Saturday, 25 April 2009

Exodus of Wealth

Forget about class war, demonstrating the economic illiteracy of the 50% tax penalty for higher earners should be easy for the Tories.

When Nigel Lawson lowered the top rate of income tax from 50 to 40% in 1986(?), the proportion of the total tax contribution to the treasury gathered from the most successful group of British workers shot-up from 19% to 26%. That in turn left huge room for the tax burden on middle and lower earning workers to be reduced. Ample evidence that the mechanism works. Permit wealth creators to do their worst and low earners do share the proceeds of growth - and society as a whole benefits. Fantastic. It's not 'trickledown', as the Left love to brand it. It's sound economic management informed by the belief in the virtue of individual liberty and aspiration, wherever you come from and whatever your lights. New Labour used to make those sorts of sounds, (unconvincingly).

Now, that revolution in sound judgment, a legacy of a Tory government charged with the huge task of clearing-up the last mess left for them by Labour, has been destroyed. Back to square one.

The underlying economic illiteracy and the politics of futile envy have returned with a vengeance. I seldom agree with Simon 'Mr Angry' Heffer, but he's pretty good on the economics. Tax returns from the most successful in society will collapse as their productivity decreases and their disposable income is reduced, draining yet more cash from the economy and punishing the workers who rely on their consumption. Worse, many, especially employers running small and medium-size businesses, will simply emigrate, taking all their expertise, drive, determination, aspiration - and jobs - with them. There will be, once again, an exodus of wealth from the UK economy.

It will happen rapidly, too, if we are to believe, for instance, Russell Payne of Tunbridge Wells in Kent. He wrote to the Telegraph yesterday to say:

SIR – I own my own business, which moves electronic components around the world and employs some 20 people. My income is around £200,000 a year. Goodbye.


What the Tories must do is make the economic case to the electorate. Higher taxes for higher earners is one thing. Deliberately to tip the balance over to punitive taxation is disastrous.

The burden of taxation - and this has been proved beyond doubt, actually rises for low earners when policies as insane as that are pursued. "Hammer the rich!", the (wealthy, privately educated) Left shouts. And all they end up doing is hammering the economy and betraying the poor. But their arrogance and stupidity is eternal. They've done it before and they will do have done it again.

One of my favourite journalists, Charles Moore, sets out the case for low taxation with typical flare in today's Telegraph.

Labour, relentlessly dishonest, are already screaming "Tory Cuts!", as if that is the other side of the coin. Of course, it's nonsense. It might be the other half of their mindless political assault but, for one thing, when the cuts come, they will be Labour cuts.

But the 'cuts' currently do not exist. There is no policy as yet in any party to 'cut' anything, although many people would understandably like to see some made, especially where there is huge waste and/or bad policy (ID cards, NHS database etc.).

There will have to be massive savings everywhere. Labour knows this and they've already stealthily started with the Eurofighter (typifying their priorities nicely). But why? Because that's what happens when you run out of money and your credit lines dry up. You have to make savings. Everywhere. But these are savings that have been forced on the country by a profligate, criminally incompetent, spendthrift government that courted hubris at every turn. I doubt there is anyone in the country that doubts that now, apart, of course, from Polly Toynbee and her equally mad fan base.

One thing is certain, punishing the productive heart of the economy to prop-up unsustainable (meaning quite literally: "it can't go on without bankrupting the country") expenditure is a one-way ticket to catastrophe. To do this -to wreck the country for a generation or more - to cause, deliberately, the exodus of wealth, for the sake of some nefarious political gain and 'power' - should mean that you're guaranteed to go to bloody hell.

Brown and Labour, you go to hell if you want. You're not taking us with you this time.

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