ECONOMICS OF THE MADHOUSE; Labour's Plan to Soak the Rich and Wage War on Business Would Cripple Britain Just When We Need to Be Stronger

Daily Mail (London), May 16, 2017 | Go to article overview

ECONOMICS OF THE MADHOUSE; Labour's Plan to Soak the Rich and Wage War on Business Would Cripple Britain Just When We Need to Be Stronger


Byline: Alex Brummer CITY EDITOR

LABOUR'S halfbaked proposals to impose huge income tax increases on those it considers to be Britain's highest earners pose an enormous threat to the nation's prosperity.

A throwback to the dark days of the Seventies, they would halt Britain's healthy growth in its tracks, destroy the prospects for a smooth Brexit and drive out many of the country's most skilled professionals and managers. Jeremy Corbyn and his Shadow Chancellor John McDonnell are under the horribly mistaken impression that if they pile extra income taxes on people earning more than PS80,000 a year, and squeeze the pips of those earning above PS100,000, they will generate a treasure chest to spend on public services.

Such a policy would be the economics of the madhouse and drag Britain back to the pre-Thatcher era when income taxes were so high thatwell-paid people left the country, enterprise was stifled and investment and jobs destroyed.

We don't have to look far to see how high-tax regimes stifle wealth creation and lead to an exodus of talent and economic stagnation.

Downfall In France, former president Francois Hollande created the very conditions that led to his downfall and that of the political establishment with his socialist high-tax regime.

When he pledged to raise France's highest rate of income tax to 75 per cent a figure not very much different from that implied by Labour proposals the impact was devastating.

Tens of thousands of France's brightest professionals rapidly migrated to Britain, turning London into the fifth biggest French city in the world.

Wealthy French business people moved their operations to Brussels and other lower tax European centres while the French economy slumped and the unemployment rate soared to above 10 per cent of the workforce twice the level in Britain.

In Britain the highest 45 per cent income tax band does not currently kick in until people earn PS150,000 a year.

But under Labour's punishthe-rich proposals, it is thought anyone earning more than PS80,000 would find themselves hit by the 45 per cent tax band.

Meanwhile, those earning over PS100,000 could find themselves paying a still higher income tax rate of 50 per cent. But that's not all. Because the government has already stopped people who earn more than PS100,000 a year from receiving tax-free allowances granted to lower-band taxpayers, and this same group also has to fork out a further 2 per cent in national insurance contributions.

Add these existing penalties to Labour's higher income tax proposals and you find a slice of Britain would find themselves enduring 65 per cent to 70 per cent tax rates under Corbyn.

In other words, around two-thirds of their pay cheque would be going straight to the Exchequer.

The truth is Labour's proposals have nothing to do with economic practicalities and are all about socialist ideology and the politics of envy.

History tells us that they will fail to raise new income while at the same time destroying Britain's competitiveness just when we need to attract investors as we embark on a bold new future outside the EU.

Burden All the evidence is that adding to the tax burden of a relatively small group of people high up the income tree will simply provide a bonanza for the accountants who are expert at creating schemes which allow people to avoid paying taxes.

Under Labour's high taxes in the Seventies, some businesses started paying a number of their workers in gold bars so as to keep HMRC at bay.

High taxes will inevitably create a brain drain of the best and brightest.

Even with its current tax system, Britain has difficulty hanging on to its cleverest engineers, scientists and technicians because of the lure of Silicon Valley and other centres of excellence abroad. …

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