Why did self assessment Income Tax decline so much at the 50% rate?


In 2008-9, well into the financial crisis, the UK state raised £22.5 billion in Self Assessment Income Tax, with a top rate of 40%. The following year, the last year at 40%, saw another £21.7bn collected.

The 50% rate then introduced was assumed by the Treasury to yield a lot more self assessment income tax, as high payers usually  have to complete the self assessment process and are an important part of that total. In the June 2010 forecast the Treasury looked forward to raising £29.2 bn from self assessment in 2012-13, and £32,5bn in 2013-14. These forecasts were reduced steadily in successive years. So what actually happened?

In 2012-13 the Treasury collected just £20.6bn in self assessment Income Tax. In 2013-14 it managed £20.9bn. In  other words, the  Treasury collected 4 -5% less  in those two years than in the last year of 40% tax, despite the inflation in the meantime.

More worrying is the gross inaccuracy of the forecasts. Revenue in 2013-14 was a massive 36% down on the June 2010 Budget forecast in 2013-14. It was 32% down on  the Budget 2011 forecast.

Much of the debate about optimum or desirable tax rates in the UK is conducted without reference to any of these outcome numbers. Too many people assume the Treasury model and official statements about the impact of higher rates are correct, where the official word is they do not have a lot of effect either way.

People interested in this topic  should instead study the outturn figures. They are markedly different from the forecasts. They show that self assessment Income Tax was hit badly by the 50% tax rate, and has been running a huge one third below forecast.


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  1. Alte Fritz
    Posted July 15, 2014 at 5:56 am | Permalink

    High marginal tax rates encourage the use of avoidance schemes both reasonable and aggressive. Some see this as evidence of the greed and wickedness of high earners, others see it as evidence of a natural repugnance to be treated as a slave of the state.

    For my part, I am far from sure that a 50 (or 45)% top rate + NI + 20% VAT on what is spent from the balance makes very much sense (and I am not in the top bracket).

    • Lifelogic
      Posted July 15, 2014 at 6:58 pm | Permalink

      Anything that takes money off the people who use it best and gives it to the government, who will generally waste it, is clearly a bad thing in general. Governments should only take the enough for the few things government can do better. Law and order and defence and not much else.

      They seem to think they have a right to take as much as they can get before they actually kill the golden goose, often even more.

      • Bazman
        Posted July 20, 2014 at 6:12 pm | Permalink

        Do you ever stop preaching your deluded fantasies and telling others they are lefty green no nothings.
        The idea that all state spending is inefficient is as simplistic and absurd as the idea that all private sector spending is efficient. If all private sector activity was “efficient”, there wouldn’t have been over 230,000 bankruptcies since the Coalition government came to power in 2010 and the state wouldn’t have had to have intervened to save the deregulated financial sector from the consequences of their own reckless gambling. In fact the short-term profit motive can actually make private sector businesses much less efficient in the long-term as they slash investment in training, research and modernisation order to provide larger short-term profits to shareholders (a philosophy called Shareholder Value Maximisation). As we have seen in the skill shortages in many industries.
        Rent seeking parasitism. Your policy of allowing private interests to put themselves in the position where they can demand ever greater taxpayer funded subsidies and charge ever increasing prices, safe in the knowledge that the state or the individual consumer will tolerate this rent seeking behaviour and cough up incrementally greater amounts, rather than suffer the much greater economic shock of having their rail network, health service or banking system declare bankruptcy and shut itself down, or the greater personal shock of having their water or electricity supply shut off due to non payment of inflation busting bills. Or in your case having housing benefit stopped for landlords.
        Do get back to us with something sensible to say.

    • Anonymous
      Posted July 15, 2014 at 10:57 pm | Permalink

      On the subject of NI…

      I am worried that if this is merged with income tax we will be told “What pension ? You haven’t contributed to any ‘pension’ so you’re not getting one. You’ve only ever paid tax and that’s already been spent on other things.”

  2. Lifelogic
    Posted July 15, 2014 at 6:04 am | Permalink

    Indeed it is surely clear the government cannot raise the amount they are actually spending (and largely wasting). Increasing tax rates beyond the current levels produces less revenue not more. Decreasing it would produce more on balance.

    Just fire the 50% in the state sector that do nothing useful (or worse still just inconvenience or mug the productive), pay/pension them the same as the private sector not 50% more, cut the payments that augment the feckless, charge for the NHS and get it to actually work, cut taxes and increase efficiency.

    20% of a much bigger GDP would be far better than taking nearly 50% of the current one -better for everyone but parasites on the gravy train.

    Why on earth has Cameron sacked Owen Paterson, perhaps his best minister?
    Ed Davey and Vince Cable were the ones who really needed to go.

