By Louise Allonby

Published at 12:11, Wednesday, 12 September 2012

WHEN will our politicians learn that taxing people until the pips squeak neither makes fiscal sense nor aids long-term economic recovery?

Louise Allonby

Thankfully, Deputy Prime Minister Nick Clegg’s ridiculous proposed “emergency wealth tax” is unlikely to see the light of day – but it is worrying that the Lib-Dem partners of the Coalition seriously believe that such a tax should be introduced.

Mr Clegg wants to impose an “emergency”, and therefore supposedly temporary, tax on wealthy people’s assets (including yachts and, for all we know, MPs’ duck houses) as part of what he calls the “economic war” in which according to him we as a country are currently engaged.

By calling it an emergency wealth tax, and by employing soundbites which refer to wars and battles, Mr Clegg and his supporters are implying – with not much in the way of subtlety – that the “wealthy” have until now been either shirking their national duties, rather like a bunch of conscientious objectors, or selling black market nylons and tins of Spam like Private Walker from Dad’s Army.

Leaving aside the practical problems of how such a wealth tax could be put into place quickly, efficiently and fairly (if that isn’t an oxymoron), Mr Clegg fails to address the fact that other countries, including Sweden, have recently attempted – and quickly abandoned – just such wealth taxes.

And the reason is simple: excessive taxation, especially in this globalised world, leads to wealth creators taking their businesses to countries which operate more tax-friendly regimes.

As Matthew Sinclair, the chief executive of the Taxpayers’ Alliance said on the subject, not only are wealth taxes unfair, but they lead to “capital flight on a massive scale”. And that is something no sensible government should wish to be responsible for.

This week, Business Secretary Vince Cable (widely tipped as Mr Clegg’s successor as Lib-Dem leader if he is ousted before the next general election), waded into the debate, by announcing that he has “chemistry” (yuck) with Shadow Chancellor Ed Balls and would be happy to work with Labour on issues such as a wealth tax and a mansion tax.

Targeting the wealthy and the nation’s wealth producers has long been the knee-jerk reaction of the Left in times of national economic fragility. It is classic, unoriginal, politics of envy stuff; and is as economically unsound and ill thought out as the provocative name of Mr Clegg’s proposal suggests.

The top one per cent of Britain’s earners already pay a disproportionate 27 per cent of taxes. Adding to the tax burden in times of economic hardship is something which surely should only be considered when costs have been cut, not as an alternative.

The current “economic war” will not be won by taxing the wealthy more than they are already. It will be won by prudent cost cutting across the board.

Put simply, government needs to spend less, not tax more.

Published by http://www.nwemail.co.uk