The Wilted Rose

Charting Labour meltdown 2007-2010

“The 50p rate will mean fewer entrepreneurs and fewer jobs” – Taxpayers’ Alliance

A new report from the Taxpayers’ Alliance finds that the “50p rate will mean fewer entrepreneurs and fewer jobs”, as Matthew Sinclair, makes clear:

Tax and Entrepreneurship looks at the relationship between the tax system and people’s decision to start a new firm.  It points out that in order for the risks association with starting a new firm to be financially worthwhile, there need to be rich rewards if things go well.  Often, those rewards will go beyond someone’s immediate needs and be saved and then passed on to children, it’s no accident that Theo Paphitis on Dragon’s Den refers to the money he invests as “my children’s inheritance.”

Unfortunately, that gets taxed heavily and repeatedly.  The money is taxed when it is earned, when it is saved and invested in a company and then again when it is passed on to children – even before it is spent.  That adds up to a total top marginal tax rate of 90% even with the current income tax regime and a top rate of 40p.  Throw the new 50p top rate into the mix and you’re talking about a top marginal tax rate of a massive 92%.  20% of the amount people are left with right now will be taken away with the introduction of the new top rate.  That is a massive burden and will reduce the incentives to start a new firm.

That means that the 50p rate shouldn’t just concern the rich.  The vast majority of new jobs are created by new firms, particularly the high growth “gazelles”.  If we see fewer of those firms thanks to the new 50p rate then more people losing their jobs now thanks to the recession will have to wait longer to find work again.

Once again, the Government’s policies hurt potential entrepreneurs and, therefore, people who they would have employed.

Labour has migrated far from its socialist roots. In attempting to outflank and wrongfoot the Tories on the 50p tax, Labour has damaged the prospects of entrepreneurs starting new firms that create jobs, which provide people with gainful employment – whatever their social background, whether working-class or middle-class, and whatever their status, whether currently employed or unemployed.

The fact is that there is nothing “progressive” about Labour’s empty rhetoric and its failure to deliver on policies, such as promoting entrepreneurship, reducing child poverty, and dealing with unemployment and worklessness – when its policies have actually exacerbated each of these indicators of prosperity and quality of life.


28 July, 2009 Posted by | politics | , , , | 2 Comments