Friday 11th October
Statistics never proved anything, they are more often used to distort the truth than to reveal it. Most of the people compiling or requesting statistics are doing so from a fixed belief, which they are sure the statistics will prove to be correct. And they usually do. If they don’t they aren’t used.
A few mornings a week I read City AM, one of the new gospels of those who see making money as the only worthwhile enterprise. It is beyond right wing, often criticizing Cameron for being too timid on cutting welfare and taxes etc: It has an inherent belief in both the free market and reducing state regulation to the point that they would be happy to see no Government at all, just a completely free rabid dog eat dog world. Yet when rogue elements are discovered fiddling rates or cheating they happily blame the watchdogs for not spotting these ‘rare’ rotten apples.
Today’s (yesterday’s) editorial was pointing up the fact that the top 1% paid a huge amount of income tax, almost a third in fact, and that the number paying the top rate had jumped substantially last year. This proved, so they argued, that lowering the top tax rate from 50p to 45p was the right policy as it actually brought in more tax. Well, you can’t argue with the figures, can you? No, but you can argue with the argument. As usual the editorial missed the blindingly obvious, and it is this.
George Osborne gave his chums in the city, and all the millionaires and high earners a nod and a wink which they simply couldn’t afford to ignore. He announced (and it is the only time I can remember such a thing) one whole year early that the top rate would be reduced. Now, most of these ‘high earners’ either directly or indirectly control their own salary; many own their own companies and can simply pay themselves drawings and not any taxable pay or dividends until they choose to, or they have friends on the remuneration committee who share their views and cannot see any justification for giving money to the exchequer that could remain in their paypackets. Simply by deferring pay, dividends, bonuses etc: into the following year they saved themselves a fortune. Which actually cost us; the ordinary taxpayer.
Consequently the year ended April 2012 brought in a much smaller amount of tax at 50p, than last year when the rate was only 45p. Had he not pre-anounced this cut, but simply brought it in on 6th April 2012 the tax collected at 50p rate would have been much higher. But that is to completely miss the point of the whole exercise. It was never about helping pay down the deficit, this was to ‘prove’ that high rates of tax are ineffective.