ALEX BRUMMER: The folly of Labour wealth taxes
My suggestion was that plans by Rachel Reeves to target wealth would undermine the energy, entrepreneurship and enterprise needed to drive UK growth.
The interlocutor insisted it was time we rid ourselves of rich free loaders with little interest in the broader population.
The pay gap between those at the top in business and working people has been widening for decades.
Tesco boss Ken Murphy picked up £10m last year, which is 431 times that earned by the average worker in the group.
As boss of a top FTSE 100 company, everything about Murphy's remuneration is known and explained in ferocious detail in the company's annual report.
Research by the London School of Economics shows that the top 1 per cent of taxpayers living in Britain account for 30 per cent of the nation's total income tax take. The targeting of aspiration by Labour is proving an own goal.
The outflow of the rich from the UK, some 16,500 people on the last count, harms spending and investment.
The elimination of non-domicile privileges began under the Tories. The Chancellor hammered in the last nail. The change is calculated to add £4.2billion to the tax take of the Exchequer in 2026-27 and more in the subsequent two years.
She will be fortunate. Rather than stay in the UK and wait for their privileges to vanish, many non-doms already have fled. The current preferred destination is Milan.
For the price of £145,000, or equivalent fee to the Italian government, it is possible to circumvent taxes on worldwide income.
As wealthy residents depart, property prices in smart central London and sales of luxury goods and services have been punished. The willingness to invest in start-ups, real estate deals, partnerships and trading in Britain is diminished.
The City survived Brexit because UK wholesale markets and derivatives trading remained the first choice for European and American dealers. The number of jobs heading towards Europe was far smaller than predicted.
When the vice-chairman of Goldman Sachs, Richard Gnodde, was driven offshore this year, one recognised how serious the exits were becoming.
Milan, Dubai, Singapore are each growing rich on exiles from investment banks, private equity, and hedge funds. Private plane leasing firm NetJets is doing a roaring trade from billionaires swooping in for a couple of days to complete transactions but leaving before their feet touch the ground.
And we wonder why UK posh firms such as Burberry, Smythson and others are having a torrid time.
As alluring as soak the rich taxes are to the Angela Rayner wing of the Labour Party, they will not resolve the nation's fiscal problems.
Every penny may count in difficult times, but the extra income generated by inheritance tax reforms will be paltry. The dial is going to be shifted by the torrent of wealth, accumulated by baby boomers, as it is released to the next generations.
Unfairness in the tax system such as the 'carried interest' loophole exploited by private equity barons should be removed.
But the Chancellor and Treasury would do well to recall that there is no group more mobile than the super-rich.
Ask Sir Jim Ratcliffe, retailer Sir Philip Green, F1 star Sir Lewis Hamilton et al.
They voted with their feet long ago.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Telegraph
16 minutes ago
- Telegraph
Britain is killing itself with compassion
To lightly paraphrase Upton Sinclair, it is very difficult to get a man to understand something when his claim to your salary depends on his not understanding it. The Government's attempt to reform welfare was billed by Liz Kendall, the Work and Pensions Secretary, as 'a fairer, more compassionate system'. This is a curious description given that, from where I'm standing, these two objectives seem to work in direct opposition. Between generations, Britain's current direction is monstrously unfair. Unless we change course, by 2070 we will have burdened our children and theirs with debt stocks equal to 270pc of GDP. Small wonder that the Office for Budget Responsibility is telling the public that state finances are on an 'unsustainable' pathway, or that its chair is saying Britain 'cannot afford the array of promises that it has made to the public'. We are headed for a crunch that will see some go without to pay for benefits they themselves will not enjoy. But it is also unfair within generations. Every day, Britain's workers drag themselves out of bed to fund Motability BMWs, central London social housing, and tax-free cash transfers that the state, in its compassion, raids their wallets to provide. And every day, sour-faced Labour backbenchers – sometimes