If Osborne wanted to be as provocative as possible (which he probably does, to appease the Tory right, his future backers for the leadership), he could hardly put together a more incendiary mix than cutting tax rates for the ultra-rich in the budget and then, 2 weeks later, impose swingeing cuts on some of the poorest families in the country.
On 6 April working couples around the country on £18,000 a year (or £346 a week, just three-quarters of the average wage) will lose £77 a week. These families contain nearly half a million children, and their income is being cut by more than a fifth.
Contrast that with Osborne’s plans for the super-rich: if he cuts the top rate of tax for this 1% richest clique in the country from 50% to 45% (as he has just leaked – so much for the days when Chancellors were sacked for revealing even the smallest details of their budgets before they were delivered to the House), that is worth nearly £100 a week extra to someone on £250,000.
The Tory detractors have used 3 arguments against the 50% tax rate which Alistair Darling rightly introduced after the bankers and the ultra-rich had crashed the economy – a very small recompense for the depredations they brought on the economy and society at large. One was that this rich cabal would use their tax accountants to ensure that the 50% rate raised very little extra money. But that of course is not an argument for withdrawing the tax – it’s an argument for tightening the tax rules to squeeze out anti-social tax avoidance and make the tax effective, in particular by bringing in a new general anti-avoidance rule.
Second, the Tories said it discouraged entrepreneurial and innovative flair at the top, when as we now know what these spivs excelled at was financial engineering, overseas speculation, and offshoring – all designed to enrich themselves at the expense of Britain.
The third argument was that if this tax levey was imposed, there would be a stampede to leave Britain for more tax-friendly havens abroad. For the record, 3 firms left, one of which (Sorrell’s advertising outfit) has since returned.
The super-rich remain by far the least taxed group in Britain. Contrary to the LibDems trying to accommodate Tory demands for a cut in the 50% rate by demanding either a mansion tax (on wealth) or a so-called tycoon tax (on income, making the wealthiest pay 32% of their gross salary in tax just like ordinary working families), what is really needed is both a wealth tax and in addition a high and proportionately fair rate of income tax for the extremely rich.