26.4.09

LAWS OF CONSERVATION. Composer Andrew Lloyd Webber contemplates going Galt.

Despite a rumour put around some years back, I have never contemplated leaving Britain for tax reasons. But in the 40-plus years I have been lucky enough to work here, I've seen a bit. So I must draw your attention to what is really proposed in this Budget.

Here's the truth. The proposed top rate of income tax is not 50 per cent. It is 50 per cent plus 1.5 per cent national insurance paid by employees plus 13.3 per cent paid by employers. That's not 50 per cent. Two years from now, Britain will have the highest tax rate on earned income of any developed country.

It's the tax burden I wish to address. I've seen more than a few posts and columns suggesting that national health insurance would relieve the legacy car companies of some of their burdens. At least one (I forget where) suggested that General Motors incurred costs of several thousand dollars per car in insurance premiums for current and retired employees that did not have to be borne by competitors in countries with socialized medicine. Something about that argument bothered me: there would be an income tax or a consumption tax or a payroll tax somewhere to raise the revenues for the single payer to disburse. Now comes useful clarification from Mr Webber: there's a substantial wedge between value of marginal product and take-home pay for British workers. Tax policies may be different in other countries, but those health insurance premiums have to come from somebody.

The wedge is particularly evident to self-employed.

I write this article because I fear the inevitable exodus of the talent that can dig us out of the hole we find ourselves in. It is inevitable, given that other countries are bidding for entrepreneurs. The Government must modify its proposals.

I give you this example. I have altered the details of the family I write about for obvious reasons. But the essentials are true.

Last Thursday I met with a thirtysomething guy. I absolutely depend on him in a highly technical area of theatrical production. For legal reasons he has to employ himself through his own company. Under the new tax regime, he will have to pay 13.3 per cent to employ himself before he pays himself anything. And then he will have to pay 51.5 per cent on what's left.

This is a guy at the cutting edge of his profession who works all over the world. He is in demand in every major territory where entertainment is produced. He has a young wife and two children. Last Thursday he told me that he and his wife had decided that the UK was no longer where they wanted to live.

His wife thinks the State education system is inadequate. And she fears that a bankrupt Britain will increasingly be a worse place in which to live as the horror of our present financial mess hits us all in the solar plexus.

He says that he is young enough to set up shop somewhere else. The new tax rates were the final straw. These talented young people know they will make it impossible for them to educate their kids privately in the UK.

Will we see countries offering tax holidays for immigrants of means?

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