    No doubt he has lined up some pro EU, big government, lefty, BBC think, high tax, pro war, EUphile, believers in the greencrap exaggeration religion. People who have the right gender for Cameron’s form of childish & blatant discrimination.

    • Lifelogic
      Posted July 15, 2014 at 3:34 pm | Permalink

      Lots of promotions for lefty, pro EU, high tax, green crap believers as expected – almost to a woman or man. Ken Clark finally gone than goodness but we now have the equally bad Grieg Clark.

      Perhaps we will have a bit of distraction with a row over the European Court of Human Rights as a pathetic side show for the election. Owen Patterson gone, one of the very few sensible/rational people that was still in the government.

      Of Michael Fallow wiki says:- As a student, he was active in the European Movement and the “Yes” youth campaign in the 1975 referendum. So even then he was daft & misguided.

      Grieg Clarke is clearly a pro EU, lefty who seem to have swallowed the greencrap religion whole. Nearly all those promoted voted for more daft counter productive wars too.

      No one surely now thinks Cameron is to be trusted on the EU. Miliband it is or we will have to watch the revolting Cameron kick his voters in the teeth yet again.

    • zorro
      Posted July 15, 2014 at 5:09 pm | Permalink

      Indeed, Owen Patterson has been treated poorly…not even a mention on the News…. More Cast Elastic tokenism…. more representative of modern Britain? What would Jim Royal say?


      • Hefner
        Posted July 15, 2014 at 6:00 pm | Permalink

        Very glad that Owen Patterson, a complete ignoramus on anything related to environment, is finally off. Maybe there is sense in what David Cameron has done.
        It is painful to have this country with some of the worldwide best research institutions related to weather, climate and environment and see them been pulled in the mud by people who basically do not know a thing on most of these topics … And that applies to some of the usual contributors to this blog!

        • Lifelogic
          Posted July 19, 2014 at 8:19 am | Permalink

          Wasting money now on things that do not even work to perhaps change the climate in 100 years ~perhaps even making it worse ~ is bonkers. These “green” things do not even work with current technology. R&d yes, rollout now with subsidy is bonkers.

      • Lifelogic
        Posted July 15, 2014 at 6:59 pm | Permalink

        Jim who?

        • zorro
          Posted July 16, 2014 at 5:39 pm | Permalink

          Sorry Jim Royle!….. Come on you cultural desert!….LOL


  3. mickc
    Posted July 15, 2014 at 6:09 am | Permalink

    The reason is that Osborne believed this was a normal recession and that growth would return more quickly.

    Instead the economy shrank, then flatlined for a long time.

    The current “growth” is the standard pre-election fantasy which will not be sustained- but that will be Milibands problem after the election. And, as ever, ours!

    • Denis Cooper
      Posted July 15, 2014 at 12:26 pm | Permalink

      As the boom had carried on for longer than is typically the case it might have been expected that the bust would be worse and the recovery slower. The question is how far we will be out of the last recession before the next one hits and the finances of the government are set back again, given that its progress towards balancing its budget is so slow.

  4. Mark b
    Posted July 15, 2014 at 6:11 am | Permalink

    You also have to take into consideration the increase in population and therefore, the increase in those that are more likely to do a self assessment.

    I do not have any figures, but if there are, then its a little worse than first suggested.

    Off topic.

    Will our kind host be giving his views on the reshuffle ?

  5. Lifelogic
    Posted July 15, 2014 at 6:20 am | Permalink

    Finally some good news from this wretched government – on Payday loans.

    Financial watchdog to announce cap on payday loan costs – about time too.


    • Bazman
      Posted July 15, 2014 at 4:14 pm | Permalink

      Next to be tackled is rogue landlords ripping off tenants with sky high rents for run down unhealthy properties as they have nowhere else to live. You will of course be in favour of that too as you are against these borrowers of these companies being exploited too? Up is where the sky is and down is where the ground is.

      • Edward2
        Posted July 15, 2014 at 6:10 pm | Permalink

        Is it just the private sector where there are landlords who charge high rents for badly built badly maintained damp properties?
        There are loads of rubbish Council estates within a few miles of where I live.
        But no criticism from you about their failures Baz.

      • Lifelogic
        Posted July 15, 2014 at 7:00 pm | Permalink

        That will just hurt tenants and restrict the supply we need more building or fewer people.

        • Bazman
          Posted July 16, 2014 at 4:23 pm | Permalink

          This hurts lenders and restrict the supply what we need is fewer borrowers and more banks with reasonable interest rates. Same as.

      • Lifelogic
        Posted July 19, 2014 at 8:15 am | Permalink

        Rent yields just circa 5% payday loans 1000% + often renting is cheaper than renting the cash to buy.

