50p tax row – who's trying to get it repealed?

Posted on: 07 September 2011 by Alexander Hay

The campaign to lower the 50p tax band for high-earners is not what it seems, as a look at the backgrounds of the key proponents suggests

The 50p challengeAs reported today by the BBC, a group of senior economists have signed a letter, published in the Financial Times, claiming that the current 50p upper tax band is harming the economy. Much gnashing of teeth and lamenting could be heard as the spectre of high-flying money making types fleeing abroad and taking their accountants with them was invoked as a dire threat.

At first glance, you'd assume that economists would know a great deal about what they're talking about. But this is not always the case. As the 2008 recession demonstrated, economists sometimes get it wrong, and are further compromised by being too close to the financial industry, especially in the USA.

A close look at some of the 20 signatories also reveals a great deal. For example, Professor Patrick Minford helped make his name defending Margaret Thatcher's somewhat dubious economic policies, including the poll tax.

Then there is DeAnne Julius, formerly of the Bank of England's Monetary Policy Committee. She was, somewhat unusually, given her position with few questions asked, despite being a US citizen who used to work for the CIA. She also thinks the end of British industry, with the havoc it wrought upon communities, was a 'Good Thing' and that economists, rather than democratically elected politicians, should be put in charge of financial policy.

Fellow MPC alumnus Sushil Wadhwani has similar form, having worked for Goldman Sachs as its Director of Equity Strategy in the 1990s during which time it expanded into the vast 'vampire squid' known and beloved today.

Meanwhile, Roger Bootle, an ex-economist at HSBC, called for greater government spending combined with less tax and more borrowing, an approach used to devastating effect in Greece and Spain.

And Professor Michael Ben-Gad, of City University, somewhat confusingly called for high tax and slashed services at the same time, while arguing that RBS should, perhaps, have been allowed to go to the wall, and to hell with the consequences for its customers.

Nick Bosanquet, Professor of Health Policy at Imperial College, has called for NHS funding to be cut and more marketisation to be introduced, wondering out aloud why younger taxpayers should fund the healthcare of older patients, rather forgetting that spreading the cost is the whole point of the NHS.

And even the consultancy that organised the letter, Volterra, has form. Co-founder Bridget Rosewell, formerly of the CBI, claimed that deregulation and unfettered bankers weren't actually the cause of the 2008 crash - she blamed feckless consumer debt and rising wages.

Another Volterra co-founder, Paul Ormerod, meanwhile peddled the claim that public sector workers were overpaid, inefficient and over-indulged, at least in comparison to the underpaid private sector. He forgot to add that wages in real terms have been falling since the 70s, but one should never let facts get in the way of an argument.

Equally dubious is how the letter is in fact a PR operation organised by Tory-friendly company Westbourne, founded by senior Conservatives including YouGov founder Stephan Shakespeare and with close links to the ConservativeHome web site. One partner, Stephen Frayne, was even given a job as a civil servant by Education Secretary Michael Gove in February, despite his also once being Campaign Director for the Taxpayers Alliance, partly run by an ex-Lehman Brothers executive and extensively funded by notable Conservative Party donors.

To imply that this is the Conservative party 'lobbying' the Conservative government to cut a tax that the latter is officially denying it wants to cut is, of course, pure conjecture. What is clear, though, is that removing the tax will simply pass on the cost to other taxpayers or see a cut in services.

Not every signatory is, of course, of questionable provenance, though the enterprise as a whole certainly is. Rather than be browbeaten by it, perhaps it's time to call the bluff of those high-flying moneymaking types who are not, by any definition, going to be starving to death any time soon.

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Alexander Hay

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