One has to rub one’s eyes. Britain is smack on course for a double-dip recession, the collapse of consumer and business confidence is ubiquitous, the manufacturing PMI barometer is turning down more sharply even than after the Lehman Brothers collapse, the US housing and labour markets remain extremely fragile, the Eurozone sovereign debt crisis is worsening by the day, both the IMF and World Bank are now counselling strongly against cutting debt too much too fast, and what is our myopic Chancellor’s response to this cataclysm of bad news……………..abolish the top 50% tax rate! That’s like opening an air-bag when the carburettor’s stalled to get the car moving again. He must be delusional if he thinks it’s either (i) relevant, (ii) necessary, (iii) fair, or (iv) appropriate. It’s none of them.
It’s irrelevant because the fundamental problem currently facing the British economy is lack of aggregate demand. Abolishing the 50% rate will make next to no difference at all to the level of demand. The extra smidgeon of demand it would create is outweighed a hundred times by the diminution of demand through the expenditure cuts and the paring back of benefits.
It isn’t necessary when any beneficial effects would be nugatory. Its proponents in their letter today to the Fiancial Times claim it is the only way by which “Britain will enjoy long-term sustainable economic growth”. That is the opposite of the truth. Three decades of tax cuts for the wealthy, deregulation and unfettered markets ended in the biggest financial crash for a century and a likely decade or two of Japanese-style prolonged stagnation.
It isn’t fair when, in the oft-quoted words of a City financier, the super-rich already pay less tax than their cleaning ladies. It certainly isn’t fair either when, as reported today, in a quarter of British families today the mother has been forced to give up work because low wages and the taxation of ordinary families makes it impossible to pay the costs of child care.
And it isn’t appropriate at a time of intense and tightening austerity for the rest of the nation that the top 1% earning over £150,000 a year walk away with another trophy of personal enrichment. It smells of gratuitous greed (I’m all right Jack) when everyone else is suffering. There is an air of cavalier dismissal not only of the plight of the poor but also of the squeezed middle classes. And what it certainly shows is the disregard of Osborne and his ilk for the interests of all but his own class.