    • zorro
      Posted July 15, 2014 at 5:12 pm | Permalink

      Yes, one of their main achievements along with getting rid of the M4 bus lane…


  6. margaret brandreth-j
    Posted July 15, 2014 at 6:33 am | Permalink

    Perhaps all forecasts are as erroneous as the weather forecasts.

  7. Mike Stallard
    Posted July 15, 2014 at 6:44 am | Permalink

    On a rather broader canvas, this is a historic problem.
    The French Revolution in all its barbarity was caused by a lot of seriously rich people not contributing to the very expensive and unwanted State. She never actually said, “Let them eat cake.” But it summed up the whole problem.
    The rise of Adolf Hitler and the dictators of Europe in the 1930s had a lot to do with public finances collapsing under Weimar. Only the rich (Juden) survived s successful capitalists.
    When there are a lot of unbelievably rich people living the vida loca in front of a lot of very poor people who actually pay the taxes, what do you expect?

    • Alte Fritz
      Posted July 15, 2014 at 4:45 pm | Permalink

      Our top rate of tax affects the aspirational rather than the uber rich. For the latter, tax is more or less voluntary.

  8. Gary
    Posted July 15, 2014 at 6:45 am | Permalink

    “Too many
    people assume the Treasury model and
    official statements about the impact of
    higher rates are correct”

    ’tis a pity. The rest of us know the treasury knows nothing and their models are useless. Their forcasts are consistent, consistently wrong. They never saw 2007 coming. The only thing they are expert at, aligning themselves around the trough.

  9. Richard1
    Posted July 15, 2014 at 6:46 am | Permalink

    Interesting article by the great economist Arthur Laffer in the weekends Sunday Times. He points to irrefutable evidence of the revenue reducing effect of higher tax rates, contrasting the tax revenue and job creation experience of high tax versus low tax states in the US. He goes on to make the valid point that both in the UK and, with Obama, in the US, its no longer about setting taxes at rates such as to promote growth and maximize receipts. Now its about political gestures (green taxes eg) and class war (high marginal income taxes).

    We need a new Thatcher-Reagan revolution in the Western World. Otherwise we are going to be left standing by newly emergent Asian economies which don’t go in for this leftist drivel.

    • Bazman
      Posted July 16, 2014 at 6:39 am | Permalink

      Still going on about the Laffer curve Richard with absolutely nothing new to say? You were challenged to go back and look at previous posts in this one.
      Which had a link in it to this one.
      You continue to write your ranting nonsense in some way hoping you can spread the word it seems without understanding what the Laffer curve actually says it seems.
      Your next black propaganda post will be pointed put too.

      • Edward2
        Posted July 16, 2014 at 11:58 am | Permalink

        Your political bias leaves you with a blind spot on this Baz
        The point Richard is correctly making is that if you set rates too high you get less revenue than you anticipated.
        This is born out by the facts and figures presented in Mr Redwood’s article.
        Taxing the rich more, as you want to do, needs more care than just setting ever higher headline percentage rates.

        • Bazman
          Posted July 16, 2014 at 4:27 pm | Permalink

          If this is your logic then there must be some sort of relation to the Laffer curve of chasing tax that is legally and illegally avoided. We are nowhere near that peak as can be seen in the high profile cases which are no doubt just the tip. You are against the chasing of tax that everyone else pays now are you in some sort of apologist nonsense of the rich who in the main could not care less about you.

          • Edward2
            Posted July 17, 2014 at 8:47 am | Permalink

            There is no connection to the setting tax of rates to gain revenue and chasing tax from those who owe it.
            The actions taken by some to legally avoid high rates of tax are actually proving how lower rates can result in higher revenues.
            Are you still firmly wedded to high percentage rates even when data shows a reduced return?

          • Richard1
            Posted July 17, 2014 at 9:09 am | Permalink

            The reason there is so much tax avoidance is the tax system is so complex. It is complex because there are so many political carve outs from high rates. The cure for this is a much simpler tax system with lower, flatter rates.

            Tax evasion is a crime which afflicts every economy, just as other crimes do. There is no simple solution to it other than prosecution of the guilty. But the lower tax rates are and the simpler tax systems, the less incentive there is to evade.

          • Bazman
            Posted July 17, 2014 at 4:09 pm | Permalink

            Maybe you should look at the often high and complex rates of tax in your dream countries such as the Scandinavian ones and interestingly Switzerland. Take a look at the cost of a TV/radio licence in particular. Your beggar my neighbour tax ideas are of little help to anyone except rich individuals who have often made their money from corruption and tax evasion. The very people the Tories are courting for election funds. 160 k for a game of tennis with Dave? Who is that attracting not business that’s for sure.
            The corporations as you well know are getting away with billions and as you like through the EU structures that help Luxembourg be a tax haven only cheaper than this one depraving millions of citizens in the UK and the EU of revenue, no tax and waste policies.

