Taxing Conundrum

Well the budget speech had no real surprises for us but Mr. Darling has been surprised by the fact that borrowing has been higher than he predicted and the recession deeper. Fair play, though, he's only running the country's finances.

The only minor shock was the last minute hike in the top rate of tax for those earning above £150,000 per annum to 50%. Of course, anyone earning between £150,000 and say £250,000 will be grinding their teeth and spitting, particularly if they take that as salary or bonus. For those earning above that level, we are into the stratosphere where compensation can come in varying forms from capital gains to dividends or some other contrivance.

In fact, of the 50+ billionaires who are supposed to make their living in the UK, they pay less tax proportionately than those on the average wage.

You see the richer you are, the more creative you can become. And for those in the super-rich bracket, well they know every trick in the book. Sir, and yes he was knighted by this Government, Philip Green made sure he did not pay a bean in tax on a single dividend of £1.2bn that his company did not earn. The dividend was paid by a bank loan and went to his wife who is apparently an non-domicile. Like many hedge fund, private equity and top end traders in the City, Green has the facility to evade paying taxes in the UK - and he is mean-spirited enough to make sure he doesn't pay a penny, not just make sure he doesn't pay more than he has to.

The best part of all that is that this Labour Government have not just allowed this to happen, they have openly supported it and enabled these super-rich people to avoid tax by making our top end system more attractive. Instead of promoting funding for new business ventures, innovation, creativity, entrepreneurship and backing bright ideas, they have allowed billions to be created off buying, revamping and reselling existing businesses and shorting stock prices. Britain is way behind its rivals in terms of injecting capital into good ideas and many of the so called 'Venture Capital' companies plough their money into juicy deals for fast-buck turnarounds rather than back creative new businesses.

What this new hike in tax will do is call into question the raft of high earners who actually have to go to work for their living, selling things, building businesses and creating employment for others. They will be the ones who stick around here not able to afford fancy Trusts like the Labour golden boys and so pay their taxes. So when the opportunity arises to work abroad for a few years or even choose their country of domicile as anywhere else in Europe, like Switzerland, then they will do so.

The whole borrowing and tax situation is only going to get worse. As unemployment moves toward a peak, the strain on the welfare state gets higher and tax revenues decrease - so the majority of us will pay for it. Tax on fuel, because we have to drive to work whereas it is nothing to the super-rich means that once again working Britons bear the brunt of all the tax bill now and in the future.

Why didn't we see 'windfall taxes' for hedge funds or private equity? Why didn't we see a higher rates of tax on future profits on banks as they should pay back the money we are stumping up ahead of us? Why don't we see all senior banking executives having capped bonuses for the future with higher rates of tax applied? Why don't we see scaled Capital Gains Tax for businesses that proportionately rewards owners who have nurtured their businesses over many years vs. those who buy, asset strip and sell in short order?

It's because they won't pay. Tax the hedge funds and they will all register their headquarters outside of the UK, same with private equity. We need a wholesale change in legislation on companies and where they pay their tax and any individual working for them before coming to the rest of us for the price of this mess created by a bunch of ministers who cannot even get the numbers right from day to day.

Once again, this is a budget on the mass of people who regularly cough up and cannot afford to leave the country. The super-rich once again get away without paying. There was a time when Labour represented the party of social equality - but, with their former leader's head so far in the trough of riches, it's pretty obvious that's all in the past.

As a final note, I heard Tony McNulty on the radio today 'defending' himself on his expenses row. He stands by the fact it's all in the rule book. It reminded me of the old Peter Sellars film, 'I'm alright, Jack' - he has got his head so far in the feeding trough he cannot see that his job is no different from the average person who has to commute to London. He claimed £60,000 on a second home that wasn't even his and is less than 13 miles from Westminster. The rule book doesn't say you have to be a greedy, money-stealing swine with no conscience.

But that's what it takes to be a Labour Minister these days - that and skin thicker than a rhino's hide.