very widespread pay cuts, which would surely have hit the news. Try tinkering with the numbers to see what it takes to account for a £6.5bn shortfall:

      http://www.hmrc.gov.uk/stats/income_tax/table2-5.xls

      • sm
        Posted March 3, 2012 at 12:22 pm | Permalink

        It is very possible paycuts have been happening. People losing work in the private sector must compete at the margin to get back in which is down.Also i understand part time working is increasing.Its why adjustment of wages is a slow grind, staff turnover and inflation.

        • Mark
          Posted March 4, 2012 at 1:26 pm | Permalink

          I’m sure there have been some paycuts, but the scale of them would have to be extremely large in number and extent if there is to be much impact on tax revenues if it doesn’t principally involve the highest earners. Even then, to make the sums fit the facts it is more plausible to suggest that some of them have simply emigrated to escape UK taxes.

          Of course, we know that many top earning bankers have suffered paycuts. But perhaps surprisingly increases for others meant the bonus payout last tax year was unchanged at £14bn:

          http://www.newstatesman.com/blogs/the-staggers/2011/07/unacceptable-bonuses-block

  27. forthurst
    Posted March 2, 2012 at 12:46 pm | Permalink

    In my recollection Mr Brown reduced the rate of CGT to 18% at the behest of a Labour Party ‘supporter’ who was also a practioner of ‘private equity’, borrowing money from banks in order to take over and asset strip existing businesses; the process normally results in either the banks writing off a great deal of money or a short term ‘profit’.

    When need new businesses not the asset stripping of existing businesses.
    Private Equity is not beneficial to this country and should not be encouraged via the tax system.

  28. RDM
    Posted March 2, 2012 at 1:27 pm | Permalink

    Can you really turn on or off Entrepreneurs with a tax rate?

    Surely it’s cultural, as well as, Motive?

    Will George Osborne give everyone a chance to be an Entrepreneur?

    Will the unemployed be able to take what ever opportunity life affords today, being to busy to require benefits? Else the government of the day will have to guarantee jobs for everyone, and I for one, don’t think they can!

    Give the British People access to the British Banking System!

    What access to capital should be based on is the assessment of Risk inherent within two things; The Idea, and the Person! Not whether or not you have Collateral!

    Failure should not be anti social, it should be a learning curve! Losing someones home will cost too much, too society!

    Technology start-ups require too much up front capital for them too be required to provide collateral.

    Nice job (Question time)!

    Regards,

    RDM.

  29. Bob
    Posted March 2, 2012 at 1:32 pm | Permalink

    Even Ken Livingstone’s had enough of it, he channels his income through a tax vehicle to avail of the small company rate and the opportunities for writing off expenses. He’s not silly, hypocritical yes, but silly he is not.

  30. Posted March 2, 2012 at 1:39 pm | Permalink

    Why won’t they learn that “Atlas can shrug” for as long as the country keeps the brakes on. It’s time that Governments released Europe’s “Sleeping Giant”.

  31. uanime5
    Posted March 2, 2012 at 1:42 pm | Permalink

    “They then added to the problem by raising Mr Brown’s very competitive 18% rate of Capital Gains Tax to 28%.”

    Capital Gains Tax to was raised from 18% to 28% because business leaders were paying themselves in shares to avoid a large amount of tax. Lowing it will just lead to more tax avoidance at a time when the Government is short of money.

    “Some of them are relocating elsewhere. Some are taking their new ventures offshore.”

    Do you have any figures to back this up? Of the 300,000 people in the UK who pay the 50% tax rate just how many of them have left the UK since it was introduced and how many have returned?

    “Some are sitting on their hands, unwilling to work harder and undertake a new venture given the tax levels that would hit any success.”

    Let me get this straight the wealthy are not expanding their businesses because they don’t like how much their salary is being taxed? Well at least there should be more opportunities available for those who run businesses and don’t earn the 50% tax rate. Foreign companies should also do well as their CEO will be indifferent to UK tax levels.

