Boris Bemoans Budget

Dave Haste
By Dave Haste Last edited 106 months ago
Boris Bemoans Budget

Amongst the many critics of Alistair Darling’s Budget is, unsurprisingly, London’s very own Boris Johnson, who has criticised the income tax hike for high earners:

We have got to recognise that this 'poke-the-rich-in-the-eye' stuff will raise only a tiny fraction of the huge sums that the chancellor and prime minister have accumulated in debt.

So at first glance this seems to be fairly stereotypical rhetoric - a Tory mayor defending the rich and having a pop at the performance of a Labour government. Nothing out of the ordinary there. But wait…

Everybody, I am afraid, is going to have to pay that off in much higher taxes all round.

Hmmm. “Higher taxes for all!” hardly seems like a trademark Conservative rallying cry, does it? Peculiar.

London is the motor of the UK economically. We need to send out a very positive signal about the enterprise culture we have in London.

Now that’s more interesting. Instead of pandering to the tired old social arguments around whether increased tax rates for high earners represent the ‘politics of envy’ (or ‘penalising success’), or whether such tax hikes are actually just a way of generating extra revenue whilst pissing off only a tiny proportion of voters, Boris seems to be, at least in part, concentrating on the economic effects of making London seem less attractive to ‘high flyers’.

And there is an interesting point there. With ‘top talent’ reportedly fleeing the City in droves, does it really make that much economic sense to further discourage senior executives from working here? The Times reports that the tax hikes “might lead to an exodus of high-earners from Britain”, and quotes a spokesman for PricewaterhouseCoopers to underline the economic danger of this:

From next April the UK will rank 18th among the G20 economies in terms of income tax and social security rates for senior executives. Lower-tax countries like Switzerland will look increasingly attractive to some of the people in the key industries needed to lead the UK out of recession.

Of course, only the most naïve observers would believe that a Budget is entirely driven by economics, and by making a taxation decision that predictably gets the media talking about ‘class war’, the government may be hoping to win a few votes from the majority of voters whose earnings are not directly affected by the tax hikes.

And as for the effects on the economy? Well, you could possibly excuse Alistair Darling for being tempted to think that the UK’s long-term economic prospects will soon be someone else’s problem. God help us all.

Last Updated 23 April 2009

RachelH

I suspect the main reason for people leaving London is a lack of jobs and profits to allow a huge bonus culture to reign supreme. Paying an extra 10% tax on anything over £150k is a drop in the ocean compared with salary cuts, job losses and tiny or non-existent bonuses and expense accounts. What will hurt is the removal of top rate tax relief on pension contributions. That's below the belt.

johnnyangel

I don't buy this thing about high earners leaving because of the tax conditions. The fact is that high earners go where there is money to be made. If they are all sodding off to Switzerland it's because there is more money to be made there, not because the Swiss have lower taxes.

Also, we have heard time and again from bankers saying that we have to keep the big bonus culture because if we don't the talent will naff off to the competition. Well, who are the competition? Where is this healthy banking industry that still pays big bonuses? Mars?