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The single most eye-catching element of the Budget is the proposal to raise the top rate of tax to 50 per cent. That has universally been billed as a soak-the-rich measure. It could, equally, be described as a tax on London. The City of London is not London but undeniably, it is by far the most significant revenue-generating part of it - and indeed of the country.
The proposals to do away with personal allowances for those on £100,000 a year and to raise the tax rate for those on £150,000 do, admittedly, affect only the top 1.5 per cent of wage-earners. The trouble is, this group comprises a great many of the people that any government is going to need to generate economic growth for the future. Most of them work in London and it is London that will suffer most if they leave.
The caricature of Alistair Darling as Robin Hood, squeezing the rich to deliver the poor, misses the point. The Robin Hood of legend did not have to worry about the law of diminishing returns: the Chancellor does. The sole question that any rational government should be considering, given the eyewatering scale of the deficit, is how to maximise revenue and reduce costs. And the reality is, as the Institute of Fiscal Studies has pointed out, that a 40 per cent top tax rate may actually be more productive in raising revenue than a 50 per cent rate, which could raise perhaps £2 billion, small beer in terms of state debt. That is the question we should debate. Instead, the Government seems merely intent on setting an elephant trap for the Tories, to force them to oppose the new rate and thus mark themselves out as the friend of the few, not the many.
Of course, the Chancellor is swimming with the tide in raising the tax on top earners, even though this breaks a manifesto commitment. The scale of justifiable public revulsion with big-bonus financiers who helped bring down the banks is such that there will be no sympathy with the argument that some may go elsewhere. But vindictiveness, however natural, should take second place to economic reason. And given the unbalanced nature of an economy in which manufacturing has been allowed to go to the wall, we all need the City to generate the economic growth that Mr Darling optimistically predicted yesterday.
The economy needs the City, and the City needs top-flight bankers, analysts, accountants, lawyers, backup staff and all the other highly paid individuals who will be hit hardest by these new rules. They can still go elsewhere and a poll today, admittedly of only 100 people, suggested that a significant percentage could do so. And that would not be in the interests of the poor.
Boris, a year on
THE Mayor, Boris Johnson, has been a year in office. He has in that time grown into a role for which he had, at the time he was elected, little experience. For Londoners, he is a recognisable figure, an individual with the charisma and vitality to front the city with style. That matters.
As for his record, it is still too early to draw up an audit of his achievements and failures, but so far, he has done well. He has engaged with genuinely difficult issues: youth crime, knife crime and public safety, both in positive ways, by engaging disaffected teenagers, and by supporting robust action on the part of the police. He has fulfilled his manifesto commitment to do away with the western zone of the congestion charge, though he may yet find it worthwhile to restore it for the early rush-hour. He has brought his authority to bear on the Met, and while he has made errors of judgment, he was right to replace Sir Ian Blair with his less controversial successor. We still have bendy buses and no new Routemaster: that needs expediting. Less creditably, erratic planning decisions on high-rise buildings have put his policy on the skyline in doubt.
Mr Johnson has not promised to run again and this paper does not promise to support him if he does. But given his contribution so far, he should aim to be a two-term mayor. He has made his mark.
Reader views (2)
The bankers affected by this new 50% rate of tax are the very same incompetents that got us all into this mess. If they don't want to pay the extra 10% tax, there is the door. Good riddance.
- Thomas, London
At that end of the salary scale, it's a tax on employers. People well know the 'net' pay they need, and 'HR' will loyally convert that to the requisite 'gross' (er, for people who really have to be retained). The company will then stump up, or see whether 'forum shopping' (ie abroad) works better for both. My one-time boss had a phenomenal UK gross, but that was because he'd been guaranteed the net he'd have earned in his home country.
- Steve, London, England