      • Richard1
        Posted July 16, 2014 at 5:42 pm | Permalink

        The rant Mr Bazman is in your post not mine. I have simply drawn attention to the overwhelming evidence that lower rates encourage growth and produce higher tax receipts, and higher rates the opposite. Leftists don’t like it of course,but the facts speak for themselves and people will make their own minds up.

        • Bazman
          Posted July 17, 2014 at 4:12 pm | Permalink

          You are telling us that low taxes are self funding. The lower the tax the more is taken without cost to the state. The Laffer curve or economics does not say this. Only your own right wing delusions. You also forget that for some the intention is to pay no taxes as they do not believe they should.

          • Edward2
            Posted July 17, 2014 at 6:08 pm | Permalink

            But no one on here is saying that Baz.
            The data shows that too high a percentage rate reduces revenues and growth.
            The art is in deciding an optimum rate to gain the revenue needed.
            So are you still wedded to the idea of higher percentage rates even if it reduces revenues?

          • Bazman
            Posted July 18, 2014 at 5:06 pm | Permalink

            Strange that this idea never applies to welfare which must be cut no matter what the cost in other areas.

          • Edward2
            Posted July 18, 2014 at 10:38 pm | Permalink

            Welfare spending is rising
            Get your facts right.

          • Bazman
            Posted July 19, 2014 at 7:12 pm | Permalink

            Even though unemployment is falling? Who is taking this extra spending? Thats right the working poor. Should we cut this and make them compete with Cheaper EU workers who also claim benefits whilst working or are you going to tell us that its scroungers increasing the cost? Which scroungers? Provide evidence and tell us which group of people. Single mothers?
            We need fact right ones.

          • Edward2
            Posted July 19, 2014 at 10:09 pm | Permalink

            When have I ever used the word scrounger?
            Stop making things up.
            You claimed welfare is being cut
            It is not
            Welfare spending is rising

  10. Martyn G
    Posted July 15, 2014 at 6:50 am | Permalink

    John, I simply do not understand why, despite all evidence to the contrary, that the government thinks that raising the tax level from 40% to 50% will provide more income. Why do they always seemingly wish to fly in the face of common sense and precedent in this and so many other issues?
    HMRC is a personal nightmare for me (and many others I suspect). Since my poor wife died soon after our golden anniversary last year, without a single explanation from HMRC I have been sent 6 different tax codes with the result that my income had been reduced by over £500 a month. And I have now received a demand for another payment on my late wife’s estate, despite last year it all having been finalised and tax paid as owed. Now, I have had to engage an accountant, it being quite beyond my capabilities to argue with HMRC; if any government department or quango needs booting into the real world it is HMRC.

    • Lifelogic
      Posted July 15, 2014 at 7:03 pm | Permalink

      Indeed it might be nice if they sent out letters with phone number on that are answered or at least ring! Maybe even an email for the sender?

  11. Roy Grainger
    Posted July 15, 2014 at 7:03 am | Permalink

    The Laffer Curve is such an established observation in economics it is not worth debating – the science is settled – but the Labour flat-earthers won’t believe it, they think higher tax rates always means more tax revenue. In my case when the upper tax rate was higher, and as the personal allowance was downrated for every £ earned above £100k, and taking NI into account,t my marginal tax rate was something over 65%, so I just paid as much as I could into my SIPP and the government took less tax from me overall. Simple.

    • Andy
      Posted July 15, 2014 at 4:28 pm | Permalink

      Exactly right. When it became clear I would no longer receive child benefit worth around £1700 a year, my instant reaction is to pay more into my SIPP to bring my earnings (As used in the calculation) below £50K a year.

      Not only does the government still have to pay out my child benefit, but they ‘loose’ the tax on the contribution I now make.

      All perfectly legal, I guess this is what they intended, since I will have a larger pension fund when I retire.

      Of course, this won’t help much when the government (inevitably some would say) comes after our pension pots at some time in the future….

    • Monty
      Posted July 15, 2014 at 9:51 pm | Permalink

      “…the Labour flat-earthers won’t believe it, they think higher tax rates always means more tax revenue”

      Not quite. I reckon the labour parliamentarians understand the Laffer effect perfectly well. But their primary agenda is appealing to the spite factor among their electoral base. The welfare class don’t care about balancing the nations budget, they are never going to pick up the tab for endless government borrowing. But the prospect of vandalising the aspirations of the better off is a surefire vote winner.
      Malcontents are generally assumed to be dissatisfied with their lot in life, but in my experience their real obsession is visceral rage at your lot in life.

