The British government needs more money. In the financial year 2023/24 the deficit was £131 billion, equivalent to 4.8% of GDP which is only slightly above the UK average since 1970 of 4.7%. (See Link 3 below) This is equivalent to around £1,920 per head of the UK’s population, but the deficit will increase because of the demand for more defence spending by Russia and the USA.
Undeserving Poor and Deserving Rich
Unfortunately, our new Labour government has unwisely committed itself to protecting the deserving rich from the horror of tax rises and are prepared to let the undeserving poor take their chances. The ten usual arguments in favour of such an approach are shown below.
Are you convinced by these arguments?
- He works incredibly hard, that is why he is so rich.
A friend who owned his own company once was honest enough to admit that working for him, was much more demanding than being him, that all his staff worked very hard. The cleaner who holds down 3 separate jobs often works every bit as hard and in much worse conditions than senior managers. The same applies to junior doctors and nurses. - He is very clever, that is why he is so rich.
This is nonsense, most of us have worked with very clever people who are content with an above-average-salary. Most of the evidence indicates that having a rich parent is more important than being clever – Donald Trump and Elon Musk. - You must not tax him too much, he needs an incentive to work.
Beyond a certain level of income, people work for status, pride and job satisfaction. Very rich people keep striving for more success because they are competitive people. Like all of us they will take more money if they can get it, but in that they are no different to the office cleaner. - We need people like him, because we depend on the wealth that he generates.
Why do we say the rich generate money? They might own the business, but the workforce generates wealth more than the owner. - If we increase his taxes, he will have less money to invest in new businesses.
After he satisfies his desire for luxury cars, extra houses, holidays and travel, the rich may reinvest in other businesses IF he finds it interesting to do and IF this will allow HIS wealth to grow. But no-one is proposing taxes at the level where the rich become poor; even after a massive tax increase the millionaires will remain millionaires. - Didn’t the Laffer Curve show that increasing tax rates actually reduces the amount of tax revenue collected
No. The Laffer Curve is based on common sense. There is always an upper limit to the amount of tax people are prepared to pay. The Sunday Times 30/3/25 reports that international standards, the typical UK worker is taxed really quite modestly.
- Rich people are mobile, if we increase their tax they will leave this country, we will be worse off.
If Scotland raises the rate of income tax, it is relatively easy to move south of the Border to England, but moving to the USA or other low tax regimes is more difficult. Selling your home, taking your children out of school, perhaps even selling your business sounds easier than it is. Lots of people threatened to take their children out of private schools once their bills went up by 20% VAT, but very few moved. The rich will always threaten to leave if we increase tax, but only a small number will.
- If we tax the rich too much they will stop giving to charity.
The poor give a larger proportion of their income to charity than the rich and the evidence is that getting richer does not encourage you to give more to charity. (See link 1) Also, not all charities are well run and if we had better government services we would need charities less.
- If the rich have less money, we reduce their disposable income and the economy will suffer.
Similar to e) above. There is a limit to how much food and how many cars a very rich man can have. With extra cash he might invest in buying property, driving up the cost of our housing and making it ever harder for our young people to purchase their own homes.
- A rising tide lifts all boats.
If you are referring just to boats this might be true (unless your boat is damaged), but people use this phrase to imply that if the rich earn more money, then the poor do better as well. This myth is sometimes called ‘trickle down economics’ and has been peddled since Ronald Reagan was President back in the 1980s but after 40 years of real-world testing, the evidence is against it. (Economists prefer the term ‘Supply Side Economic’ to the term ‘Trickle down Economics’)
Multiple studies show that rather than spending their extra income, rich people tend save their money, often in off shore tax free investments or invest in purchasing housing and other assets, and driving the prices of housing out of the reach of the poor. The IMF (see link 2 below) found that ‘increasing the income share of the poor and the middle class actually increases growth while a rising income share of the top 20 percent results in lower growth—that is, when the rich get richer, benefits do not trickle down.’
(There is a joke about trickle down economics, but only 5% of the population get it.)
The Labour Party under Keir Starmer and Rachel Reeves appear to have committed themselves to supply side economic policies like tax cuts, deregulation, and reduced government intervention, with the belief that these will lead to economic growth, despite short term pain for middle- and working-class families.
Time will tell, but I suspect the middle- and working-class communities of England will find themselves looking to other parties, perhaps the Liberal Democrats to represent their interests in the future.
1) https://www.civilsociety.co.uk/voices/why-are-the-poor-more-generous-than-the-wealthy-.html
2)
3) https://commonslibrary.parliament.uk/research-briefings/sn06167/
Arnold is a retired teacher from Lisburn, now living in Belfast.
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