People have been asking me for my progressive small business view on the 50p tax rate. Those affected by it don’t like it, those hoping to earn that much (£150,000 pa) don’t either which is not a surprise. Their argument against it is that it doesn’t raise that much and it doesn’t affect that many people. It actually raises some £2.7bn and affects some 320,000 people. We are told that they are important people that Britain can’t do without and there is a danger of them leaving the country because of it. A TV interviewed showed a financial trader or banker complaining that people had to ‘bust a gut’ to earn this sort of money and that it was unfair to now penalize them.

I don’t think they are being penalized, they are just being asked to pay a fair share and if this fellow was representative of those complaining and threatening to leave the country then my first point is I would be happy to give him a lift to the airport. Secondly the myth that because City traders work hard they deserve their bonuses and lower taxes just doesn’t wash. Lots of people work hard and some of the lowest paid jobs do require some of the hardest work. But those people don’t have the privilege of a six figure salary but are reliant on the tax system to redistribute wealth to provide goods schools and a decent health service. Thirdly does such a figure make a difference? If it is such a nominal amount is it worth collecting? Well 2.7bn sounds like a lot to me.

We should be sympathetic though to the small business owner who instead of playing with other people’s money has instead worked up his business and had a successful year only to find now he is being taxed at the 50% rate. But don’t forget that this 50% only applies to monies earned above the £150,000 point. A small businessman could keep this in the business and reinvest it, the city trader cannot as his salary and bonus and role is not an entrepreneurial one and so he complains all the more. It is strong public services not weak ones provide the foundations for people to become their own bosses.

I hear complaints that the tax system is being used as a ‘political tool’ and that is ‘wrong’. It is not wrong, it is one of the few devices we have to redistribute wealth in society. Regardless of your income our welfare state aims to promise good health and education for our children and families regardless of how much income we may personally have. That is the blue water between us and them. They believe Government’s role is to simply run services for their own sake following a charitable and paternalistic model. Whereas we believe that Government’s aim is to deliver a fairer society.

So what of the 50p tax rate? Should we keep it as a symbol of political intent? Or just keep it for the revenue it raises? Those who pay high taxes complain that they don’t know where the money has gone and that it is wasted. This is not something we should dismiss out of hand. I suggest that we let people see that their higher taxes are making a difference. We should hypothecate this 50p tax rate. I would suggest putting it into an entrepreneurial fund that could be used to help small businesses. For instance it could provide a fund for small firms to help them cope with maternity costs or as an investment or development fund. The burden of legislation falls heavily on small business and employment costs are higher for them. Why not mitigate these costs with such a fund to provide a fairer more even playing field?  Alternatively have other funds that tax payers could nominate their taxes for cancer for health or special needs for education or even international development. I know treasury ministers have always hated the idea of hypothecating taxes, but in this instance it could work. We could create a fund to help small firms, drive up prosperity, grow the economy and prove that the 50p rate does make a difference. The results would all be there before us. Who knows they could even derive some pride from paying into it.