      • Bazman
        Posted July 18, 2014 at 5:09 pm | Permalink

        The fat earthers are the ones who believe that tax cuts are self funding and no mention of middle class welfare and the massive corporate welfare that exists here. Most welfare is paid to those that work or pensioners so square that one off.

        • Edward2
          Posted July 18, 2014 at 10:41 pm | Permalink

          Pensioners are not on welfare, as well you know.
          They pay in during their lifetime via tax and NI
          A full pension requires over 35 years of steady NI contributions.
          Had they invested the same amount in a private sector scheme their pension would be much better.

          • Bazman
            Posted July 19, 2014 at 7:20 pm | Permalink

            Opting out of SERPS was a bad idea. Many including myself have been advised to opt back in which I have done. So much for your private is better theory. The pension does not come from some investment it comes from the taxpayer and is in effect welfare in all but name. You need to read a bit outside your silly right wing views Edward2 I would recommend the internet, a dangerous fact filled place for someone like you.
            Things that you could be offended by. Thoughts, opinions, ideas. The whole human race is there if you look and burrow.
            Maybe it could in some way be stopped like file sharing?

          • Edward2
            Posted July 19, 2014 at 10:13 pm | Permalink

            Ive rarely read such rubbish
            Are you actually trying to say that people who work hard and pay part of their wages into a pension are on wefare?
            And you have the nerve to call others deluded

          • Bazman
            Posted July 20, 2014 at 11:34 am | Permalink

            The point is that there is not some big fat fund that pays pensions like dividends from an investment. It is paid from taxes like welfare. The truth hurts I know.

  12. Leslie Singleton
    Posted July 15, 2014 at 7:04 am | Permalink

    I agree with your judgement on this, but what is missing is any hint at an explanation (anywhere that I have seen) of how and why others, on the Left of course, apparently strongly disagree, with Miliband recently saying that he is going to put rates back up again. Can you yourself not have a go at an explanation? Do they simply not care about the actual tax take so long as they can gain cheap popularity?

  13. Narrow Shoulders
    Posted July 15, 2014 at 7:16 am | Permalink

    Further proof that tax payment is an option for the wealthy but a mandate for PAYE serfs. A simplification of the tax code would give the wealthy less room to manoeuvre. I acknowledge that the lucky few do bear a large portion of the tax burden but not such a large burden proportionate to their income and lifestyle. I guarantee I pay a larger percentage of my income in tax than them and many of them are not so special as to deserve those earnings. They are as parasitic as the benefit cheats and should be dealt with too.

  14. acorn
    Posted July 15, 2014 at 7:19 am | Permalink

    Your questions have all been answered and I think HMRC and ONS are trying to avoid using OBR predictions for official national statistics.

    “Projections of incomes for high earners for 2012-13 and 2013-14 also allow for possible behavioural responses following the introduction of the additional rate of tax in April 2010 and the reduction in the rate from 50% to 45% in April 2013. Specifically, these responses are: (a) continued temporary reductions in incomes below ‘normal’ levels for those affected during 2012-13, the counterpart of significant forestalling of incomes in 2009-10 ahead of the introduction of the additional rate; and (b) possible anticipatory effects in 2012-13 and their subsequent counterpart in 2013-14 that may arise in advance of the reduction in the additional rate of tax to 45%.”

    2014-15 is likely to be the first year to be relatively unaffected by timing effects due to the changes in the additional rate of income tax in the recent series. The projections to this year are, however, still influenced by the uncertainties regarding the extent of unwinding of forestalling in the base year. (ONS – ITLS).

    Number crunchers estimates are a total of £22 billion in pay has been forestalled during 2009 to 2014. The high earners will tell you that the Coalition was slow to reduce the 50% rate; and, they expected the “additional rate” of tax would have been abolished by now.

  15. oldtimer
    Posted July 15, 2014 at 7:24 am | Permalink

    To answer the question posed in your headline: because the 50% rate was introduced, and then maintained at high rates, for political reasons not to optimise tax revenues. Greasy pole politics is responsible for this shambles, like so many others that disfigure public life. The solution is obvious.

  16. alan jutson
    Posted July 15, 2014 at 7:35 am | Permalink

    People who are filling in self assessment forms, unlike those on PAYE, usually have some sort of control over their own income, own business expenditure and allowances.

    Thus they are able to a degree, to manipulate the system, thus when they feel that they are simply being used as a cash cow and are paying the government more than they can themselves, they make legal (and in some cases illegal) adjustments.

    The fact that these very people are usually in so called non secure employment with no fixed income would also mean that any recession would likely hit them first and hardest through loss of contracts and sales directly.

    Given my recent experience of HMRC with regard to calculation errors, refusal to answer questions, and a refusal until very recently to explain why, it is no wonder that the sums simply do not add up.

