The Times reports this week that the new 50% tax rate on high earners, announced by Alistair Darling in his second Budget as Chancellor, could herald a 1970s-style brain drain.
Mr Darling admitted that net public sector borrowing would hit a massive £175 billion this year, and total national debt would peak at almost 80 per cent of GDP.
Altogether the Treasury is forecasting borrowing of more than £700 billion over the next five years – and that figure could rise if Mr Darling is wrong in his prediction that the UK will emerge from recession by the end of this year and return to growth thereafter.
The Chancellor said that those earning more than £150,000 a year would be taxed at 50p in the pound from next April, up from 40p. Those earning more than £100,000 a year will lose all personal allowances, significantly increasing the tax bills of thousands of professionals, including doctors and head teachers.
The tax hike brought immediate warnings from the City that highly-paid individuals would move to countries with more progressive tax regimes, like Ireland or Switzerland, as happened under Labour in the 1970s when the top rate of tax hit 83 per cent.
The UK economy contracted by 1.6 per cent in the last quarter of 2008 and would have declined by a similar amount in the first three months of this year.
The Chancellor is confident that the British economy will suffer less than Germany, Japan, Italy, and the Euro area as a whole this year. The British economy is diverse, flexible and resilient – which is why we can be confident in recovery.”
Mr Darling announced a £3 billion package of measures to help the jobless back into work and prevent those who lose their jobs becoming long-term unemployed. He also announced £1 billion in funding to help fight climate change, £2.5 billion to help businesses invest in high-technology jobs and £500 million to kickstart stalled housing projects.
He also announced a £750 million strategic investment fund, which he said would help to unblock as much as £50 billion in new business investment this year, including £10 billion in the communication sector.
The Government will also contribute £300 million towards a “scrappage” scheme under which motorists can claim £2,000 towards a new car or van if they trade in a vehicle that is at least ten years old.
For a full budget report including UK tax rates see the BBC website.
Demand for staff in areas affecting migrant workers, such as the Care Sector, remains strong, with Care Home employers still reporting shortages of Care Assistants and Nurses.
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