Taxing the rich will make Britain poorer
The news that surging public sector pay has driven up government borrowing comes as no surprise. Neither does the Labour Government’s response: carving out room to go back on its promise to avoid raising taxes on working people.
Having already eyed a U-turn on employer National Insurance Contributions, ministers are now leaving the door open for a tax raid on high earners. Asked six times whether someone earning more than £100,000 per year would be classed as a “working person”, care minister Stephen Kinnock refused to offer a definitive answer. We are happy to clear up any confusion: those on high salaries are by definition working, and among our most productive residents.
A definition of “working people” which excludes those who earn a good wage would be an evident absurdity. Regrettably, it would also be in keeping with the anti-wealth, anti-aspiration tenor of this Government. While other countries compete to attract the talented and mobile, Britain has constructed a system that seems all but designed to drive away the successful.
The withdrawal of childcare support can leave working parents earning £134,000 worse off than those earning £99,000, while the withdrawal of the personal allowance in combination with the student loans system produces extremely high marginal rates that sap the incentive to work.
It is a combination that sits poorly alongside the Government’s other priorities. The immigration system continues to bring in low-skilled, low-wage workers who will pose a substantial fiscal drain over their lifetimes. The public sector, where productivity has dropped below the levels seen in 1997, is getting inflation-busting rewards. The welfare system continues to support a new aristocracy of leisure, free of the obligation to work or earn to support itself. And this is increasingly paid for by a tiny fraction of the population.
As things stand, the top 1 per cent of earners already account for 29 per cent of all income tax revenue. Raise taxes further, and an increasing number will surely begin to look for work overseas – where productivity is better rewarded, and the standard of living higher – while others will simply choose to work less, substituting leisure time for the post-tax income they are now unable to earn.
It is difficult to see how such a tax raid would deliver the return to growth Britain so desperately needs. Driving away the productive and successful would simply leave us poorer.