We should worry that Tracey Emin, Hugh Osmond and Michael Caine are fleeing the 50p tax rate
The 50p tax rate will be a disaster for the economy – taking us back to the dark days of the 1970s, says Boris Johnson.
Not everyone will miss her as much as I will. Not everyone can relied upon to mourn the departure of Tracey Emin and her duvet. You may have seen that the gorgeous Britart supremo is off to France. She has had it with Britain, says the woman who famously embroidered a tent with the names of everyone she had ever slept with, and was shortlisted for the Turner Prize.
Some readers may feel that the country can rub along without her. Take up thy tent and walk, they may say, in the words of the gospel. And then there may be people who don’t give a monkey’s that Michael Caine is thinking of vamoosing, or that we are about to lose Eddie Jordan, the former Formula One chief, or the milk tycoon Lord Haskins. Some of you may not care a tinker’s cuss if the former bookshop king Tim Waterstone deserts these shores, and as for the impending absence of Hugh Osmond, an entrepreneur who has had a role in everything from pizza to insurance, you may feel that we just have to dry our eyes and get a grip on our feelings.
Boris argues: “If it is true, as is now daily related in the Financial Times, that the hedgies are starting a quiet and well-shod stampede to Zug and Pfäffikon and other bourgeois Swiss towns, you may think that is their look-out. They know perfectly well that some Swiss cantons are so tyrannical that they have a law against urinating standing up after 10pm – in case it disturbs people in the neighbouring apartment. They have been warned about the traffic police and the kind of nightlife you find in Geneva. You may think that they deserve their fate.
And yet the 50p tax rate that is beginning to drive these people away is a disaster for this country, and it is a double disaster that no one seems willing to talk about it. When Margaret Thatcher’s government cut the top rate of tax to 40 per cent in 1988, she was completing a series of reforms – beginning with the removal of exchange controls and followed by the Big Bang – that helped to establish London as the greatest financial centre on earth.
Britain had been transformed from a sclerotic militant-ridden basket-case to a dynamic enterprise economy, and the capital became a global talent magnet. It wasn’t just financial services, and the masters of the universe who came from all over the planet. It was the lawyers, the accountants, the whole downstream chain of service industries – and manufacturing industries, come to that – which prospered in an environment that was fundamentally benign to those who showed dynamism and initiative.
That is why London now has four of the world’s six leading law firms, and why the city leads the world in everything from academic health science to advertising. It is the reason we had the phenomenon known as Cool Britannia – the style, the fashion, the restaurants and the Britart sensation that launched Tracey and others on the world. Whatever his other mistakes, Tony Blair understood the vital importance of maintaining the stability and certainty of that 40 per cent rate. He instinctively understood the role that limit played in providing incentives to the energies of the most diverse and talented city in the world.
So it is utterly tragic, at the end of the first decade of this century, that we are back in the hands of a government whose mindset seems frozen in the wastes of the 1970s. If Gordon Brown remains in power – and perhaps even if he does not – Britain’s top rate of tax will soar far above that of our most important global competitors. China, Germany and Australia are on 45 per cent maximum; Italy is on 43 per cent; Ireland on 41 per cent; France on 40 per cent; and America is on 35 per cent.
When Mrs Thatcher cut the top rate in 1988, the Treasury saw yields go up. People stopped avoiding taxation; people thought it worth their while to get up at 5am and work that extra bit harder – and the share paid by higher-rate taxpayers actually increased as a result of the tax cut. What Gordon Brown wants to do is therefore economically illiterate.
So why are they doing it?
It is nothing to do with the needs of the economy, of course. It is all about politics. This Government has spectacularly mismanaged the public finances. It has overseen an explosion in the wage bill of the state, to the point where the average public-sector worker now earns £74 more per week than a private-sector employee, as well as having much better pension and other entitlements.
In the next few months there must be a bloody reckoning, and as the cuts fall, Labour wants to be able to console its suffering public-sector vote bank. You may be hurting, they will say, but the rich are hurting, too.
In other words the 50p tax is not far, in its political motive, from Stalin’s assault on the kulaks. Above all, Labour wants to portray any opponent of the new tax as a thoughtless defender of the rich. We are not. The truly rich will get a smarter accountant or buzz off to Zug. What we want to protect is the spirit of enterprise that has been so vital in reviving this country in the past 25 years, a revival that has helped all sectors of society.
If the Labour Government cannot understand the importance of the enterprise economy, it has become a catastrophe for Britain, and should go as soon as possible.”
You can read a fuller version in The Daily Telegraph