The 50p rate & the pressing concerns of economists
The UK economy is beset by a multitude of problems – falling real wages, a consumer recession on the high street, contracting manufacturing, weak business investment, high inflation and worrying signs of trouble in the labour market. In internationally the Eurozone is in crisis, the US economy is slowing and unable to generate jobs and the ‘currency wars’ look to be flaring up once again.
The fact that I greatly respect many of the signatories makes this even more depressing.
We don’t yet know if the 50p rate is raising revenues – although I suspect it is. Even the government now seems to admit that, recently briefing that:
Treasury analysis shows that Labour’s decision to raise the rate to 50p for those earning £150,000 a year or more has generated up to £2.4 billion a year.
The central argument of the 20 objectors is that Britain is now:
one of the highest personal tax regimes in the industrialised world, making it less competitive internationally, and making us less attractive as a destination for both foreign investment and talented workers
An argument not backed up by either immigration figures (where the attempt to cap numbers is struggling) or foreign direct investment analysis (where the UK is ranked highest in Europe).
I also notice that the economists make no effort to put a figure on what the contribution to growth of cutting the 50p rate would be.
We’ll get a Treasury analysis of the effects of the 50p rate in the next few months – not that this will settle the argument, the crucial assumptions on how the rate has affected behavior will no doubt be subject to argument, one year after the bankers’ bonus pay roll levy there is still a fight about how much it raised. This letter seems an attempt to soften the ground for cutting the rate.
I’m reminded of one of favorite Kalecki quotes (actually on using fiscal policy to achieve full employment rather than on tax per se, but the point stands):
In this situation a powerful alliance is likely to be formed between big business and rentier interests, and they would probably find more than one economist to declare that the situation was manifestly unsound.
If the economics profession had any self-respect, those 20 economists would be tarred and feathered for making such evidence-free political assertions.
OR
If the economics profession had any self-respect, those 20 economists would be tarred and feathered for selling their policy voice to the top 1% for such an appallingly low figure. If you’re going to sell your integrity to the rich, at least get more than a pittance.
Shame the entire field is corrupt from the ground up. There’s a reason mainstream economics completely ignores land, and that’s because it was funded by landlords.
I’m not sure which is worse, the letter itself or the BBC choosing to lead with it on the day’s mainstream news programmes, coupled with such “even-handed” journalism that they punted that 50p would be removed eventually and the decision about timing was only political. Aren’t journalists meant to ask questions about evidence and effectiveness, you know, apply some form of critical facility?
The main problem I have with this is that the term “economist” would any longer confers a person with authority on economic matters.
Duncan, what are your opinions on the libdem’s mansion tax.
A mansion tax would be hideous for horizontal equity.
What’s “horizontal equity”?
The union for actors lying down.
Good post. The evidence for scrapping the 50p tax rate is poor, at best.
Incidentally, I checked your listed interests, and immediately thought of a blog that would interest you. It’s a in depth post keynesian blog:
http://socialdemocracy21stcentury.blogspot.com/
Give it a go.
Lord Keynes’ blog is excellent, as is Robert Vienneau’s similarly flavoured blog:
http://robertvienneau.blogspot.com/
[...] an end to the 50p tax rate, noting that there are other much more urgent economic problems that need to be addressed, although Labour List asks for a more developed [...]
I see you link to the Left Foot Forward post where you claim that Speccy Nelson wrongly attacked your triumphant claim of additional revenue courtesy of the 50p rate. several posters there have pointed out that Nelson was factually correct and you are factually wrong as regards HMRC payment on account rules.
Any comment on this?