Boris Johnson calls for tax cuts

January 28, 2011 1:17 PM

This morning The Telegraph carried an interview with Boris Johnson. He says that the Government should use March’s Budget to set out a plan for how they aim to cut taxes. The Mayor of London is shocked that the UK has higher personal tax rates than not only the US and Japan but Germany, France and Italy too. As the Telegraph notes, he fears it is hurting our competitiveness. And of course it is. Take the 50p tax rate – it’s nothing more than a political gesture to sate the anger felt towards that seemingly homogeneous group of bankers.

In July last year Matthew Sinclair co-authored a report with Dr Jonathan Scott on entrepreneurship. They showed that the 50p rate of tax could mean a top combined marginal tax rate of 92 per cent for successful entrepreneurs on income earned, saved, invested in a company and passed on to children. At a time when we desperately need to encourage new businesses to form, grow and stay in the UK this is a massive disincentive for would-be entrepreneurs. It also means existing large companies may consider relocating abroad, which would be disastrous for jobs and growth.

Matthew Sinclair wrote a piece on economic growth for ConservativeHome the other day, outlining where the Government have gone wrong and what they can do to help kick start the recovery. Setting out a “clear direction of travel” as Johnson put it would be a great start. But the Government would do well to remember that pro-business policies are not necessarily the same thing as pro-growth policies. For example, Regional Development Agencies were not the best way to achieve growth in the regions, and the Regional Growth Fund is a pro-business policy that gives back taxes in grants to select projects favoured by a panel (which incidentally includes someone who doesn’t support economic growth). A plan for a simpler and lower tax system would be far more beneficial for growth.This morning The Telegraph carried an interview with Boris Johnson. He says that the Government should use March’s Budget to set out a plan for how they aim to cut taxes. The Mayor of London is shocked that the UK has higher personal tax rates than not only the US and Japan but Germany, France and Italy too. As the Telegraph notes, he fears it is hurting our competitiveness. And of course it is. Take the 50p tax rate – it’s nothing more than a political gesture to sate the anger felt towards that seemingly homogeneous group of bankers.

In July last year Matthew Sinclair co-authored a report with Dr Jonathan Scott on entrepreneurship. They showed that the 50p rate of tax could mean a top combined marginal tax rate of 92 per cent for successful entrepreneurs on income earned, saved, invested in a company and passed on to children. At a time when we desperately need to encourage new businesses to form, grow and stay in the UK this is a massive disincentive for would-be entrepreneurs. It also means existing large companies may consider relocating abroad, which would be disastrous for jobs and growth.

Matthew Sinclair wrote a piece on economic growth for ConservativeHome the other day, outlining where the Government have gone wrong and what they can do to help kick start the recovery. Setting out a “clear direction of travel” as Johnson put it would be a great start. But the Government would do well to remember that pro-business policies are not necessarily the same thing as pro-growth policies. For example, Regional Development Agencies were not the best way to achieve growth in the regions, and the Regional Growth Fund is a pro-business policy that gives back taxes in grants to select projects favoured by a panel (which incidentally includes someone who doesn’t support economic growth). A plan for a simpler and lower tax system would be far more beneficial for growth.

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