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April 26, 2010

Promises, Promises

By Spear's

Spear’s has read the manifestos so you don’t have to; the picture for high-net-worths is not pretty.

Is there anything more enjoyable than browsing the book-length manifestos of the three main political parties in the fortnight before the General Election? Almost certainly there is, but those other activities won’t inform you about how the next Government is planning on taxing you out of existence. That’s why Spear’s has picked out the choice promises to comfort or terrify you.

First, a reality check: taxes will go up. We have to pay for our billions of borrowing and 11 per cent deficit somehow. Whether it’s VAT or National Insurance or some other means hitherto unknown to homo oeconomicus, this debt will be repaid, and those who earn more may well have to pay more. We have seen the first strike with the new 50p higher tax rate, as well as the removal of certain tax reliefs on pensions.

So what do the parties have to say? Labour’s manifesto is big on what they’ve already done or announced – the higher tax rate, the NI increase, the bonus tax – but remarkably silent on where new income is coming from. It promises no increase in income tax, but it did in 2005 too. There is the promise of a bank levy, living wills and greater capital requirements.

The Conservatives, singing their old tax-cutting tune, have left out tasty morsels such as the rise in the inheritance tax threshold to £1m and a cut in corporation tax to 25p, ‘funded by reducing complex reliefs and allowances’. A bank levy is there too, but no figure put on it, and there is no clarity as to where more money is coming from.

The Lib Dems set out what is most radical, changing capital gains tax to match income tax, which should raise a lot of money, especially the higher-rate differential is now 32p. In fact, the Lib Dem manifesto is positively directed at alienating the wealthy: properties in offshore trusts will be subject to stamp duty; a Mansion Tax of 1p for properties over £2m; a time limit of seven years on non-doms. Sources of money are clear – and they are you.

The Conservative manifesto is the only grown-up one, in many respects. For a start, it is the only one to use the word ‘macroeconomic’ in talking about a stable economy; it also has ‘prudential’ and ‘structural deficit’, which are phrases from serious documents. Labour gets in with ‘capital requirements’. The Lib Dems are too busy sticking two fingers up to the wealthy, as if this were the best way to keep wealth-creators in Britain, to talk about things in a non-patronising manner.

Even the font and colours reflect these outlooks: the Conservatives’ has a serif font and subdued colours, apart from Rodchenko-like campaign ads; Labour’s looks like a primary school prospectus, all bold colours; and the Lib Dems’ resembles a local council leaflet (which is, after all, where most of their executive experience is from).

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The problem is that no party is – or could be, we suppose – honest about either the scale of the cuts we face or the sources of mitigating revenue. This election will be more about trusting in the underlying spirit of the party you vote for to protect you and save the country, rather than relying on specific promises.

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