    “There are still entreprenuers on strike, and entreprenuers who no longer like the UK tax and regulatory regime.”

    And your point is what? As you’re so fond of saying the market will fix itself; so if the existing ‘entrepreneurs’ don’t want to work this will raise the price of their whatever they used to do, which will attract new entrepreneurs into the market (especially since the Government is throwing money at new entrepreneurs). Thus the existing entrepreneurs will either be forced back to work or go bankrupt.

    “His economic antennae should also waggle and tell him the way to tax the rich more is to make it more worthwhile for them to stay here and invest here.”

    If this causes his antennae to waggle then it’s obviously faulty. It’s companies than provide jobs, not the rich, so he should make it more worthwhile for companies to stay and invest here. One of the best ways to do this is to make it harder to fire employees, like every other European country, so that when job cuts needs to be made they don’t all occur in the UK because it’s so easy to fire people here.

    “Falling Income Tax revenues: January 2011 Total Income Tax receipts £22 billion, of which £10.9 bn was self assessment

    January 2012 Total Income Tax receipts £21.8 billion, of which self assessment £10.3 billion.”

    John why are you assuming that the drop in Income Tax is solely because of the 50% tax rate? Isn’t it more likely to be from higher levels of unemployment, more people working part time, and the Lib Dems increase in personal allowance.

    reply: The main drop was self assessment, which most people do not do or pay.

    • Mark
      Posted March 2, 2012 at 8:22 pm | Permalink

      The record for CGT revenue was in 2008-9 – some £7.85bn, collecting tax on gains made in 2007-8. The regime provided for indexation relief for assets bought prior to 1998 up to 1998, and taper relief for assets held thereafter. The effect was that business assets paid CGT on just 25% of the gain at 40% – an effective rate of just 10% – if they had been held for two years or more, while non-business assets were taxed at marginal income tax rates on a sliding scale of taper relief that reached 40% after ten years (so a 40% taxpayer paid an effective 24% rate on unindexed gains post 1998, but a 20% taxpayer was only paying 12%).

      The 18% rate with no indexation or taper relief saw CGT revenue drop the following year to £2.49bn. The higher rate and loss of indexation relief meant revenue collapsed. The further increase in rate to 28% the next year would have generated £3.9bn of tax if it had no effect on gains crystallised: instead it generated £3.6bn.

      The point is that it is cheaper to borrow using assets as collateral than to crystallise a gain and pay tax. Business assets dominate CGT revenues.

    • JT
      Posted March 2, 2012 at 11:36 pm | Permalink

      the main drop in taxes can be attributed to lower City bonuses
      Simple as that … it’s a 5% drop
      (oh, yes, add on lower City pay – because higher City unemployment — a large part of which is not registered)

  32. Disaffected
    Posted March 2, 2012 at 2:02 pm | Permalink

    When these people (MPs, Lefty civil servants etc) talk about taxation it is as if they are entitled to other people’s money and it is okay. It is not. Taxation should be a necessary evil to pay for the minimum amount of public services, it is not, and should not be seen as a right to take other people’s money, so people can make it a life choice not to work and get a good living on the state on the backs of others. Why does the socialist Coalition think it is right to take more than the person earns???

    It is very sensible for the 300,000 to relocate and live in the Isle of Man, Gibraltar or another tax haven- the socialists are robbing you. What the socialist Coalition does not waste on welfare it throws down the EU socialist drain of welfare and Eurocrat greed.

    The Government needs to learn that it needs to spend less and then it can tax less. When commentators say politically this or that- the public do not care. Lawson was not condemned for lowering taxes on income or corporation tax. Wake up Tory MPs and get rid of MR Cameron before it is too late. Theses weaklings do not have the courage to cut public spending.

  33. Bickers
    Posted March 2, 2012 at 2:11 pm | Permalink

    The Coalition needs to be bold and go for growth. That means lower taxes, lower public spending and deregulation of the jobs and business markets.

    It’s increasingly clear that Europe and the Euro is being run for the benefit of Germany & France, therefore the UK has to ask the ‘big question’ – what’s the benefit of being in the EU when the market is rigged for the French & Germans and the policies of the Euro group are self destructive and anti competitive.

