It has taken a while, but the Labour Party has reverted to type. In putting the top rate of tax up to 50% for those earning in excess of £150,000 gross from next April, Brown and Darling have decided to turn the clock back to the 70s; going a fair way to undoing the brave work of Thatcher and Lawson.
As wrongheaded as such a socialist policy would be, this budget is not about the redistribution of money from rich to poor, but from private entrepreneurs to the public sector. Even in a deflationary period the size and cost of government is continuing to grow. If they can’t cut the cost of government now, how can we trust them to do so in the future?
Hiking up the top rate of tax is of course a massive disincentive for those earning over £150,000 gross to stay in the country. Although we are unlikely to see a massive exodus of people (after all many have already left), it is entirely likely that enough will leave to ensure that this policy will result in less money in the pockets of this improvident government than they would otherwise have got. Also, in times such as these, the government more than ever needs to back off and give wealth creators the room to set this country on the path to recovery: this government needs reminding that wealth is not created, but destroyed in the corridors of Westminster.
This certainly leaves the Conservatives in an interesting position. They will want to focus on government debt for now, but if in power there will be pressure for them to once again undo this tax hike on the highest earners and at least start the task tackling the most bloated government departments. Only time will tell if they have the leadership to do this.