Deep down, I think most governments understand this, they just don’t know where to draw the line. So news today that Britain’s financiers and entrepreneurs are quitting the UK at a rate of 10 a week to avoid Labour’s new 50% taxes ought to be cause for alarm at HM Treasury.

And then again, I do wonder a bit. When looking at the mobility of  individual wealth, you have to factor in inertia, family ties, moving costs and generally economically irrational behaviour. I keep thinking about Jeremy Clarkson’s insightful and as ever humorous piece  from a month ago, who despite his obvious disgruntlement with Britain declines to emigrate, stating;

You can’t go to Australia because it’s full of things that will eat you, you can’t go to New Zealand because they don’t accept anyone who is more than 40 and you can’t go to Monte Carlo because they don’t accept anyone who has less than 40 mill. And you can’t go to Spain because you’re not called Del and you weren’t involved in the Walthamstow blag. And you can’t go to Germany … because you just can’t.

You can’t go to Australia because it’s full of things that will eat you, you can’t go to New Zealand because they don’t accept anyone who is more than 40 and you can’t go to Monte Carlo because they don’t accept anyone who has less than 40 mill. And you can’t go to Spain because you’re not called Del and you weren’t involved in the Walthamstow blag. And you can’t go to Germany … because you just can’t.

The Caribbean sounds tempting, but there is no work, which means that one day, whether you like it or not, you’ll end up like all the other expats, with a nose like a burst beetroot, wondering if it’s okay to have a small sharpener at 10 in the morning. And, as I keep explaining to my daughter, we can’t go to America because if you catch a cold over there, the health system is designed in such a way that you end up without a house. Or dead.

Canada’s full of people pretending to be French, South Africa’s too risky, Russia’s worse and everywhere else is too full of snow, too full of flies or too full of people who want to cut your head off on the internet. So you can dream all you like about upping sticks and moving to a country that doesn’t help itself to half of everything you earn and then spend the money it gets on bus lanes and advertisements about the dangers of salt. But wherever you go you’ll wind up an alcoholic or dead or bored or in a cellar, in an orange jumpsuit, gently wetting yourself on the web. All of these things are worse than being persecuted for eating a sandwich at the wheel.

I suspect, anecdotally, that upper middle class  individuals can put up with quite a lot – it’s not as if Britain’s Tory Party cares for them. And for those that are wealthier, they can afford clever accountants and non-dom status.

The same is not true of companies, who are not the least bit emotional about crunching the spreadsheet and changing the location of their head office.  And be in no doubt, it is happening.

My fear is that just as the UK’s recovery post 1992 was significantly aided by an investment boom by companies coming in, it will be hampered this time by companies going out.

Like it or not, companies still control far more investment capital than individuals. That’s why what happens on corporate tax levels matters – a lot – to the recovery. The Republic of Ireland understood this early in the 1990s and despite all their woes today (thanks to the Euro) can look back on 15 good years of growth, prosperity and human capital augmentation that they would not have had without aggressively low corporation tax rates.

Would that the UK learn from Ireland and do the same.

This entry was posted on Sunday, December 13th, 2009 at 7:30 pm and is filed under EPC Diary. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.