ministers – take to the airwaves to insist that they aren't really doing enough, and that taxes will need to rise to pay for more cash transfers. The fundamental incentives at play aren't hard to understand. Adjusted for inflation, a benefits system that cost around £244bn a year in 2019-20 now costs around £303bn six years on, an enviable growth of 24pc or so. The economy, meanwhile, grew about 4pc between 2019 and 2024. Unless this year is going to be an absolute blockbuster, it's hard to see how this is an affordable trend. Politically, meanwhile, it's hard to see how it's going to be unwound. Democracies seem to be prone to 'ratchet' effects; once spending rises, it creates constituencies for that spending who fiercely resist any attempts to lower it. We can treat this statement literally as well. Look across the benefits with the largest caseloads in Britain – the state pension, universal credit, various disability and sickness benefits, and housing benefit – and the scale is staggering. There are, by my count, somewhere around 19.5 million people over the age of 18 claiming various forms of welfare in England and Wales. Break this down by constituency, slicing the data to avoid counting people claiming more than one benefit twice, and those adults in receipt of these benefits would be enough to exceed 50pc of all registered voters in about 155 Westminster seats. They exceed 40pc in 447. It's not particularly surprising, in other words, that two half-hearted attempts to tinker with old-age and disability benefits ended in disastrous about-turns: even a Government with a majority as large as Sir Keir Starmer's would find it tricky to engage in the wholesale paring back of the welfare state that is desperately needed. And that's reckoning without the point that many Labour MPs simply don't want to. They see the economy as an arbitrary block of money that has somehow been dealt to those who are undeserving – bankers, lawyers, coders and so on – rather than to the pillars of society: undocumented migrants, the unemployed, unemployable and underworked, unionised workers and many of those in the public sector. It is their task to compassionately correct this error. This would be hard enough to swallow on its own terms – the state returning to its earliest incarnation as armed bandit, here utilised by a concentrated voting bloc to hand itself ever greater shares of income – but becomes intolerable when put into a wider context. While Sir Keir is refusing to rule out a wealth tax – probably the best way to devastate an economy short of bombing it – the state is beginning to fail in some of its most basic functions. The Government is musing on abolishing the right to a jury trial for a swathe of offences in order to save money, even as it releases prisoners early to avoid prisons overflowing. Other criminals will simply be offered 'out-of-court resolutions'. The Channel crisis is making a mockery of the Government's responsibility to protect the borders, and putting the interests of the British people ahead of the desire of MPs to play the role of saviour to the world. The Home Office has no idea how many people on expired work visas actually leave the country when their time is up. A similar observation could be made about a range of Government behaviours: policy made, as David Goodhart quotes former Cabinet secretary Gus O'Donnell as saying, to 'maximise global welfare not national welfare', from net zero commitments through to Starmer's Chagos surrender. It would be one thing if this compassion was funded by a state in robust fiscal health. But this year we are expected to borrow £137bn, almost 5pc of GDP. Total government investment in infrastructure over 2024, meanwhile, ran to about £28.9bn, and the current budget deficit over the last fiscal year was roughly £75bn. We are not borrowing money to build world-class bridges and railways, or rebuild our military. We are eating the seedcorn, and leaving tomorrow to look after itself. As GK Chesterton once observed: 'The modern world is not evil; in some ways the modern world is far too good.' We pursue isolated virtues without reference to others, putting compassion ahead of prudence. And the result of all this kindness, in the end, is to put the state on the path to penury, to drive away the productive workers who fund it, to destroy the systems that make it possible. Cutting benefits is cruel. Denying access to migrants who want a better life is cruel. But it is also cruel to destroy functioning countries that could generate huge increases in long-term global welfare if allowed to function properly today. Sometimes, you have to be cruel to be kind.
