The threats to the rich

Our leaders - both elected and non-elected - are planning to have a go at the personal finances of anyone they consider to be even vaguely rich.

If the economic recovery in the UK is beginning to make you feel a little bit more confident in your financial future, you are clearly not concentrating. That's the message from this week's news.

On Monday we heard from the Labour party about their plans to have a go at the personal finances of anyone they consider to be even vaguely rich. The top rate of tax is to go back to 52% (including the National Insurance payments that insure us against absolutely nothing). Pension relief is to be cut to 20p in the pound for everyone. There is to be a new bonus tax (a bit like the last "one off" bonus tax) and there will, of course, be a mansion tax which will take in every three-bedroom cottage in Fulham as a matter of course. You can say that each one of these is no big deal. Pensions are over-subsidised; bonuses are too high (and banks are state-supported anyway); and the mansion tax might at least cap house prices at the top end.

But together they are a big deal. Theywon't raise enough money to make the slightest difference to anything, but theydo add complication, confusion and anextra element of hate the rich' division to our tax system. We don't really need any of those things.

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However, even more of a threat to the wealth of some MoneyWeek readers than the actions of any elected government will soon be those of our non-elected leaders the Monetary Policy Committee. On Tuesday, Bank of England governor Mark Carney was questioned by the Treasury Select Committee. Two things of interest emerged. The first is that the Bank has effectively monetised a significant chunk of the UK national debt. Quantitative easing (money printing, or QE for short) involved the Bank buying £375bn worth of gilts (British government debt). Reversing QE would involve selling those gilts back into the market. But, according to Carney, "we're not going to sell £375bn of gilts". We've all suspected for years that this would end up being the case. But now we know.

The second is that Carney expects interest rates to rise to 3% by 2017. This confirms for us something else that we have long suspected: the 30-year trend of falling interest rates is nearly over. Rates might rise faster than that. They might rise more slowly. And either way it still represents a remarkably loose (and experimental) monetary policy. But the direction is absolutely not in doubt. We are constantly told these days as we were pre-2008 that housing is a safe place to put our money and that buy-to-let is back. I wonder if we will still think that by the time interest rates have risen by 600%.

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Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.