Sunday, 3 May 2009

Special pleading

The Torygraph has a piece about City people on the Government's financial services group moaning about the new 50% top rate of tax for the very rich. One name in particular stuck out:
A number of members of Mr Darling's Financial Services Global Competitiveness Group, which includes heavyweight figures such as Michael Geoghegan, the chief executive of HSBC, and Dame Clara Furse, the outgoing chief executive of the London Stock Exchange, were alarmed to discover that the report would not directly address the 50pc tax rate announced as part of last month's Budget.

I've blogged before about the way some directors are provided with incredibly generous retirement provisions, and they are of course not linked to performance. Michael Geoghegan is one of them. Here's what HSBC's latest annual report (PDF) says (see page 324).
Mr Geoghegan receives an executive allowance of 50 per cent of annual basic salary to fund personal pension arrangements.

For practical purposes you might as well regard this as just another cash bonus. It will also be several times larger (as a % of salary) than staff in HSBC's DC scheme are offered. Just another sizeable slug of money trousered by the chief exec without performance conditions. It's standard operating procedure in the world he inhabits.

I don't know if Geoghegan is one of those kicking off about the 50% top rate, but I presume that's why the Torygraph has been written the piece in the way it is. What isn't surprising is that the paper has taken the line that it has. The thing is, how much longer is this kind of threat (tax us more and we'll leave) going to be taken seriously? My gut feeling is that the new top rate will prove to be more popular going forward than certainly the right-wing press is making out. The more you hear about extremely rich people moaning about it, the more the parallel some have drawn with the position of the unions in the 70s starts to ring true. Not only is there an unflinching sense of entitlement to the extremely priveleged position they have, there is also no evidence that these people have any idea that the current state of affairs might greatly aggravate people's sense of what is fair.

Behavioural research suggests a sense of fairness is hard-wired into us, to the extent that we will sacrifice our own self-interest in order to punish those perceived as acting unfairly. Is it possible that at some point even those more moderate people who are worried about the potential of driving talent abroad (I'm not making a comment about whether this is a valid argument or not) think 'sod you then' when they hear very rich people threaten to leave the UK rather than pay more tax? I think we may be near that breaking point in the public policy debate.

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