  34. Posted March 2, 2012 at 2:33 pm | Permalink

    Congratulations on excellent performance on the 50% tax question BBC questiontime last night . The labour & LibDem spokeswomen failed to address your point & appeared in a very poor light.

  35. sm
    Posted March 2, 2012 at 2:36 pm | Permalink

    Perhaps if the system was less complex if National Insurance & Income Tax were combined and Capital Gain’s were taxed as income and an effective anti-avoidance rule was in place, things would be clearer.

    Difficult to tell on raw numbers, one mans entrepreneur could be the head of gov dept or similar, or senior local government consultant/employee. Sometimes its difficult to see where they would relocate too without leaving the underlying business behind to another entrepreneur.

    What happens when those who cant avoid tax and who pay it directly via PAYE receive less netpay, it immediately reduces demand for non-essentials. Investment flows to stable essentials sending a price signal, which further crimps non-essential demand until new supply intervenes or we get effective rationing. (People turn off the heating)

  36. A Different Simon
    Posted March 2, 2012 at 3:15 pm | Permalink

    The quickest way to create jobs is to ensure an abundent supply of cheap energy .

    Natural gas is now 5 times more expensive in the UK than the US .

    As Nigel Lawson says , for the sake of the UK , DECC must be disbanded immediately .

    DECC is actively opposing shale development because it isn’t on the 50 year roadmap and conflicts with their ideological commitment to renewables and might start an industrial revival which could leave the UK’s “climate change commitments” in tatters .

    How can a companies invest in UK shale development when they know the authorities are just looking for an excuse to shut it all down ?

    “Minister for climate change” , what a sick joke .

    • lifelogic
      Posted March 3, 2012 at 6:51 pm | Permalink

      “Minister for climate change” , what a sick joke

      Indeed it is.

  37. oldtimer
    Posted March 2, 2012 at 3:21 pm | Permalink

    You make compelling points. Alistair Heath at CityAM makes similar arguments. He points to evidence from the HMRC that only 23% of 50p taxpayers work in what HMRC describes as “financial intermediation”, what everyone else calls bankers. The other 77% work in other parts of the economy. I know some who are soft pedalling to keep below the 50p tax threshold or who have left to work abroad. As for 28%CGT, it is a matter of simple arithmetic that it positively encourages short termism – as any calculation of the net present value of future returns at this tax rate clearly demonstrates.

  38. John Hill & Co
    Posted March 2, 2012 at 3:43 pm | Permalink

    Dear Mr.Redwood,

    Thank you for continuing to put pressure on the government on tax rates. It is vital for our future prosperity that tax rates and public spending are brought down.

    Capital gains and wealth taxes (including Inheritance Tax) are particularly pernicious because they destroy the country’s capital stock and reduce future investment. Do you have any figures for Capital Gains tax receipts since the rate increased? I would bet they have shown a decline, since it is easy to avoid the tax by simply not selling the asset in question. Restoring the 18% rate would actually raise revenue.

    I urge you not to forget the Conservatives’ electoral promise to raise the Inheritance Tax threshold to £1million. I am sure that allowing families to keep more of their inherited capital leads to the creation of more small businesses. Family capital is much less risky than taking out a loan, because often no interest is required and the entrepreneur is not left with a burden of debt if the business fails.

    Reply: It takes a long time for the impact of a change of rate to come through – a year to take the gains, and then months later to file the returns. The Treasury themselves forecast a fall in the first full year which I have used widely.

    • John Hill & Co
      Posted March 2, 2012 at 6:14 pm | Permalink

      Capital gains for 2010/11 should be in the self-assessment returns filed by 31 January this year – hence my question as to whether any figures are yet available. This is not a full year at the new rate, but may be indicative.

