50% Income Tax likely to cost Britain £600m pa

“Likely”, the possible cost could be over £1bn.

This chart is from the very recent Institute For Fiscal Studies briefing note that was anticipating a 45% rate (see page 14 for chart):
http://www.ifs.org.uk/bns/bn84.pdf

The most startling aspect when the IFS looked at the sums:

It would appear that the Treasury has not allowed the behavioral response to affect revenues other than income tax receipts.

This is quite extraordinary. A very cheap piece of electioneering by Labour will turn into a very expensive debt for taxpayers.

Peas and Bonds

That pea being Black Eyed Pea member “Will.i.am.”. He repeated an oddity that keeps cropping up:

“If America really wants to make a difference, it should stop importing China’s products and pay back its debt“

Now the former is a personal choice, the latter is… well, it makes no sense.

America issues debt in the form of treasury bonds and China along with any other individual or institution on the planet can buy them. Perhaps too much paper is issued but given the low yields on current treasuries its obvious there’s plenty of demand to be a creditor.

The US dollar has depreciated against the Renminbi in recent years, moreso than the bonds yield. Effectively the Chinese government is subsidising the US but at no cost to the US government or taxpayer.

Restricting access to US debt would currently benefit China, not hinder it.

The Irrelevance of Northern Rock

The UK has added circa £111bn of assets and £110bn of debt to its balance sheet. A back of the envelope calculation would suggest that, even with a major housing recession, the British taxpayer will only have to cough up a small fraction of the amount the press suggest.

A 40% real-term drop in house prices and an exceptional default rate on mortgages of 10% would mean a loss of only £4.5bn, £75 per person.

The British taxpayer spends £4bn per annum on the World Bank, £10bn is given in net subsidy to the European Union, the proposed ID card scheme will cost £6bn just to set up and £20bn has been wasted on the NHS computer operations in the last few years. There is so much fat on the lumbering beast that is the British government that at this point a few more pounds is just a little more blubber.

By far the greatest economic worry for Britain is the public sector pension obligation. Amounting to £1,000bn these future payments have quadrupled over the past 10 years. While future social security and pension funding is at the forefront of all facets of the US government economic policy there is no talk in the UK of the, proportionally, far larger debt. It makes the targeting of Northern Rock for political wrath so puzzling.