The great theme of the political Left in the arduous, economically damaging build-up to Wednesday’s Budget is that wealthier taxpayers need to pay more. The critics also cite the Nordic nations as societies to which we should aspire.
It was at the International Monetary Fund (IMF) annual meetings in October that Rachel Reeves gave voice to the mantra that those with the ‘broadest shoulders’ should pay more. The Chancellor’s view is endlessly parroted by Labour apparatchiks.
The rabble-rousing, newish leader of the Greens, Zack Polanski, advocates a wealth tax. He cites France as an example of the best way to address the financial black hole. His advocacy, in frequent broadcast appearances, is often greeted with applause. Yet evidence shows that such a charge would raise modest new income – maybe £1billion at best.
But it would likely drive wealthy investors and entrepreneurs overseas. They are the most mobile sector of society. Several thousand have already headed for their private jets since Labour began mindless assaults on inheritance and capital gains.
No one expects honesty from politicians. But the belief that well-paid City traders and bankers, business creators and the landowning classes are freeloaders is a whopping untruth.
The highest earning 1 per cent of UK residents are already responsible for paying 30 per cent of taxes. Drill down to the top 10 per cent and you find they are responsible for 60 per cent of collected revenues.
Rabble-rouser: Newish leader of the Greens, Zack Polanski (pictured), advocates a wealth tax
As for much disparaged ‘fat cats’, collectively the Square Mile pays about 10 per cent of the nation’s taxes, or £76billion. That is enough to fund the UK’s national defence and education alone.
There is another killer statistic to be drawn from OECD data. In Britain, 45 per cent of the top earners’ salaries are consumed by tax and National Insurance contributions. This compares with 29 per cent for the average worker, or what Starmer and Reeves might call working people.
Britain has the widest gap in the G7 between taxes paid by high earners and working people. It is only comparable with much smaller Norway and Denmark.
The odd thing is that the surging tax burden for Britain’s better off, creating a fairer society, largely took place during 14 years of coalition and Tory rule. It was a period when governments had to cope with vast costs of Labour’s financial crisis legacy, Covid-19 and Russia’s brutal war on Ukraine. The contrast between Britain’s supposedly free market model and that of the fast-growing US economy could not be more pronounced.
In the US, it is the average taxpayer rather than the better-off who provide most of the income for a less generous federal government. Americans have a totally different attitude to the likes of Polanski and Reeves. Instead of the politics of envy, many lower-income US citizens believe that in a land of opportunity, one day they could join the elites.
The build-up to the Budget has been horrendous. The GfK consumer confidence index is dropping, retail sales are sinking in the run-up to the holiday
season and the latest S&P purchasing managers’ index is in retreat signalling stagnation – if not recession.
All of this is having a baleful effect on the public finances with tax receipts falling and the Budget deficit already £9.9billion higher than the projection in the spring statement. Taxing endeavour, enterprise and entrepreneurship doesn’t work. Something Labour’s naive front bench fails to understand.
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