    • Mark
      Posted March 2, 2012 at 8:54 pm | Permalink

      It’s hard to know what the final figures will be, but HMRC reported receipts of £3.4bn for CGT in January 2012. See here:

      http://www.hmrc.gov.uk/stats/tax_receipts/tax-receipts-and-taxpayers.xls

      • John Hill & Co
        Posted March 3, 2012 at 1:21 pm | Permalink

        Perhaps the increase is due to gains being realised before the rate went up on 23/6/10.

  39. Mark
    Posted March 2, 2012 at 4:04 pm | Permalink

    The silence of the Dewsbury audience as the penny dropped was stunning.

  40. zorro
    Posted March 2, 2012 at 4:21 pm | Permalink

    Yes, I see that uanime5 hasn’t come back with a comment about the tax take from the previous blog……We need to maximise income from the highest payers and the best way to do that is by encouraging them to create taxable wealth. Ideally, we should be spending less too to allow us to lessen the tax burden on the lower paid workers. We all know where the savings can be made, but Cameron is incapable of making a case for doing this.

    Unfortunately, this government is struggling in a number of areas and I worry about security at the borders particularly with UKBA. They have got rid of staff but are now short and desperately seeking alternatives.

    I really despair of how politicians have dismantled functioning organisations and replaced them with new ones with CEOs who know sweet nothing about the business. It is cultural Marxist vandalism at its worst.

    zorro

    • uanime5
      Posted March 3, 2012 at 12:09 am | Permalink

      I tend not to go back to previous blogs as everyday there’s a new issue to discuss.

      The problem with spending less is that there isn’t anything that can be cut without making the service worse. As you mentioned firing employees results in the remaining employees being overworked. Cutting services is also unpopular among people who rely on these services, such as the elderly, disabled, addicts, and mentally ill.

      Since when has replacing functional organisations with dysfunctional ones been ‘cultural Marxist vandalism’. It sounds more like normal bad decision making.

      • zorro
        Posted March 3, 2012 at 3:44 pm | Permalink

        Really? Look at the aims of the Frankfurt School around changing society, and tell me they have not been successful.

        zorro

  41. Adam5x5
    Posted March 2, 2012 at 6:06 pm | Permalink

    Lower the tax rate a bit on everything and slash, and I mean really slash, public spending – especially in the public sector employment. Not necessarily through firing people, but through not filment of vacancies of non-jobs.

    It’s not hard. A quick look on lgjobs.com can turn up several jobs that aren’t necessary, such as:

    Peripetetic General Assistant – Elmbridge Borough Council – circa 8per hr (a what?)
    Relief Keyholder – Woking Borough Council – circa 7per hr
    Specialist Parenting Practitioner – Mansfield District Council – circa 25K pa
    Online Tutor – Surrey – circa 32K pa!!!

    Seems like most of these could be got rid off easily, without significant detriment to anybody.
    That took all of 5mins on the website – mainly due to a slow connection at work.

    If something isn’t done to reign in the public sector soon and cut it down to size, the who structure will collapse under it’s own weight as Greece has done.

    • uanime5
      Posted March 3, 2012 at 12:23 am | Permalink

      I had a look at the ‘non-jobs’ you selected.

      Peripetetic General Assistant: a general assistant who work across our seven Centres for the Community. As ‘peripatetic’ means someone who travels from place to place I guess they don’t want to give each centre their own general assistant to save money.

      Relief Keyholder: someone who opens and closes the Vyne Centre, also they have to act as a receptionist and cleaner. Sounds like a standard job.

      Specialist Parenting Practitioner: you have to support families with children whose antisocial behaviour is adversely affecting local neighbourhoods. Working with problem families is essential for preventing these children becoming criminals who terrorise neighbourhoods.

      Online Tutor: you have to educate and help find jobs for young people who are disengaged from mainstream education (I guess this means they’ve been expelled from school). Another jobs where you have to work with problem children to prevent them becoming criminals.

      So of the 4 jobs you listed removing the first two would deprive the community their centres, while the last two would be greatly detrimental for problem children. Next time try reading the job description, rather than just the job title.

