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.
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
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.
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.