Sean O'Grady: Changes to top-rate tax are symbolic, not seismic

 

Share
Related Topics

Purely in terms of the effects on government revenues and borrowings, moving the 50p rate to 45p in the pound will make little difference in the great scheme of things – maybe a billion or two either way in a tax-take hundreds of times that number. Useful as such sums may be to the Exchequer, they are largely totemic.

The "boost" to the economy as a whole would be rather greater, as that money gets into the shops and starts to circulate. Even then, and assuming it was all spent rather than saved, the effect is relatively modest; probably less than £5bn in an economy of £1.4 trillion. What's more, top-rate taxpayers comprise the wealthiest few per cent of the population, and are likely to save the extra money, if they notice it at all. It would, thus, do little to create jobs and bolster spending.

A much more efficient measure would be to raise social security or pensions, where the vast majority of the funds would burn a hole in the recipients' pockets because the poorest can easily find a use for it. Taking more of those people earning less than £10,000 a year out of taxation, an avowed Coalition goal, would also be more effective.

Cutting the top 50p tax rate ought not to be dismissed however. No one is going to alter their entire life just because of some small adjustment in income-tax rates. But economics works "at the margins", and a relatively small incentive could dissuade some on the cusp of a making a personal decision to, say, move their banking work to Switzerland. In that way it may do good.

Longer term, the Government ought to encourage entrepreneurs – and reducing the rate to 45p and would be a step towards George Osborne's ambition to have the lowest tax regime in the advanced world. Then again, it is embarrassing for a government where deficit reduction is supposed to be the overriding priority.

Besides, the public finances are so dire there must be doubt as to whether the new 45p rate really signals a rapid movement towards the ultra-low tax economy Thatcherites dream of, or whether it looks more like a gimmick. It seems a high price to appease a few Tory backbenchers. I doubt it would impress the IMF.

React Now

  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

Recruitment Genius: Assistant Property Manager

£15000 per annum: Recruitment Genius: Are you looking for your first step into...

Recruitment Genius: Mechanical Design Engineer

£25000 - £40000 per annum: Recruitment Genius: This innovative company working...

Recruitment Genius: Car Sales Executive - OTE £36,000

£12500 - £36000 per annum: Recruitment Genius: This established Wakefield Deal...

Recruitment Genius: PHP Web Developer / Full Stack Developer

£24500 - £28000 per annum: Recruitment Genius: This is an exciting opportunity...

Day In a Page

Read Next
The rocketing cost of remarking scripts coupled with the squeeze on school budgets has led to some schools charging parents for the cost of requesting exam boards to review marks, the Association of Teachers and Lecturers' annual conference in Liverpool heard.  

A teaching crisis we can’t afford

Louise Scodie
Miliband boards his General Election battle bus for the first time  

Can someone please tell me where this election is happening?

Mary Dejevsky
General Election 2015: The masterminds behind the scenes

The masterminds behind the election

How do you get your party leader to embrace a message and then stick to it? By employing these people
Machine Gun America: The amusement park where teenagers go to shoot a huge range of automatic weapons

Machine Gun America

The amusement park where teenagers go to shoot a huge range of automatic weapons
The ethics of pet food: Why are we are so selective in how we show animals our love?

The ethics of pet food

Why are we are so selective in how we show animals our love?
How Tansy Davies turned 9/11 into her opera 'Between Worlds'

How a composer turned 9/11 into her opera 'Between Worlds'

Tansy Davies makes her operatic debut with a work about the attack on the Twin Towers. Despite the topic, she says it is a life-affirming piece
11 best bedside tables

11 best bedside tables

It could be the first thing you see in the morning, so make it work for you. We find night stands, tables and cabinets to wake up to
Italy vs England player ratings: Did Andros Townsend's goal see him beat Harry Kane and Wayne Rooney to top marks?

Italy vs England player ratings

Did Townsend's goal see him beat Kane and Rooney to top marks?
Danny Higginbotham: An underdog's tale of making the most of it

An underdog's tale of making the most of it

Danny Higginbotham on being let go by Manchester United, annoying Gordon Strachan, utilising his talents to the full at Stoke and plunging into the world of analysis
Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police

Steve Bunce: Inside Boxing

Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police
No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat