Of all the many and pressing problems bearing down on the UK economy, from rising unemployment to climate change, the menaced fortunes of the enormously wealthy could not be considered amongst them. Quite the opposite: the incomes of the top 1 per cent rose by 10 per cent over 2010, just as average real earnings were falling.
It’s this 1 per cent that the 50p tax rate hits – those earning over £150,000 a year. But this happy crowd, and their apologists, had of late got up quite a little circus of indignation. The top rate was alleged to be damaging the UK economy. Various round-robins were signed and circulated amongst the usual suspects.
The squealing reached quite a crescendo in recent weeks, as assorted inhabitants of the top 1 per cent lined up to insist that their ample troughs were filled just a little closer to the brim. We feed the porkers, and they – by some miracle of the free market, or private enterprise, or simple generosity (it being never made entirely clear what) – would deign to grant us jobs.
At no point was any actual, robust evidence for this marvellous prediction presented. An insistence on seeing the evidence would be quite old fashioned in the brave new world of Osbornomics, in which rising borrowing is repaying a debt, or falling employment is a sign of incipient recovery, or continuing stagnation is a ringing endorsement of one’s half-cocked economic policies.
Not even Osborne’s own economic forecasters, the Office for Budget Responsibility, think the 50p cut and falling corporation taxes are going to help create jobs. They’ve revised their predictions for business investment this year down by a huge 6.9 per cent.
The 50p cut is a futile, repulsive little gesture that with any luck will haunt the Chancellor to his dying day, or at least until he is safely out of office - whichever arrives soonest. In the biggest global slump since the 1930s, with millions unemployed and thousands falling weekly into poverty, George Osborne was the man who rewarded the super-rich. No-one should let him forget it.
Nor how he paid for it. Nearly half of all pensioners will see their incomes fall after Osborne removed tax allowances to raise £3bn. Meanwhile, the government’s own analysis of the impact of the Budget shows the poorest third suffering much more than average (chart B.2). The richest 10 per cent look like they’ve been whacked, relatively speaking, but – incredibly – these figures apparently exclude the impact of the top rate reduction, on the grounds that the effect is too large. A few scraps here and there don’t reverse the impact of Osborne’s backwards Budget – not even close.
This is car-crash economics from a part-time Chancellor. After two years in office, Osborne’s two solitary concerns have become clear: one, that he admits to, is hammering away at public spending to pay off the UK’s national debt. On this he is visibly faltering, and – if growth does not return – will fail. The other, that he does not admit to, is funnelling cash from the great majority to a tiny bloated elite. On this he is a resounding success.
The more he shovels upwards, the worse off the rest of us become. Spending cuts are no way out of economic stagnation – quite the reverse. Government has to take a lead. Tax the rich to pay for public services. Invest in sustainable infrastructure to create employment. And overhaul our crippled financial system.
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