    Our tax system is far too complicated, and quite honestly is unfit for purpose.

    Any government which believes people will work for them, rather than themselves, is also rather deluded.

    • Mark B
      Posted July 15, 2014 at 11:17 am | Permalink

      Great post !

    • Joshaw
      Posted July 17, 2014 at 8:02 am | Permalink

      I was intending to say something like this but I think you’ve made a better job of it.

      The last paragraph, in particular. It should be copied, framed, and mounted on every wall in every office at HMR&C and the Treasury.

  17. Roger Farmer
    Posted July 15, 2014 at 7:50 am | Permalink

    As soon as taxation exceeds the level at which the payers consider it excessive then avoidance and evasion come into play. This is not rocket science. They know that Government in the form of civil servants and the political executive are unbelievably generous with other peoples money and see no reason to encourage excessive government which amounts to useless people building a power base. HS2 is to quote but one example. A scheme for the self aggrandisement of a few but which has no commercial basis whatever. If it did, real money would invest in it. The only investment will be the lending of money to government on guaranteed interest rates. A budget airline using an A380 could probably offer a Birmingham to London return for £50.00 if only the respective airports could handle such business, but of course they cannot due to lack of investment in runways deemed too politically dodgy. What I ask will the rail fare be, even in todays terms, to pay for such a white elephant.

    • Roger Farmer
      Posted July 15, 2014 at 3:32 pm | Permalink

      Today there is talk in the Telegraph of Skylon and it’s potential for a two hour flight to Australia from the UK. Our business secretary is showing interest which I hope is not the kiss of death. Someone with real vision has identified eight potential sites for it’s eventual commercial operation. Six in Scotland. one each in Wales and Cornwall. So we have five hours each way to the airport and two for the flight. I doubt whether the Aussies will have the vision to put their facility somewhere west of Ayers Rock. Our terminal should of course be on Boris island with an HS3 link to the capital. If you allow politicians anywhere near it this is the level of thinking you get.

      • The PrangWizard
        Posted July 15, 2014 at 6:38 pm | Permalink

        And there is the question of the Scottish independence vote. Cameron, and a large proportion of the British Establishment are betrayers of England’s interests. He gave naval shipbuilding to Scotland in advance of the vote, and now what if this thing goes to Scotland. All decisions of this strategic nature should be delayed until after the vote. And yet we know that whatever the vote he will continue to appease the Scots to the detriment of England. He never mentions the name of the my nation.

    • Bazman
      Posted July 16, 2014 at 6:52 am | Permalink

      Two hour flights to Australia, but no high speed rail? You are obviously a train spotter or in the industry.
      Planes cannot handle the same number of passengers as trains. In Japan many Jumbo jets an hour would be needed top carry the passenger numbers. In the rest of Europe high speed rail is being invested in so why not here or should we just slip behind the rest of Europe. You are being questioned your ownership of the facts.

      • Sebastian Weetabix
        Posted July 16, 2014 at 8:34 am | Permalink

        High speed rail, from here to Australia? There’s a thought.

        • Bazman
          Posted July 16, 2014 at 4:21 pm | Permalink

          Underground at a 100omph in a vacuum?

  18. David Murfin
    Posted July 15, 2014 at 8:31 am | Permalink

    “More worrying is the gross inaccuracy of the forecasts.”
    HMRC cannot even answer the phone effectively. Do you expect their forecasting to be accurate?

  19. Antisthenes
    Posted July 15, 2014 at 9:07 am | Permalink

    Hayek, Mises and other right wing economists are consistently proven to be right in their assumptions that left wing economic policies are damaging and fail to achieve that which they set out to achieve and are in fact counter productive. The Laffer curve is always derided as being at best inaccurate and at worst nonsense by the left despite the evidence that it is does predict the downside of too high taxes and this is just another prime example. History tells us consistently that too high taxes has a negative effect on productivity and is a barrier to healthy growth and wealth creation.

  20. Anonymous
    Posted July 15, 2014 at 9:26 am | Permalink

    Sorry to go off topic – Michael Gove replaced ???

    • Roy Grainger
      Posted July 15, 2014 at 10:19 am | Permalink

      Gove is no great loss to be honest. Though I supported the free schools idea when it started I have been very unimpressed with the ones I have seen in detail. I conclude you can’t let parents run schools as you get no continuity and potentially arbitrary decision making – as an example I would direct your attention to the (situation ed) that is Toby Young’s West London Free School where they are already on to their third headmaster in two years (with no official explanation why) and have massive delays in redeveloping their three separate and unsuitable sites. Labour’s Academy programme was far better. Sorry, it just was.

