Saturday, July 03, 2010

Severely Taxed

A colleague of mine has become very vexed by the tax rates in this country of late, despite the 'entrepreneurs' relief'. He has a point. There is absolutely no incentive in this country to build a company and create wealth under the current regime. There is even less incentive to join the Board of a young company and help them grow (you end up with 70% tax on your options).

So, as they propose to axe 25 - 50% of public sector jobs (well, I know it's costs they're talking about, but that does mean jobs...). No one in the private sector is going to be able to offer anything near the astronomical benefits given in the public sector (read pensions), so these people are going to end up claiming unemployment and other benefits. Therefore the cost of getting rid of a generation of bureaucratic pen pushers is going to be very high, and the impact on them is going to be devastating.

I have absolutely no doubt that we are heading for a dreadful and crippling recession of the kind we have never seen before in this country. Unemployment in areas such as Wales and the North East will reach 20 - 25% and the overall economy will collapse as a result.

There is no money from anywhere to start new businesses, so they will be incapable of taking up the slack. Even viable existing businesses find it next to impossible to raise finance and many of our most valuable companies are now being picked off wholesale by foreign companies (see Shed by Warners or RDF by D'Agostini in our media sector).

Also, many of these companies service the public sector, so they will cut back, not increase employment.

The smiley confidence of the coalition is one thing, the steely dourness of the old lot was another. I know what I would have preferred.

So, the sons of the bankers who got us here get to be 'tough' on the economy (but not on their mates in banking, of course..). The bankers get off with a slap on the hand, and the rest of us reap the results.

What the UK needs is proper tax relief for entrepreneurs, a serious incentive for everyone to invest in small companies and swingeing tax on gambling such as derivatives and marginal trading and other non-direct investments. Leveraged investments need to be highly regulated - loading a company with the debt used to buy it is perverse, as any Liverpool or Man U fan will tell you.

So, can we now get real before my colleague heads for Switzerland ?