The Sun
16 minutes ago
- The Sun
Royal Mail gets go ahead for HUGE change to deliveries in massive shake-up
THE Royal Mail has been given the green light to make a huge change to its deliveries in a blow to customers. The postal service has been told it can deliver second-class letters every other weekday and not on Saturdays to help cut costs, the industry regulator has said. 1 Ofcom said that a reform to the Universal Service Obligation (USO) was needed as people are sending fewer letters each year. As a result stamp prices keep rising and the cost of delivering letters goes up. Under the current one-price-goes-everywhere USO, it means Royal Mail has to deliver post six days a week, from Monday to Saturday. It also must deliver parcels on five days - from Monday to Friday. The decision comes as part of proposals laid out by industry regulator Ofcom. Ofcom said Royal Mail should continue to deliver first-class letters six days a week but second class will be limited to alternate weekdays. Natalie Black, Ofcom's group director for networks and communications, said the changes are "in the best interest of consumers and businesses". She added: 'Urgent reform of the postal service is necessary to give it the best chance of survival. 'But changing Royal Mail's obligations alone won't guarantee a better service – the company now has to play its part and implement this effectively." She said that the regulator will make sure Royal Mail is clear with its customers about what is happening and pass the benefits of the changes on to them. She also added: 'As part of this process, we've been listening to concerns about increases in stamp prices. So we've launched a review of affordability and plan to publicly consult on this next year.' .
Daily Mail
23 minutes ago
- Daily Mail
Is the Chinese EV bubble about to burst? Oversupply sparks crushing price war in China
Chinese cars have been stealing a march on the UK market of late. Despite their infancy, a number of East Asian newcomers have well and truly stamped their mark this year, latest industry sales figures show. In June, BYD, officially now the world's biggest electric vehicle maker, sold more cars in Britain than Mazda, Mini, Citroen and Dacia - a remarkable achievement for a brand that launched in the UK only two years ago. And when you combine its sales with other recent Chinese debutants Omoda (launched August 2024) and Jaecoo (launched January 2025), the trio of relatively unknown marques last month delivered as many motors as Audi. Given that a decade ago Chinese brands had little to zero presence in the UK, the speed and scale of their recent growth is unprecedented - and largely driven by their cheap, well-equipped EV models. But as the wave of new battery-powered arrivals from the east continued this week with the confirmation that Geely, Denza and Chery will bring their sizeable profiles to the UK in 2025, a saturation of manufacturers is having a crushing impact on China's domestic market. Oversupply has resulted in overwhelmed competition, sparking a debilitating price war that some experts say could overflow into the UK market. Others believe it will result in a 'bloodbath' of Chinese brands, with around only one in ten existing marques likely to survive. So, could the Chinese EV bubble be about to burst? The noise coming out of China right now suggests the government is on the brink of tightening the reins on its bulging electric car segment. But it has largely been the maker of its own issues. Its recent industrial policy has engineered a remarkable transformation to electric vehicles in what is now the world's largest auto market. But in so doing, Beijing's incentivised backing has spawned far more brands than can possibly survive. Even as the headline sales numbers soar to new heights and China is projected to produce in excess of 33million cars in 2025, long-simmering concerns about oversupply and a crippling price war is coming to the fore. Price cuts of more than 30 per cent have been introduced by manufacturers for EVs in their home market. Industry observers says the sheer volume of makers - which now exceeds 100 different EV manufacturers - and the level of discounting taking place will lead to a 'bloodbath' of brands. In late May, BYD launched a fresh round of price cuts to 25 different models due to excess inventory. This saw it secure its best monthly sales performance in June, but it has kickstarted another price war in China as rivals have discounted pricing in response BYD's sales are up 31% in the first half of the year. Some 2.1 million motors branded with Build Your Dreams were bought between January and June, figures show Fingers pointed at BYD BYD is prime example of the problems facing China's electric car segment. It has taken advantage of its dominant position, triggering price wars over four years that has caused losses across the industry, according to Murthy Grandhi, an India-based financial risk analyst at GlobalData. BYD's sales are up 31 per cent in the first half of the year. Some 2.1 million motors branded with Build Your Dreams were bought between January and June, with almost a half-and-half split between EVs and plug-in hybrids (having culled combustion engine cars in 2022). But in late May, it came under thinly veiled criticism when it launched a new round of price cuts to 25 different models due to excess inventory - a move that saw it secure its best monthly sales performance in June. However, several competitors followed suit, downgrading their pricing to make their vehicles more attractive to customers - further compressing margins for manufaturers. The chairman of Great Wall Motors said he is growing increasingly concerned that the industry could come under threat if it continues on this trajectory, with the government expected to step in to force a dramatic reshaping on the nation's EV landscape. On 23 May - the day BYD initiated its price cuts - GWM's Wei Jianjun said he was pessimistic about what he called the 'healthy development' of the EV market, drawing comparison to Evergrande, the Chinese real estate giant whose collapse sent the entire industry into a downturn from which it has yet to recover. 