Balls 1 – 0 Osborne
Boris Johnson has echoed plans to scrap the 50p tax on people earning £150,000 and above to give London a chance to compete with foreign cities.
He said the same in late 2010, noting the tax ‘can’t go on forever’ if London is to remain competitive as a world financial centre.
But the idea is being floated again now growth figures are on the go-slow, and the suspicion is that Boris’ plea is not a noble one to get London booming again (?), but because the rich, who he is a representative of, want to remain so.
If this is too suspicious for you, then fine. But what is the thinking behind reducing this tax, over say freezing VAT, in order to drive up consumer spending?
Research group Acxiom claimed in 2009 that rich consumers – earning over £45,000 a year and who tended to spend more than £90 a week at Tesco, Waitrose or Sainsbury’s, now shifting towards low-cost brands at Asda, Morrisons, Aldi and Netto – were the ones cutting back; perhaps this informs latest thinking?
But I doubt many would say that the possibility of the kind of QE Vince Cable alluded to recently is informed by a lack of higher earners spending money.
Instead poorer consumers, the ones most affected by inflation and the 20% VAT, need more money in their pockets.
Such was the message of Ed Balls, when in June called on Osborne to freeze VAT.
If Osborne had listened to Balls, perhaps growth this quarter would not have looked much different, but that of next quarter may have – that is unless there are too many leaves on the train track, or the wrong type of sunny days.