The politics of envy have returned to Britain with a vengeance. The role of the financial sector in the recent crisis has been transformed into a bitter resentment of the wealthy – a trend that many politicians have exploited.
In some ways George Osborne did well to resist the pressure to soak the rich. He took the courageous step of reducing the 50% income-tax rate for high earners to 45%. Most economists have long argued that such a high rate is counterproductive. In the longer term it actually reduces revenues by deterring effort and encouraging avoidance strategies. Talented individuals – and the firms that wish to employ them – are also deterred from locating in the UK.
While the cut in income tax was a welcome victory for economic logic, there were other measures that are likely to do significant damage. The hikes in stamp duty for properties worth over £2 million send out a very negat