'The Evergrande in the automobile industry already exists, but it is just yet to explode,' he said in a video message posted on social media. Two days later, a BYD executive rejected any comparison to Evergrande. 'To be honest, I am confused and angry and it´s ridiculous,' Li Yunfei, BYD's general manager wrote on social media. 'All these [comparisons] come from the shocking remarks made by Chairman Wei of Great Wall Motors.' But sector commentators say the finger is understandably being pointed at the world's biggest EV producer. 'When volumes get bigger, it´s just much harder to manage and you become the bullseye,' Lei Xing, an independent analyst who follows the industry, told Associated Press. He said the Chinese government is now trying to rein in what is called 'involution' - a term initially applied to the rat race for young people in China and now to companies and industries engaged in meaningless competition that leads nowhere. The government and an industry association too has weighed in on the argument. The China Association of Automobile Manufacturers called for fair competition and healthy development of the industry, noting that major price cuts by one automaker had triggered a new price war panic. And the Ministry of Industry and Information Technology vowed to tackle involution-style competition in the auto industry, saying that recent disorderly price wars posed a threat to the healthy and sustainable development of the sector. 'That price cut might have been the final straw that irked both competitors and regulators for the ruthlessness that BYD continues to show,' Lei said. Experts say Chinese brands now need to identify markets outside their own to sell their surplus of vehicles - and the UK is particularly attractive given its low tariffs and maturing charging infrastructure Could China's problems overflow into the UK? There's already over a dozen Chinese brands selling cars in Britain today - and more have confirmed their arrival for 2025 or 2026. While MG is the brand we know best - having relaunched a much-loved British badge in the early 2010s - its rivals have only broken into the market more recently. Huge manufacturers with various marques under their banners have been drip-feeding new names into the segment - and Britons have been snapping them up at a staggering rate. But with Chinese manufacturers already imposing average EV discounts of 17 per cent - a new record - in their domestic market, the ripple effects could impact new and used car values across Europe and the UK, experts have said. Andy Shields, Indicata's global business unit director, warned: 'Chinese OEMs [original equipment manufacturers] are facing massive oversupply and intense competition in their domestic market. 'They need to find markets outside of China to sell their vehicles, and Europe represents their most viable and profitable export destination.' The Indicata analysis also pointed to Chinese manufacturers facing significant new barriers in other major markets. The US market remains largely inaccessible due to high tariffs, while other global markets outside Europe currently lack the suitable charging infrastructure to support mainstream EV adoption. 'Whilst there are tariffs in place for BEVs [battery electric vehicles] in the EU, it's still possible for Chinese manufacturers to sell BEVs in Europe more profitably than in their home market,' Shields explained. 'The UK market is particularly exposed as there are currently no additional tariffs on Chinese BEVs,' he warned. Of the 129 Chinese makers currently selling EV and PHEV models, experts believe only 15 will survive a 'bloodbath' of brands linked to the oversaturated market and increased competition Just one in ten Chinese brands will survive 'bloodbath' Only 15 out of the 129 brands that currently sell EVs and plug-in hybrids (PHEVs) in China will be financially viable by 2030, as the intensifying competition and market-wide price cuts forces consolidation and some to exit the market, consultancy AlixPartners said last week. These 15 brands are projected to account for approximately 75 per cent of China's EV and PHEV market by the end of the decade, each averaging annual sales of 1.02 million units, AlixPartners said, without specifying brand names. However, consolidation in China is expected to proceed more slowly than in other markets, said Stephen Dyer, head of AlixPartners´ automotive practice in Asia, because local governments may continue supporting non-viable brands due to their importance to regional economies, employment and supply chains. Despite Chinese regulators calling time on the price war, Dyer said it is likely to continue, but through 'hidden' factors such as insurance subsidies and zero-interest financing rather than direct discounting. Capacity utilisation ratio at Chinese car plants has fallen to an average 50 per cent in China last year, the lowest in a decade, pressuring profits, Dyer added.
