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July 30, 2009

Higher Tax, Lower Morals

By Spear's

When most of today’s higher-rate taxpayers were growing up in the UK, they loved the practical possibilities of the schoolboy ditty, ’If I give you half-a-crown/Will you take your knickers down?’

When most of today’s higher-rate taxpayers were growing up in the UK, they loved the practical possibilities of the schoolboy ditty, ‘If I give you half-a-crown/Will you take your knickers down?’

This seemed like a well-priced deal at 12½p per go at the time, for both sides. Now they’ve grown up and are threatened with four half-crowns in tax the other way. In reality it’s only a 10p increase on income above £150,000, but it’s a threat from a different Darling than the one they had in mind in their youthful dreams. And for 10p in those far-off days they wouldn’t have even got a laddered stocking unclipped. It’s more about the shame of being brutalised by Gordon Brown in public.

There are several moral cases for Brown to answer. The first is that New Labour promised that there would be no new income tax or capital-gains tax increases while they were in power. Promised! And, stupidly, we all believed them. At the last election this promise was repeated by Tony Blair, but the breaching of election manifestos has long been less than a moral issue for politicians, especially Labour.

New Labour is the same old tax-and-spend Labour that we thought had ended with Wilson, Healey and Callaghan. Remember him, Old Calor Gas and the three-day week, when even dead tax inspectors couldn’t get a timely burial? The point is that New Labour is now as morally and financially bankrupt as the old one. Should that surprise us?

The second moral point is that taxing high earners is not just. Tax those who pollute, tax (or jail) those who exploit, tax (and then jail) those who got us here today and think that ‘bonus’ really means ‘basic salary’. But to tax people because they are successful? This says that the government is not interested in encouraging the best and brightest individuals of today to innovate and to reach for the skies. What they want to do is punish them for their success.

It is a fool’s errand anyway. The high earners will simply set out their stall differently from a tax-paying point of view, quite legally, if they haven’t already done so. (As ever with this inept government, Darling has not yet told the non-doms how this will affect them.)

Thatcher understood that enterprise should be rewarded. When she came to power 30 years ago, her first fiscal move was to reduce the higher rate from 97½p to 63p, then down to 60p, and then to 40p, as she thought the level of tax claimed by the state from GDP was as much a moral as an economic issue, and she was right on both counts. And she, the daughter of a Methodist lay-preacher, aspired to a moral standard in public life.

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Brown, a son of the Manse, has waffled on about his ‘prudence’ for ten years and has claimed since the crisis broke that it was all to do with nasty foreigners, not him. That was his third shaky moral stance. But now that he has moved his moral high ground to attacking hedge funds and tax havens, he sounds increasingly like Wilson’s attacks on ‘Speculators’ and the ‘Gnomes of Zurich’, as he tries to move the blame from his own failures to those who lawfully make money for their investors and themselves.

Hence his justification for the 50p tax-hike, just as we hear that he has claimed £6,000 from the taxpayer on behalf of his brother for some alleged domestic service. This mendacity and hypocrisy, more than his party’s breach of electoral promises, are what really condemn him to the moral dustbin. 

It seems that some act of personal immorality, as in claiming injudicious expenses by issuing false invoices on the taxpayer whilst holding public office, is more reprehensible than bankrupting the nation’s finances, blaming it on others and then imposing tax increases, in what has been dubbed a ‘class war’ initiative. The greater of Brown’s failures will be punished at the coming elections and by history, but his personal economic and personal moral lapses are the ones that will hurt him most.

This is not to say there are not moral questions for the bankers and market-driven capitalism to answer. Regulation should take account of the morality of letting people earn money without regard for the effect on society, both in grotesque disparities between rich and poor and in the recession they have caused, which affects all of us.

The real worry is that governments are already rushing to regulate against a repeat of this crisis, led by the moralising Brown, but in a way that is very likely to cause a very different crisis wherein capitalism is neutered and reduced to a sclerotic basket-case by inappropriate and heavy regulation. The Brown solution, no less.

Who knew that a small silver coin could be at the centre of so many moral dilemmas?

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