    • Roger Farmer
      Posted July 15, 2014 at 3:37 pm | Permalink


    • Richard1
      Posted July 15, 2014 at 3:45 pm | Permalink

      It’s very disappointing. Michael Gove has made a brave attempt – the first door over 20 years – to raise educational standards by taking long th Blob. Cameron has been spooked by the Blob’s campaign against him. I don’t know anything about Nicky Morgan. Hopefully she will continue Michale Gove’s excellent work.

      Same thing with Paterson. Green leftists have secured his removal. Mr Cameron is deluding himself if he thinks any of these people will now do anything to promote a Conservative re- election.

      There is no point trying to curry favour with the Left. It would be better to stick to the best people and the right policies.

      • Lifelogic
        Posted July 15, 2014 at 7:07 pm | Permalink

        Indeed the right policies are also popular policies.

        Low taxes, government efficiency, less waste, no expensive energy & green crap, far less EU, good defence (not attack) and law and order with some real deterrents.

      • Anonymous
        Posted July 15, 2014 at 11:18 pm | Permalink

        We have capable politicians moved, aptitude tests for safety critical jobs dropped and now the police accepting convicted criminals in order to fill quotas. Plenty of suitably qualified white men are being sidelined, which might just be acceptable if standards weren’t being eroded to this end.

  21. David
    Posted July 15, 2014 at 9:29 am | Permalink

    I don’t pay 50% tax. If I did and it was the sort of job where I could do less work and earn less (not true of e.g. CEOs). I would do so.
    Possibly people put more into their pension etc.
    I am very close to the limit where child benefit gets taxed but if I ever get there I will put more into my pension rather than pay such a large amount in tax.

    • Lifelogic
      Posted July 15, 2014 at 7:08 pm | Permalink

      50% tax 20% vat NI is quite an incentive to fit you own kitchen, do your own garden etc. or just pay cash in hand as so many do.

  22. Kenneth Morton
    Posted July 15, 2014 at 9:44 am | Permalink

    For once, the science IS settled . The out turn figures prove the logic of the Laffer curve to be correct. Not that it was ever in doubt.

    The Great Westminster War of 2012 to 2014 between ‘The Long Term Economic Plan’ and ‘The Tax Cut for Millionaires’ has produced a clear winner.

    Applying Laffer, ie finding the ‘sweet spot’ for the various taxes raised, requires more art than science. The work of the OBR since 2010 has proved the need for truly accurate and independent economic data though even a Conservative Chancellor can be over optimistic about future trends.

    The big question is whether a Conservative government will be allowed to continue the good work or whether a Labour government continues with the age old and wrong policy of tax, spend and decline.

    • Lifelogic
      Posted July 15, 2014 at 7:10 pm | Permalink

      It is only a sweet spot for the parasites in government, we should not be seeking maximum revenue for government but far less.

  23. Andy
    Posted July 15, 2014 at 9:57 am | Permalink

    50% understates the real tax rate. Consider the marginal rate on a higher earner, a normal employee, who does some work and then spends the money he earned. The employer gives the employee £100 bonus. The employer pays 13.8% NI before it enters the employees pay packet, leaving £86.20. The employee pays 2% employees NI & 50% income tax, leaving £41.38, then he pays 20% vat on anything he buys, meaning he has to produce £100 to buy things worth £34.48 to him.

    The real marginal rate for top rate payers is very nearly 66%.

  24. ian
    Posted July 15, 2014 at 1:16 pm | Permalink

    Self employed red herring, retirement, going back to work for a company and selfemployed employing family members to become a company and paying 20% tax not 50% or 45% tax and good people going aboard for work.

    • libertarian
      Posted July 15, 2014 at 6:21 pm | Permalink


      Not entirely sure what you point is. If you are saying that someone becomes self employed and then pays their spouse and children salary so that they all pay basic rate? If so I think that you and they would be pretty stupid. As that would be 3 lots of tax, 3 lots of NI and 3 lots of ENI which I think you’ll find is worse than paying the higher rate on 1 salary

  25. ian
    Posted July 15, 2014 at 1:20 pm | Permalink

    When i say selfemployed employing family members i mean wife and children who do not work.

  26. Martin Ryder
    Posted July 15, 2014 at 1:44 pm | Permalink

    This morning, whilst reading the paper, my wife exploded with annoyance and said, ‘Look what Cameron is doing now. He is sacking capable and experienced ministers just so that he can appoint women to cabinet jobs. He thinks that women are fools who won’t recognise a PR stunt when they see it. Next election I will not bother to vote.’

    My wife has voted Conservative in every election, local or national, for nearly 50 years.

  27. Dennis
    Posted July 15, 2014 at 2:37 pm | Permalink

    Why did self assessment Income Tax decline so much at the 50% rate?

    You ask the question and I hoped you would give an answer but you didn’t so presumably no one knows, yes?

