"It sends out a signal to people who create wealth, people who are energetic... can generate new industries or drive large enterprises of one kind or another... that we want to take more of their proceeds away than before. It is a deterrent to enterprise."That was Boris Johnson on the 45p tax rate on ANY QUESTIONS last night. I couldn't agree more. The thing that I can't get over is that if Labour hadn't announced that tax for top rate payers would go up to 45p, I just can't seriously imagine George Osborne would have come up with the proposal himself. If he needed to find £2 billion he would have found it elsewhere. And therein lies the rub. Will it actually raise anywhere near that sum? Many economists believe that a rise of this sort may in fact do nothing of the sort. When this tax rise was first announced, I wrote...
This measure was nothing to do with economics, it was all to do with politics - class politics. So it's quite right that the response is political too. And the response has been perfect. "Reversing this would not be a priority" is what has been said by Tory spokesmen. Which says everything and at the same time, says nothing. Why should it? Because at the moment, there is nothing to reverse.
It is a profoundly unConservative thing to approve of class based tax increases. No Conservative I know of would do such a thing. There may well have to be tax increases in the future - Gordon Brown's economic chaos has almost made that a racing certainty. None of us know what the situation will be like in 2011, so why the Conservatives should have to give any response to the 45p rate at all is beyond me.
What I do not understand is the logic of moving away from this position. If you need to raise revenue from top earners why stop at a 5p rise? Hasn't the position significantly worsened since November? Using the logic of the argument, you could easily make the case for a 50p rate. Indeed, I can't quite understand why the LibDems have been so quiet on this. Didn't that used to be their policy?
Tim Montgomerie wrote a stinging piece on ConservativeHome yesterday afternoon attacking George Osborne...
We are told by the Tory leadership that it's too early to say what a Conservative government will do on public spending but it's not - apparently - too early to say we'll accept increases in taxation. That inconsistency betrays the party leadership's instinct to keep both public spending and taxes at Labour's relatively high levels - an instinct evident in the Tories' 2007 decision to match Labour on public spending increases.The focus should now be on how to curb spending. I don't expect to hear specifics on spending cuts - which there will have to be - but neither do I expect to hear specifics about tax rises. We're more than a year away from an election. Why be specific on these things at this stage in the cycle, when there is nothing to be gained by it? Yes, be honest about the situation the country is in, yes, give an indication of where you are heading in policy terms, but to commit to a 5p tax rise in April 2011 is not a sensible place to be.
I accept that George Osborne has left himself some wriggle room by using the phrase "difficult to avoid" but this whole debate was one which we didn't need to have.
I continue to believe that it is lower taxes which stimulate incentives and economic growth, not tax rises - and I think that is particularly true for top rate payers. The mantra all along has from the Conservatives has been for "flatter and lower taxes" This 5p rise meets neither aspiration.
Being honest with people about the state we are in is a good thing, and I am delighted George is taking far more about spending restraint, but it's about time he met with the Taxpayers' Alliance and learned a bit more about the negative effects of increasing top rate taxes. I'm sure they would be happy to provide the data.