Lynne Featherstone

MP for Hornsey and Wood Green

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Lynne's Parliament and Haringey Diary, established 2003

Would you leave this country?

Firstly, obviously, Happy New Year to everyone.

I went to my hairdresser to have a hair cut (too short – hate it) and we were having a conversation about the new tax rate. Or rather, he was telling me of a client who is moving to Switzerland because of the 50% tax rate and the change to bankers’ bonuses etc. He said other clients were thinking of leaving the country (this is a little hairdressers in Finchley Central by the way – not a swish West End jobby)  because of this stuff.

I said (and please remember this is a hairdresser/client conversation and not a political debate) that going to live in Switzerland was a high price to pay to save a bit of tax (sorry Switzerland) as it was boring, made clocks and had nice mountains – but living in London - the most exciting, brilliant city in the world – had to be worth a slightly higher rate of tax particularly as it the new rate doesn’t kick in until you are already earning £150,000.

I then put the case that there comes a point in terms of earnings where the amount earned is enough for a really decent and even luxurious life – and that thereafter it is not such a terrible thing to pay 50% tax. (It was, after all, LibDem policy until we moved to a more progressive form of a tax switch – from income to pollution and taking low and middle income earners out of paying any tax up to the first £10,000 of earnings). Of course, business and profit are to be lauded and encouraged – that is how business works – and I come from a family who all had small businesses and know how tough it is to make a profit.

And we, my hairdresser and I, agree that it is great to want a decent life and be able to afford what you want – but that that there is a need for the common good and the narrowing of the ever-widening gap between rich and poor. We collectively shake our heads sagely in comfortable agreement about the greed that drives people to move their estates off-shore, to become non doms to avoid tax – and all such devious moves to deny the Treasury its tax take.

OK – so I read this morning in the Guardian that Angela Knight, Chief Executive of the British Bankers’ Association has issued a ‘stinging attack’ on the 50% supertax and bankers’ bonuses.  Well – that’s her job – so no surprise there.

But the point is that, even if there had been no economic crisis and no credit crunch – it seems to me to earn £36.8 million before bonus as the top earning Director of a FTSE 100 company did either last year or the year before – is obscenely more than you need to lead a decent or even an uber-luxurious life-style and a bit of extra tax is not only fair but also will make that Director feel better about his humongous earnings – having paid his dues.

Or am I wrong?

Fri 1 January 2010
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Comments

  1. stephen moss says:

    I’m a professor at UCL, and I might be forced to move abroad, though this would have nothing to do with taxation. If Labour’s massive cuts to HE and science go ahead, then it may simply become impossible for me to do my research in the UK. Interestingly, the US, Germany and France all announced vast increases in HE/science spending last year, as a mechanism for getting out of recession. So, even though moving abroad would definitely mean a salary cut, I have to be somewhere where I can do my work.

  2. WitteringsfromWitney says:

    Ma’am, From where I sit living on a state pension it is just as obscene for MPs to have the taxpayer maintain their constituency homes when they are not living in them! It is also just as obscene for them to have had the taxpayer provide furnishings, equipment etc.

    I appreciate you are an Inner London MP – however the principle above is no different to that of a banker.

    It is just as obscene for MPs to disregard the wishes of their constituents and place party above country – witness the disregard for the wish of a referendum on EU membership.

    Just a thought………

  3. Nick, london says:

    There cannot be many people who would argue against a fairer society. However the reasons I have heard people are leaving the UK is because a concern in professional job prospects combined with a possible sterling crisis. While the supertax may be a good headline debate; if we don’t focus on sterling and job prospects in new industries we may end up incenting those potential well off professionals, entrepeneurs and investors to leave the UK and we will all be poorer for it.

  4. Silent Hunter says:

    If these “Bankers” do go abroad . . . can we reclaim their bonuses from them, since it was paid using OUR money, and I certainly don’t remember agreeing to fund “Off-Shore Banking”.

    Mind you. I don’t remember agreeing that the greedy bankers should be bailed out using OUR money in the first place.

    I wish the LibDems good fortune for 2010 and I hope that they trounce Labour in any Lab / LibDem marginal seat, rather than splitting the vote and allowing Labour in by accident.

    Oh yes! And please could the LibDems give a CATEGORICAL assurance that they WON’T support a minority Labour Government in any hung parliament.

  5. Simon, London says:

    I agree with the sentiment between you and your hairdresser over bankers moving abroad, and that the money earned is obscene.
    However, from speaking with one very rich businessmen in this country (also a tax exile) the mindset for these rich individuals is about having more money than the next mega-rich person – even if that figure is obscene.
    The thoughts of the common man and woman trying to get by by comparison doesn’t even occur to them.
    They just want to be able to say they have more money than everyone else, at any cost.

