PoliticsHome | Only the latest five entries on the PhiWire are visible to non-subscribers
- Sign up to see last 24 hours
Dont have an account?Sign up here
Monday 19th March 2012 | 07:00
Last week in the United States of America, while riding in the Presidential motorcade, it is highly likely the Prime Minister will have driven past numerous references to the ‘American Dream’.
Whether on a highway billboard or a Cadillac bumper sticker: working hard, being given the opportunity to prosper regardless of background and circumstance is the ‘American Dream’ that continues to motivate, provide hope, grow success, and inspire individuals and America’s fifty states.
Whether you are the first in a family to go to university, or a junior athlete with dreams of future Olympic gold, or a small town retailer seeking to become America’s next Walmart, male or female, young or old, white or black, the American Dream is a hope-filled chronicle that cuts across ethnic, cultural, and religious boundaries. It is an inspiring meta-narrative that binds Americans together with a shared sense of individual and national pride, and says: if you work hard and have faith ‘tomorrow can be better than today’.
In the same way this week’s Budget also needs to provide ‘a narrative of hope’ and reach out beyond a simple austerity message. The Chancellor must announce a Budget which enthuses all in Britain who aspire to a better future and a prosperous tomorrow.
For all who risk setting up a new business, who study into the late hours to improve their job prospects, who save for retirement and yearn for a better life for their children; from first time buyers to Britain’s daring and innovative entrepreneurs, all share a universal adrenalin which provides the aspiration that can move Britain out of recession and into recovery.
The Chancellor must unleash this aspiration by scrapping the 50 pence and 40 pence upper rates and replace it with a single 38 pence higher rate. The 50 pence tax is a job destroying tax, is fundamentally un-Conservative, and economically dumb in that it acts as a punitive deterrent to all would-be entrepreneurs and investors. It is posture politics. Similarly, the 40 pence rate eats into middle earner’s disposable income and their ability to spend in the wider economy.
Nonetheless, some senior coalition figures still luxuriate on the merits of redistributing wealth, and in so doing, seek to overturn Conservative economic orthodoxy. Such actions shed a revealing light on tensions within the coalition and also the ‘quiet struggle’ going on within the Conservative Party – a struggle for its future political and economic direction.
This is evidenced by pushing nearly one million more middle earners into the 40 pence tax rate, sending contradictory fiscal messages on marriage, backtracking on Treasury support for married couples with children, the row over child benefit changes, and government department’s authoring over-generous employee entitlements - all are political high risk.
The relative wealth of Britain’s middle earners, compared to the income, assets, and savings of the very wealthy, often hidden in multi-million pound family trusts, can be measured in the moderate thousands of pounds, not the tens of millions. Middle earners are not wealthy, yet invariably it is Britain’s over-taxed middle earners who bear the brunt of most Budget tax rises. It is rarely the very wealthy, foreign or domestic.
Indeed, some in politics who inherit substantial wealth often feel a sense of guilt because of that wealth. This is misplaced guilt. In return they can sometimes advance policies designed to redistribute wealth from the wealthy to the lower paid, but in return, end up penalising millions of middle earners. More politicians need an understanding of what ‘earned wealth’ is, and what sacrifices may have been made to obtain it.
Plans to end higher rate tax relief on pensions is another false economy and a policy that will send a perverse message to all who dream of climbing the income ladder, including the tens of thousands of public sector workers the Conservative Party needs to attract at the next general election. It will also exacerbate Britain’s ongoing savings crisis, a legacy of Gordon Brown’s pensions meddling. Ending 40 pence pensions tax relief is ‘fool’s gold’ and will also lead to major reductions in pension funds. This policy should be abandoned.
The fairest and most effective way to redistribute wealth is for the Chancellor to allow more people to keep more of their own money and allow them to spend it in the way they choose. Yet they can only spend money if they earn money – with a job. Raising taxes and high income taxes are a barrier to job creation, market liquidity, and growth in the wider economy. No amount of credit easing can replace the market demand created by Britain’s free market battalions.
If the Chancellor continues to increase taxes on Britain’s struggling middle earners he will be in danger of turning back the clock to the fiscal mistakes of the past. That is why, if the economy is to grow at any meaningful rate, the government must reward aspiration - not penalise it.
Wherever they reside, Britons share a common vision to live in security, freedom, and prosperity. That is why given the choice between shrinking the size of government, and reducing central expenditure more quickly, or lowering employer and employee taxes, the vast majority of Britons want the government to cut taxes.
On Wednesday the Chancellor needs to place the Budget on the ‘scales of fairness’ and ensure the scales weigh in favour of Britain’s hard working middle earners and job creators.
Following all the Presidential ‘bon ami’ and important foreign policy exchanges, I hope the Prime Minister and the Chancellor both found time to reflect on how America’s competitive employee and employer tax rates are once again growing jobs, boosting confidence, attracting investment, and moving America out of recession.
This week’s Budget must show the government are serious about unlocking individual and national aspiration. That is why they must stand up for the British Dream.
Labour Party Political Broadcast for 2013 elections 19/04/13
UKIP Party Political Broadcast for 2013 elections 19/04/13
Green Party Political Broadcast for 2013 elections 19/04/13
Conservative Party Political Broadcast for 2013 elections 19/04/13
Lib Dem Party Political Broadcast for 2013 elections 19/04/13