Increasing taxes on having invested reduces investment

If we could just bring in a touch of that awful reality stuff to those arguing for a Wealth Tax. Even, those trying to insist that the income from wealth must be taxed more - you know, CGT equal to income tax, national insurance on investment income, all those foolishnesses?

For Ed Miliband, it’s a truly awkward moment.

His own statisticians have released data showing that Britain’s North Sea will produce a billion barrels of oil and gas fewer than expected between now and 2050 – with analysts linking the downgrade to Labour’s imposition of 78pc taxes and a ban on new drilling.

The assessment, by the North Sea Transition Authority (NSTA), the government regulator that reports to Mr Miliband, suggests the UK will have to import a far higher proportion of its oil and gas over the next 25 years.

According to a separate analysis, the accelerated decline of the North Sea could see half the 200,000 jobs it supports destroyed by 2030.

Nothing awkward about it from Ed’s point of view this is what he wants to happen. The Miliband vision of the future is us all enjoying our raw turnips as we shiver in our hovels midwinter. In the dark. This is by design and taxing away the reason to invest in the N Sea is equally by design. Investment in the N Sea is Bad, M’Kay, therefore let us tax the profits that result from having invested in the N Sea in order to reduce investment in the N Sea.

We can disagree with the goal all we like but the logic is wholly sound. If you tax something you get less of it, tax the results of having invested and you’ll get less investment.

But that last sentence is always true, not just about the N Sea. Therefore increasing the taxes on having invested - NI on investment income, higher CGT rates, a wealth tax - will reduce investment.

Which does lead us to an interesting question about all these calls for that higher taxation of investment income and the results of having invested like wealth.

Which of the problems Britain faces will be solved by less investment?

Tim Worstall