  28. Bert Young
    Posted July 15, 2014 at 3:22 pm | Permalink

    I have posted several times that that our taxation system should be scrapped and replaced by a tax on spending . The infrastructure costs of monitoring and collecting taxes is enormous and seriously out of hand . A tax on spending is a far simpler method .

  29. BobE
    Posted July 15, 2014 at 4:08 pm | Permalink

    Mates rates. Also trades helping out on one job by swapping days on another job. Cash payments for as much as possible, just logging the smallest reasonable amount. Always declare assets, much better a new laptop than pay HMRC. If you overtax you encourage ways to not earn income and earn in other ways.

    • Anonymous
      Posted July 15, 2014 at 11:20 pm | Permalink

      When you try to control people then they become deceitful.

      • Anonymous
        Posted July 15, 2014 at 11:22 pm | Permalink

        … and rightly so in my view.

        I fully understand why people dodge high tax and don’t blame them for doing so.

  30. Edward2
    Posted July 15, 2014 at 6:20 pm | Permalink

    Its odd that seemingly well educated economists who expect shoppers to seek out the cheapest goods and act in the most efficient way, are then surprised when we alter our behaviour to avoid high rates of taxation by modifying our behaviour.

    I know several who have decided to do simple things like reducing the size of their company, to take more time off and to manage with a little less income.
    When the State takes more than half, then why bother working long hours.

    • Bazman
      Posted July 16, 2014 at 6:56 pm | Permalink

      But the rest of us are incentivised by desperation and you have told not told us why the British should not compete with EU migrants working for lower wages, helping industry by keeping their wage bill down and learning new skills as well as cash?

      • Edward2
        Posted July 17, 2014 at 8:56 am | Permalink

        Those motivated by desperation act in the same way as everyone else in that we are all careful how we spend our money and how it is taken off us.
        You keep repeating your question to me in your last para which I have tried to answer before. Its not my fault if you refuse to accept my reply as valid.

  31. Monty
    Posted July 15, 2014 at 10:17 pm | Permalink

    I suspect that changes in patterns of work also have a significant impact on the criticality of the Laffer effect. People in steady, long term employment under the PAYE system don’t have the flexibility to keep their heads under the adverse tax thresholds. But with more and more people contracting, freelancing, and self employed, the scope for tuning their working and earning cycle increases.

  32. Lindsay McDougall
    Posted July 16, 2014 at 12:27 am | Permalink

    What is the total income on which income tax was levied at a rate of 40% or more? To answer that, I guess you would need to include the self assessment and the PAYE returns, and obtain the active co-operation of HMRC. Is there any prospect of this?

  33. ian
    Posted July 16, 2014 at 1:36 am | Permalink

    The self employment red herring is small shop small business employing people as self employed so they do not involve them selves in pay roll tax”s. Pay someone about £200 or so a week or less and they can pick up the all the government perks, usual foreign people who do not pay INs but will get a full pension on retirement because they will say they are poor live and work here most of their lives.

  34. Andyvan
    Posted July 16, 2014 at 6:41 am | Permalink

    What shocks me is the mentality of anyone that thinks it is that it is right to steal more than half the amount that a person has earned on the basis of some mythical “social contract”. I for one have never signed such a contract and never would especially as one party (government) does not uphold it’s end of the bargain. Tax is out and out theft and robs the wealth of the citizens of the country to flagrantly waste on bureaucracy, war and bribes. This obvious fact seems lost on great numbers of people that have entirely adopted the slave mentality and scream for blood if they see anybody trying to avoid being mugged by the state. We’re so brainwashed we put up with paying far more tribute than medieval serfs and actually tell ourselves we’re freer than they were. Collectively we are far less free and resemble sheep herded into a pen for fleecing more than we do intelligent and independent human beings.

  35. Robert K
    Posted July 16, 2014 at 6:44 am | Permalink

    The real iniquity starts at GBP 100,000, when the tax free allowance is eroded, giving an effective marginal rate of tax of up to 60%.
    Take the example of a lawyer or doctor earning GBP 100,000 a year by working 10 hours a day, five days a week. Let’s say they want to increase their earnings by 20% by working 10 hours a day for six days a week. Their actual increase in pay will be less than half the gross increase, so why would they bother? The net effect is less tax for the government and less economic activity by successful professionals.

  36. ian
    Posted July 16, 2014 at 12:55 pm | Permalink


    You open a company it pays 20%tax on profits if you make a profit, The family members go down as selfemployed. and pay class 2 NI or class 4 NI usual around 150 pound a year if they over the age of 18. No income tax till you get to 10,000 a year. Pension contributions, mobile phones and other tax allowances for selfemploy and business. You can cut your tax bill down

  • About John Redwood

    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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