Conor Boyle: Anti-wealth policies fuel a cycle of doom

Conor Boyle is a young conservative and unionist from Northern Ireland, an Oxford graduate, and now works in the financial services sector.

How many items in Britain’s current economic policy, tax system, regulatory framework, and so-on, exist almost entirely for domestic short-term political consumption?

Of that, how many items are actually harming our economic performance?

You would have to conclude that the answer to both is: a lot.

What’s worse is that the short-term popularity of certain measures is derived from a belief that we are going to make the rich and successful pay more and atone for their greed and general ‘evilness.’

Of course, this view of the world runs contrary to basic economic literacy.

Money is mobile, and it goes where it’s best treated.

The ‘tax the rich’ mentality that this failing Labour government – and I’m afraid to say the previous Conservative governments also had in large part – is based on the fallacy that we’re going to phase out excessive wealth.

A realistic government should accept that wealth – including levels of which we may find excessive or distasteful – are always going to exist, and we should play our cards better to be a welcoming destination for it.

Creating economic conditions which are hostile to investment, business, finance and the likes is just a gift to the exchequers of our competitors. Countless examples, from Ireland’s low corporation tax regime to cutting the higher rates of Income Tax here in Britain, show beyond doubt, that creating a pro-wealth environment attracts more tax revenues.

To some, it’s counter-intuitive; you increase taxes to increase your revenue. But the most basic understandings of anything to do with economics or tax shows that’s very rarely the case, especially when dealing with the most mobile demographics of people. Thus, the basic political driver inherent in so much of our political discourse; love of the NHS; is improperly framed. Public services, the National Health Service, benefit most from making Britain a place to come and part with your money. It’s not a choice between the nurses and the rich, if we punish rich, they sod off to Dubai and the nurse becomes relatively “richer” in the eyes of the taxman, expected to contribute more as a result.

It struck me a few years ago that policies like the cap on bankers’ bonuses, the high rates of Income Tax, tax on second homes and landlords, the energy windfall tax, the surcharge paid by banks on top of their Corporation Tax, Corporation Tax itself being hiked to 25 per-cent, and other measures, not only don’t serve their stated purpose of financing our beloved public services, but they could be a barrier to a well-financed exchequer.

Take that bankers’ bonuses cap.

A typically populist move enacted after the 2008 recession. The political intuition is clear; banks bad, bankers bad, be seen to “make them pay”. But, as Kwasi Kwarteng pointed out as Chancellor, the cap didn’t cap the amount that bankers were being paid. They were simply paid more in basic salary to avoid is being counted as a bonus. Useless.

Worse than useless though. It’s fair to speculate that such a measure, while totally ineffective, sends out the message to any bank or financial firm around the world that Britain is a place that begrudges your financial success, and sees wealth as a dirty concept. Faced with the choice of New York, Dubai, Frankfurt, Doha, Dublin, even Paris, and very soon potentially Riyadh, many of whom are actively trying to woo new businesses to onshore, we are chasing them away.

Every business that doesn’t move jobs or activity to Britain is lost earnings to young British graduates and school-leavers, lost revenue to our retail and hospitality sector, and of course, lost revenue to the Exchequer, and added pressure on our saintly nurses, teachers and other public servants as a result.

At some level, you can’t blame politicians for their intentions. Many, you assume, mean well. That is, however, no substitute, and no excuse for implementing, cheering on and defending policies which make Britain poorer in the long run.

The same goes for the 45p rate of Income Tax. Part of the “pay their fair share narrative”, but when both Nigel Lawson and Gordon Brown – yes him – actually cut the higher rates, rather than losing money as was predicted, the Treasury received more in tax take. The truth is that the wealthy and successful are wealthy and successful for a reason. They’re smart enough to stay wealthy even when governments are hounding them. But they can be turned-off Britain as a destination for their capital with these envy-driven policies.

And without wanting to sound like a certain former Prime Minister, much of this is based on the fundamentally flawed way that our institutions forecast tax revenue. It’s assumed – seemingly – that tax cuts cannot be revenue-raising measures. As such, Chancellors appear to be cornered by their officials into these spiteful measures designed to squeeze more out of the productive actors in the economy in order to satiate a growing public sector and welfare state. It doesn’t, as we conservatives know well, work. So, the people are not, on average becoming better-off, and those who are; they’re upping sticks and leaving.

In-turn then, with people not being able to get ahead financially, and the feeling of stagnation setting in, the public animosity towards the rich increases. Rather than a virtuous cycle, we get more anti-wealth policies which just create a circle of doom, and the nation is as far away from prosperity as ever.

The state of Britain’s economy necessitates a pro-growth mentality now from government.

It’s easy to say – and has been now by both parties for a few years now – but the action (the bit that matters) is much more difficult. It requires a political spine of lead, and a sort of immunity from immediate bad headlines and the condemnation of a Question Time audience.

The reward will be success.

Success felt in the pockets of the British worker, the tills of the British shopkeeper and restaurateur, the efficiency and improvements in the British hospital ward and classroom and increasing sense of aspiration that comes with it all. Over a four- or five-year electoral cycle, we know which is more pertinent for voters in the long-run. And politics aside, the country needs to be more prosperous. Somebody needs to have the will to stand up and deliver it.