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Thursday, 23 April 2009

Brown's flawed strategy

Putting the top rate of tax up by 10% will raise £1 billion, so Brown won't fix the deficit unless he puts up the top rate of tax to 1750%. Does not compute.

What it also shows is how little impact the well paid actually have on the overall economy. That £1 billion of tax implies that all of their UK taxable income would only amount to £10 billion out of a GDP 140 times that figure, so don't believe the protestations of all those who would bemoan the departure of a lot of wealth creators.

The simple fact is that wealthy people and their money are very mobile. The fact that somebody is resident in the UK does not mean that they invest in the UK. The large number of non-doms who keep their investments in businesses and property offshore are evidence of this (although they are largely unaffected by the change in UK tax rates because they bring very little taxable income onshore). Conversely, large parts of British business are owned from offshore including by Britons resident overseas. Philip Green (BhS etc) is a good example but Monaco, Jersey and the Isle of Man are full of expat Britons running UK businesses largely outside the scope of UK personal taxation.

What Brown's higher tax rate does do is discourage the potential British entrepreneurs and people in medium high positions from excelling. Why bother if the government is going to swipe more than 50% of what you produce. It is easier to take an overseas posting where the stress may be lower but the post tax income considerably higher. It happened 30 years ago here, 10 years ago in France and it is happenning again in the UK.


Anonymous said...

Hi Alex do these current figures look correct:
1. GDP 1.84 trillion
2. Government expenditure 690 billion
3. Government income 36.4% GDP @ c670 billion
4. Government debt 1.34 trillion
5. Government borrowings 175 billion + c30 billion budget deficit.

I am standing on a stool with the noose round me neck!

Alex said...

1. GDP around 1.40-1.45 trillion
2. Government expenditure 690 billion - about right 48% of GDP
3. Government income 36.4% GDP sounds about right, that would be around £520 billion
4. Government debt depends what you include and to be frank they lie about what is included. I will right up something about this tonight.
5. Government borrowings for this years is going to be around £175 billion to cover the deficit (expenditure minus income) and around £30 billion to cover the cost of outsanding bonds that are due for redemption.

Don't do anything sill. It is far simpler to spend a few years living abroad. I did that in the last few years of the last years Labour and the painful years of the Thatcher government. Highly recommended.

Anonymous said...

Thanks Alex, a true gentleman. I have a little bolt hole just the other side of the Channel where I will hole up if necessary (You and yours will be welcome) however my business will keep me here as long as possible. If these figures are anywhere near we have a real problem, yet all I read is the class wars on the 50% rate, a silly diversion.

Alex said...

I too have a place in Brittany which is handy for the occasional bucket and spade holiday, but is also wired for broadband. If absolutely necessary we will decamp en masse and enjoy fresh croissant for breakfast every day.