  6. Witterings – just a clarification – I am not an inner London MP and it would have been ‘within the rules’ for me to have had a second home – but I chose not to – as it would clearly be wrong, living as I do in Highgate.

  7. Simon – yes – but I know other people who could make more money or keep more money – but actually choose paths that pay less but mean more. So perhaps the question is what is the cultural environment that would encourage people to hold other aspects of life equally important as money.

  8. Libby says:

    “London – the most exciting, brilliant city in the world” – used to be, it’s not anymore, it’s a giant slum called “Londonistan”… I should know, I left to live abroad for that very reason!

  9. Would you leave this country? | Lynne Featherstone MP http://tinyurl.com/yhpotce

  10. John Lilburne says:

    I’m contemplating leaving the country but not because of the 50% rate tax. I agree with you that looking at the options, they’re not good. Switzerland=boring. Singapore=long hours. Hong Kong=long hours. Australia=difficult to get in to. New Zealand=boring. US=same state as we’re in. China/India=underdeveloped.

  11. Terence Eden says:

    I think it’s a perception problem. I remember when I got my first job at 16 – £4 pounds and hour. I was going to be rich beyond my wildest dreams! Then my first pay cheque came and after tax, national insurance, pension, etc I ended up with considerably less money than I thought.

    Why aren’t jobs advertised at a “take home” rate?*

    One of the strangest things about going to the USA is seeing pre-tax prices on all the goods. You pick up a box marked $9.99 and when it’s rung through the counter, you get charged $11,72. It seems crazy to me – but it’s ostensibly so you can see how much the Government is charging you. Here in the UK, the price on the sticker is the price you pay – whether VAT is 0, 5 or 17.5%.

    If you were told that your pay was going to be £25,000 a year – that’s what you should take home.

    It would take some getting used to – especially the mental leap of taking an apparent pay-cut as your £150k job became a £75k job..
    It would also give people a more realistic idea of what they were earning.
    The only disadvantage is that it may desensitise people to the amount they pay for state services – but that could easily be rectified by giving everyone an annual “statement” of what their taxes have paid for.

    T
    *Obviously, I understand that student loans, etc make it hard to calculate it exactly.

  12. Robert Walsh says:

    I am 58, well qualified;paid for by myself, but if offered the opportunity of a contract in the US or Canada I would jump, and the trip would be one way! Anyone with any go about them are crushed by repressive direct and indirect taxation. I am not interested in green issues; the answer there lies in population control. So if I am to aspire and achieve the respect and the lifestyle I wish for them it has too be abroad. We are one overtaxed, over populated small island. I dont see any change with the current crop of politicians.

  13. Nonconformistradical says:

    “it seems to me to earn £36.8 million before bonus as the top earning Director of a FTSE 100 company did either last year or the year before – is obscenely more than you need to lead a decent or even an uber-luxurious life-style and a bit of extra tax is not only fair but also will make that Director feel better about his humongous earnings – having paid his dues.”

    I can never see how anyone can realistically EARN that kind of money. I also don’t think such a director would feel in the least bit better about their earnings if they paid a bit more tax – these are scum who regard tax as being for the rest of us poor sods to pay on their behalf – they probably call themselves patriots into the bargain.

    I also regard the bailed-out bankers as being scroungers far worse than any benefit scrounger (about whom no doubt they bleat to their hearts’ content). The bankers screwed up big time – then they want bonuses??? We should wave good-bye to them – they are a bunch of parasites. The big mistake was that the British economy was ever allowed to become so distorted in favour of this bunch of money shufflers.

  14. Ragnar Danneskjöld says:

    You know what – the State does not own me, or my labour. And I consider that asking me to pay over 50% of my earnings to the State under force of imprisonment is tantamount to slavery. As it happens I don’t earn over £150K, perhaps half of that at the moment, but the principle is wrong. If I ever get close to that figure, or a lower figure (as I suspect it will be revised ever lower as the revenue from the 50% rate proves to be derisory, or even negative, and the politics of envy continue on their inevitable path) then I will do everything in my power to not pay that tax. I will use every legal tax loophole to avoid it. Ultimately I will leave the country if necessary.

  15. Swiss Family says:

    My son and his partner live in Switzerland. Now income tax is 6% and they live in a place where you can leave your cycle unlocked at the railway station all day ( a major city) People leave items on display in their cars, and guess what children as young as 5 walk to and from school on their own. Children come home for lunch!

