The reasons why Nick Clegg is wrong to demand an emergency wealth tax are legion. Even once you dismiss the hypocrisy of a man who voted to get rid of the 50p tax rate in the last Budget trying to install something similar, there are plenty of ways it’s a terrible idea
The reasons why Nick Clegg is wrong to demand an emergency wealth tax are legion. Even once you dismiss the hypocrisy of a man who voted to get rid of the 50p tax rate in the last Budget trying to install something similar, there are plenty of ways it’s a terrible idea.
The principal objection is that this is a punitive measure which does not hurt those bankers and hedgies the Lib Dems will undoubtedly portray as its target but those entrepreneurs who have created jobs and, yes, wealth not just for themselves but for the UK. Is discouraging growth and innovation really what Nick Clegg wants to do at a time of economic stagnation?
Take any successful entrepreneur, from the wildly famous Richard Branson to the tech boffin about to sell their business to Google. If they had known that Nick Clegg wanted them to pile up all their assets – not income, assets – every year and deliver a chunk over to HMRC, their incentives to stay in the UK would have been diminished.
Of course, entrepreneurs won’t cease to innovate completely because they’ll be slightly less wealthy when they do cash in, but it’s more likely that they’ll arrange their tax affairs elsewhere or even take their businesses abroad. Just look at the exodus of the French to London in fear of Francois Hollande’s 75 per cent tax rate.
If Nick Clegg wants to punish bankers and their ilk, he can go about it in a number of creative ways: increase the bank levy, restrict bonuses at state-owned banks, flog Bob Diamond with a carpet-beater in front of Mansion House and all the commuters on the 76 bus that passes by. Very few will stand in their defence. But entrepreneurs – them we need.
Clegg’s basis for this tax (other than talking to the dwindling, unenthusiastic grass-root Lib Dems) is the idea that if the wealthy contribute more it will help us ‘to remain cohesive and prosperous as a society’, but this is false and pernicious.
We had a decade of buoyant tax revenues when society only got more unequal because the government failed to deal with underlying problems such as young people not in education, employment or training. It wasn’t that the resources weren’t there – it’s that the government isn’t good at using them. Clegg has been part of a government that has shut libraries yet expensively reorganised the health service – does this show a desire for a cohesive society?
He says he wants the tax to be a ‘time-limited contribution’, which sounds benign, but is in fact the spoonful of sugar: under that euphemism lies a quinquennium of gouging entrepreneurs. Indeed, I’m sure the tax will be temporary only until he can make it permanent.
What Nick Clegg is really doing here is making a pitch to Labour for the coalition he hopes the 2015 election will install the Lib Dems in. And that’s what’s really worrying: if we do get that coalition, we may get this counterproductive assault on the people we exactly need to be cultivating and encouraging.