We have seen the top rate of income tax reduced from 50% to 45% for those earning £150,000 a year or more and there are rumours that it will be cut again back down to 40%.
The argument has been that we cannot hike taxes because it will drive away our own highly-skilled people overseas and highly-skilled foreigners will not want to come to Britain and help boost our economy.
Firstly, there has been no evidence produced that proves there will be a mass exodus from the country if the wealthiest are taxed more more – the 'evidence' has been anecdotal at best and scaremongering from vested interests at worst.
Secondly, a report from KPMG has shown Britain is far from the worst offenders when it comes to high rates of income tax. The global average top rate of income tax has risen 0.3%, but the UK has bucked this trend by reducing the top rate of tax.
France has had the gall to introduce two new tax rate bands for higher earners increasing the top rate of tax from 41% to 45% for those earning €250,000, and the French president is planning to go even further with a 75% tax rate band for those earning over €1 million.
In fact the 45% tax rates is not much higher than the 37.7% European average, which factors in every country in Europe, most of which are not key financial players.
The fact is, the City is a key financial player and the UK will always be a desired place to work and live, whether our tax rate is 45% or 50%.
Reducing the rate when we are in the midst of an economic storm is not sensible for the economy, and places further burden on those who are not earning £150,000 a year.
When the government produces some concrete evidence that a 50p tax rate is damaging our economy then it should think about reducing it but until then it should stop trying to placate its banking buddies and do the right thing.