    It is a friendly place and population of Switzerland is 8 million 2.5 million are non swiss citizens. There is no council tax, and they have referendums to decide laws budgets etc.

    Who would not live there? Oh and my son is not a banker he works in a bar, his partner works in an office. Nothing rich and flash. Its like living in England in the mid 1950s.

    Integrated transport, who needs cars? Switzerland has it all. A reflection when I was there in the bar were some bankers/dealers and they were talking in deals of hundreds of millions. One of them had their young daughter with him, she asked her father for 2 francs to have a go on the slot machine.

    He said but darling that is a pound! I thought if he is that worried about a pound he can look after my money anyday.

    I would live there tomorrow given the chance. Tell your hairdresser that she can earn a fortune in Switzerland its 200 quid for a hair do, and there is a shortage of hairdressers.

  16. jock says:

    this is the politics of the twitching curtain.

    we all know there is a tipping point where excessive tax,reduces the tax take(laffer curve) .we are now beyond that.

    i dont care if a business man or banker makes a load of money.it just is not on my page.i am not jealous.

    why dont you bring up football players?

    i am considering moving my estate abroad if labour win.the reason,nothing other than principal.

    excessive tax and spend countries fail,or have very bad services.

  17. Roger Thornhill says:

    A couple of points:

    1. If you don’t like the Director earning so much, don’t buy the products the company sells or the companies it invests in – and tell them so AS AN INDIVIDUAL. Using the law and tax law as a vehicle for envy politics or social engineering do-goodery is disgraceful.
    2. It is am obscenity to have the State take more of ones earnings than one gets.
    3. THe best way for the gap between rich and poor to be closed is to not get in the way of people earning a living. Taxing people does not achieve that, in fact it has the opposite effect.

    The best and simplest way to tax more fairly is to tax spending, not incomes, remembering that unprepared food is not taxed and if I had my way rents and domestic energy would not be either, so there is little for the genuine poor to pay in tax, no?

    This has the following effects:

    1. Taxation shifts away from taxing domestic employment to taxing all goods purchased (including foreign produced) equally and fairly. This alone should be justification. We should be looking to make UK employment cost effective, no?
    2. No need for the State to get involved in charitable giving or determining which cause the State thinks “deserving”. Why should supporting some lobbying rent-seeking NGO get preferential treatment vs. supporting ones own relative, for example?
    3. Rich people tend to a) invest their money so creating jobs and making products cheaper by providing more sources of borrowing b) spend it. To tax a) is idiotic. Do I have to explain why? b) will be taxed directly or indirectly* and rich people will still pay tax.

    * e.g. they buy a house and the vendor gets the cash and spends it and so is taxed.

  18. Mark says:

    50% tax rate? It is so much.
    I ever had a hair cut in China during my trip. It is quite confortable, not only hair cut but also good massage and service. And the important thing is that it only costed me about USD3.00 totally, no any supertax.

  19. Ray D says:

    Yes, I would leave and as a nurse of 25 years experience Canada looks mighty attractive. Not because of the taxes but because the Labour party has destroyed this country and I was a Labour supporter. I see nothing new coming from either the Tories or LibDem to address the mess.

  20. James Sutherland says:

    I think Nonconformistradical has misunderstood the nature of the bank “bailouts” – the equity and derivative traders who make the money and earn the big bonuses (generally based on the profits they earn for their employer, so they really do earn it: if I somehow made my employer a hundred million pounds, I’d feel quite entitled to 1%!) are a totally different activity from the “retail” banking which got overextended writing long-term loans on the back of short-term deposits. The lax mortgages, some even offering instant negative equity, were ridiculous – but the government itself underwrote some of those, continuing to offer them through Northern Rock even after the government bought it!

    I’m not close to hitting a 50% tax band, but the very concept of there being a level of income at which the state feels entitled to grab the majority (with NI) of your income for itself is disturbing.

    Like Terence says, tax is the price we pay for services from the state. My local council is, for me, appalling value: thousands of pounds per year, and they only empty the bins every second week? If I had a use for more of their services, I could perhaps justify it, or more – but I don’t.

    Nonconformistradical does perhaps have a point about bankers not really earning tens of millions of pounds – but can anyone honestly claim those bankers receive the tens of millions of pounds worth of services from the government that they are somehow being expected to pay for?

