Cover of MoneyWeek magazine issue no 766, Friday 30 October 2015

The new global arms race

29 October 2015 / Issue 766

Peaceniks have increasingly restrained Western military might, to the benefit of general living standards. But we live in a new bellicose era – we'd be wise to invest in defence, says Jonathan Compton. Read this week's cover story here.

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Merryn Somerset WebbEDITOR'S LETTER

Merryn Somerset Webb

A rich tax too far

“Tax the wealthy to atone for Osborne’s raid on the poor.” That was a headline in an article in the FT this week. Its author, Janan Ganesh, suggests that George Osborne’s attempt to change the UK’s distortionary and expensive tax credits policy looks like a “vindictive war of choice” on the poor, because he has not also “picked a conspicuous fight with people of entrenched wealth” at the same time. He should, says Ganesh. It is time for a proper wealth tax.

Hmm. There are two points to make here. First, cutting tax credits (which are not a credit, but a benefit) isn’t just about the poor. As James Ferguson pointed out last week, it’s possible to earn the pre-tax equivalent of £50,000 while inside the benefit system. That’s just not poor. And it has to end.

Second, although it’s fun for opposition politicians to take pot shots at the well-off, it simply isn’t the case that they aren’t being hard hit by new taxes and changes to old taxes. If you earn more than £150,000, you are already paying tax on your income at seven percentage points more than you were in 2007. Your income tax on anything over the additional-rate threshold is up by five percentage points and your national insurance (NI) is up by two percentage points, so you are paying tax on your income over the threshold at 47% rather than 40%. Earn £250,000? That’s £7,000 more gone. You have also lost your personal allowance – you don’t get a single penny of tax-free income. Everyone else gets £10,600.

• Read the full editor’s letter here: A rich tax too far