      • JimF
        Posted March 3, 2012 at 1:39 pm | Permalink

        I think we have to establish some tests for “necessary”, viz
        1 is the absence of these jobs life-threatening?
        2 would people who benefit be prepared to pay for other people to do these jobs ahead of, say, paying for their social life?
        3 are these jobs just filling an artificially-created hole – i.e. do pupils who have been expelled, rather than improving and going back to school warrant alternative individual free education when free education is already available in the mainstream?

        I think to put these jobs ahead of paying for life-saving treatments on the NHS, and paying for them on money borrowed by the government from the loan-shark banks is just daft.

      • Bazman
        Posted March 3, 2012 at 4:31 pm | Permalink

        That key holders job was offered at seven quid an hour when the minimum wage is six quid. Without the minimum wage someone daft/desperate enough could be found to do the job for a few quid every now and then. What a waste.

  42. Electro-Kevin
    Posted March 2, 2012 at 7:53 pm | Permalink

    The UK is no longer competitive on tax because money needs to be raised now.

    “Entrepreneurs will bring down unemployment.” they say.

    They won’t be able make much of a difference actually. With net immigration of 260k per year unemployment can only get worse – the demands on State provision can only get worse. That requires a lot of taxation. Now.

    I hear that the ‘drought’ in Lincolnshire (of all places) has meant the need to construct a new water pipeline from the north of the county to Boston (of all places.)

    We might wonder why. Even the BBC are reporting it first as ‘global warming’ but second as a massive increase in population – even they couldn’t leave this detail out.

    We can be certain that the vast majority of the 350k Brits leaving each year are not in the 52% bracket but are skilled and taking funds with them – their destinations are unlikely to offer free welfare or unskilled work to them.

    So what of the entrepreneurship that they could have offered the UK ?

    So what is the plan, Mr Redwood ?

    There isn’t one, is there.

    The Coalition is winging it.

    Uncontrolled immigration (no one complains of the controlled variety) will continue unabated.

    For this reason taxes will HAVE to go up. And in this age of party politics they will have to go up until the economy goes pop. Because none of you have the will to take welfare away from all but the destitute.

    • Electro-Kevin
      Posted March 2, 2012 at 7:56 pm | Permalink

      I might add, Mr Redwood (and say it with great regret) that, not only is the Coalition winging it, but so are you.

      • Electro-Kevin
        Posted March 2, 2012 at 8:13 pm | Permalink

        PPS – Many of those with the skills, the funds and the inclination (we’re talking small business entrepreneurs to lift the economy btw) have already left.

        I doubt it’s much to do with the tax as not wanting to raise their children in Britain.

  43. Edward Forster
    Posted March 3, 2012 at 10:46 am | Permalink

    We already have 50p tax rate and we all pay it, because that is the effective cost of tax today in everything we buy as consumers.

    Consumers’ cash necessarily supports the entire hierarchy of commerce. There is not a commercial entity that can survive without ultimately servicing the needs of consumers, directly or indirectly. From whom else do you suppose businesses and employees make money? Every tax incurred in the supply chain shows up as a hidden tax in consumer prices.

    ‘Income Taxpayers’ are are simply involuntary intermediaries in the collection of tax from consumers. ‘Income Taxpayers’ are not always reliable as third party tax collectors, as we know, but the reason they are employed is that Income Taxes are very useful tools for confusing the issue of who really pays tax and concealing the crushing cost of Government from voters.

    The more you spend your hard earned cash, the more you pay tax, rich or poor, in the UK currently equivalent to a VAT rate of 100%. This is considered the tipping point economically, where decline becomes inevitable.

    Income tax is the curse of the Western World; an illusion to please the unthinking.

  44. Terry Harris
    Posted March 3, 2012 at 12:47 pm | Permalink

    Well said on QT although a shame that most the audience were deaf, dumb and blind to your observations.

    I have just checked the HMRC Website and counter 25 different categories of NICs. No wonder employers and employees, alike, are confused over this fiasco.

    If the Treasury could wipe out that lot and put this tax on the Income Tax register where it belongs just think of the jobs we get rid of in Whitehall.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

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