    For me, paying more money for less service doesn’t make me feel better at all – it makes me feel ripped off and want to leave. Essentially, government, national and local, is just a provider of some services which has a monopoly within that region. If prices get too high or service gets too bad, I’ll switch suppliers – it’s more difficult than switching electricity supplier, but much the same principle.

    I suppose I might feel differently if I felt I had a real say in the government’s actions – but neither my council nor the government has ever pretended to care. Twice a decade those of us who can be bothered go and cast a vote, almost all of us against the incumbent, who usually wins anyway by having a slightly bigger minority than the others, then the government goes ahead with whatever it felt like doing anyway. I see other countries – like Switzerland and some US state governments – where the electorate can overrule the government on specific issues. Right now, the only real choice the government leaves me is whether or not to stay here!

  21. Lee says:

    I just think there is something wrong with the government taking half of your money. Obviously, we need to pay tax because we use the infrastructure and everything else, but 50% is too much. The super rich have the whizz-kid lawyers to help them avoid paying tax, but the aspiring cafe owner or the doctor will be the ones who get hit. I say this as someone who only works part-time and doesn’t even earn enough to warrant paying any tax. Give me that 50% and I’m sure I could benefit my local community a lot more with the money than the government.

  22. Nonconformistradical says:

    “I think Nonconformistradical has misunderstood the nature of the bank “bailouts” – the equity and derivative traders who make the money and earn the big bonuses (generally based on the profits they earn for their employer, so they really do earn it: if I somehow made my employer a hundred million pounds, I’d feel quite entitled to 1%!) are a totally different activity from the “retail” banking which got overextended writing long-term loans on the back of short-term deposits.”

    As I understand it the derivatives and other ‘funny money’ involve packaging up the original bad loans and selling them on in such a form that few understand what they are really buying.

    These people are just messing about in a gambling casino making short-term gains and to hell with the consequences.

    It would be interesting to know what are the bonus policies in some of the other FTSE 100 companies whose profits go up because of factors not directly due to their own efforts e.g. rising commodity prices – price of oil goes up and BP’s profits rocket. Do they dish out ridiculous bonuses on that basis?

  23. Bishop Brennan says:

    The problems with a 50% rate are:

    - The very rich are uber-mobile, so will move abroad. Revenue will fall.
    - Someone who can’t move abroad has less incentive to work hard, with the State taking, by force, more than half of their earnings. Revenue will fall.
    - These two factors also remove a large amount of spending from the economy. Revenue will fall.

    In the end, high taxes are simply the politics of envy, and don’t increase revenues. As much as I would like to earn £150k +, I won’t ever do so. And, actually, that’s fine – I have a good life. But I don’t think others should be made slaves of the state for having the good luck and working hard enough to earn that much (for many of them, it will have been that or earn very little – they took the risk).

    However, the economic mindset that goes with the creation of a 50% tax rate might make me leave the country (I am lucky enough to be able to move to the US). In particular, the reality that it is people like me who are on a middle income who end up paying most tax – only to see it frittered away.

  24. Lynne,

    I think that we should test out the 50% rate on MPs first—how about that.

    Of course, with NI added on, it’s actually more like 64%, so I think that you’ll find that your… what? £65,000… becomes £16,900 take-home pay.

    Of course, I don’t think that you deserve even that much—so it’s a good thing that your pay isn’t set at a level that I think you deserve, isn’t it?

    DK

  25. Well DK – if you want to test out 50% on MPs you would have to raise their salary to a point where the 50% kicked in. It comes in on earnings over £150,000. And whilst I sense your hatred for all MPs and your belief that we should be paid virtually nothing – you just make a tit of yourself when your argument is so rubbish.

  26. Al says:

    Note that an MP on a salary of £64,000 is also claiming on average tax free expenses of £144,000 – equivalent to a total taxed salary of £304,000 for the rest of us mortals who have to pay tax on the full whack.

  27. Absolute rubbish Al – that’s part the problem – ‘expenses’ are for the most part staff salaries, office rental and costs, postage etc – not a penny of which is part of salary. I get the basic salary and London weighting and that is it!

  28. Terence Eden says:

    There’s currently a public consultation on the issue of MPs’ expenses – http://mpexpensesconsultation.org.uk/

    One of the issues that I’ve raised on it is that MPs’ staff salaries shouldn’t be counted as an expense. The staff should be employed like /as civil servants.

    I’d advise anyone interested in the issue to complete the consultation. It’s a fairly simple web form and won’t take more than 30 minutes.

  29. Terence – exactly right. In fact, quite recently we voted for the House administration to take over all the administration of staff etc -which is how it was done when I was on the Greater London Authority – much better and clearer.

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