A ‘tax’ing proposal

Not surprisingly, the announcement by Ed Balls, the Labour Party leader, of his proposal to reintroduce a 50 per cent income tax rate was greeted with widespread opposition. Typical was the comment by Lord Digby Jones, who has in his time served as Director General of the Confederation of British Industry, and as Minister of State for Trade and Investment. He described the proposal as “another attempt to kick wealth creators”. The announcement also went down badly with most U.K. newspapers, national and local.

Such hostile reactions were not at all surprising. The most basic reason is that no one is keen to see tax rates increasing (if, that is, they are going to be affected by them).

I have no particular feelings about whether a 50 per cent tax rate would be appropriate or not. What I find interesting about the Ed Balls proposal is what may lie behind it. Is the idea, as has been widely suggested, to show that the burden of reducing the national deficit should fall on the broadest shoulders — on those who have the highest incomes. The indications are that this is indeed what lies behind the proposal.

It may or may not be a sensible policy to introduce. I am no economist, and I do not propose to get into that argument.

What I do feel, however, is that many of the objections to the idea are based on dubious thinking. One argument, frequently put forward, is that any great increase in the taxation rate would cause people expected to pay it to leave the country. I never find that a particularly convincing argument, not least because when the tax rate was higher, the so-called likely leavers remained. My reaction, furthermore, is coloured by my feeling that if people decide to leave the country because they are expected to pay higher taxes — to reflect their higher incomes — well, let them go. Would their departure be a great loss? (And would they automatically find more fiscally acceptable places to settle in?)

That, I readily accept, is a rather flippant reaction. Not at all flippant is my firm belief that we need to ask ourselves what national wealth is created for. The answer must surely be that it should be created for the benefit of society. Certainly the individuals helping to create it benefit themselves — and so they should — but we need to keep in mind the overriding purpose. The point was made strongly by a number of contributors to the letters page of

The Guardian . I will quote from just two. Trevor Rigg, writing from Edinburgh, commented, “If those earning over £150,000 really think that paying a bit more tax is an unbearable and unfair burden in a country that already is one of the most unequal in the developed world, let them go elsewhere.”

This is exactly the point that I have just made. My second example is the Rev. Peter Godfrey, writing from Gloucestershire, who declared succinctly: “How good to hear the pips squeaking.”

Behind all the controversy is the fact that basic attitudes of many of the most financially successful in our society (notably, for example, the bankers) are very different from what they were a generation ago.

I shall use my own experience as an example. Just over forty-five years ago I was appointed to a professorial level post at Cambridge University. The salary was pretty good by the standards of the time. The job was stimulating, demanding, and wholly enjoyable. It would never have occurred to me — or my contemporaries — to expect a bonus on top of our salaries, for doing our job well, and with commitment. It was a different age, and although I am always reluctant to view the past through rose-tinted spectacles, I am not convinced that the “bankers’ bonus” culture has improved things.

Email : bill.kirkman@gmail.com