If you’re planning to leave Britain for sunnier climes in the coming months, you’d better book now. City bigwigs have been making noises about abandoning London following the Budget’s imposition of a 50% income tax band, while Michael Caine is threatening to leave for the US. To judge by some reports, you’d think every plane in the UK was filling up with would-be tax exiles.
I’ve nothing against Mr Caine. But celebrities and business people should have learned by now to keep quiet on this topic. The hint that the rest of us are somehow over a barrel because a few entertainers and a handful of financiers might swan off elsewhere is guaranteed to bring out the worst in everyone. As Anthony Hilton put it in the Evening Standard this week, if they want to uproot their entire lifestyle for the sake of “a few thousand pounds” then good luck to them.
Of course, it’s ridiculous that the government is now taking even more of our money, particularly when it’s already spent so much on so little. But the real problem with Britain’s tax system isn’t the size of the tax take. It’s that the government just won’t stop fiddling with the system and adding new bits. One of our biggest problems right now is that it’s very hard to predict what’s going to happen to the economy over the next three months, let alone longer.
By constantly changing the rules, the government just makes this uncertainty worse. We already know that the 50% tax rate won’t raise much money, certainly nowhere near enough to plug the vast hole in our public finances. But it will succeed in making even more people question the point of saving for a pension, or of attempting to plan their finances on any sort of long-term basis, because they can’t be sure that the government won’t just change everything on a whim come the next Budget.
The UK tax code now runs to more than 10,000 pages, and is the longest tax code in the world, longer even than notoriously bureaucratic India’s. Thanks to Gordon Brown’s desire to micro-manage almost every aspect of the economy, it’s more than doubled in size since Labour came to power in 1997 and it’s not getting any shorter under Alistair Darling.
It’s this weight of ever-changing, ever-expanding regulation that really threatens the long-term health of our economy. The good news is that the sheer complexity of our system means that future governments surely shouldn’t have much trouble finding things to cut.
The bad news is, with no sign that any party so far is genuinely committed to a smaller government, they may just indulge in more fiddling. Meanwhile, we look at some of the ways to keep more of your money out of the government’s hands – until the next Budget at least.