24 April 2009

A funny sort of 'class war'

The favourite expression of right-wing commentators to describe the Budget this year was 'class war' - apparently because Alistair Darling introduced a 50% tax rate on incomes over £150,000. I know that people like Simon Heffer and the even more ludicrous Jeff Randall have a vested interest in knocking the Labour government (although to be fair to Heffer, he hates Cameron as well - I don't know if anyone in the current crop of Tory MPs is right-wing enough for him to actually support them. Maybe Frank Field on the Labour side might be... Enoch Powell is sadly deceased, although my wife's great-aunt believed he was still alive, but that was before she was dead too), but if we're drawing the dividing line between 'the great unwashed' and 'Middle England' at £150,000 then we ain't got many people in middle England.

Data from HMRC (the Survey of Personal Incomes statistics) shows that only about 1% of income tax payers earn more than £150,000 per year. And only about 70% of adults in the UK are income tax payers. So the class war is 99.3% of the adult population of Britain in the working class vs 0.7% in the middle class. With such a small middle class it's no wonder the economy is going down the tubes. 

Even the number of higher rate (40%) taxpayers is pretty small as a proportion of the population (although a lot bigger than it used to be, as average earnings have grown faster than the higher rate threshold.) I think it's about 15 to 20% of taxpayers in that bracket. So even a rise in the higher rate to 50% would be a pretty unbalanced 'class war'. 

Of course it's in the Daily Telegraph's interest to paint a picture of oppressed hordes of City workers - but there are actually a small handful of high earners at best. During the boom years their salaries grew far faster than anyone else and they cultivated a reputation as the saviours of the UK economy. In the wake of the credit crunch this reputation has largely collapsed - although in many cases their earnings remain high. In some cases we have found in retrospect that not only were they not worth these inflated salaries, their worth to the economy was actually severely negative (step forward, Fred Goodwin).

The government's strategy is - or should be - based on targeting a small number of people who have done very well - far too well - out of the complete imbalance of the global economy in the last three decades. The 50p top rate is only the start of that strategy; Capital Gains Tax needs to be reformed and a lot more needs to be done to reduce tax avoidance. But it's absolutely f*** all to do with class war, whatever Simon Heffer or Jeff Randall might tell you. 

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