So it's goodbye to New Labour. The leaked increase in our top marginal tax rate will only raise about £1-2bn pa of revenue, but the message it sends is much more significant.
Despite a mass of evidence to the contrary (see many previous blogs), Labour has never believed that lower taxes lift economic growth. And they have certainly never felt comfortable with Lawson's 40% top rate for the "super-rich". As far as they're concerned, if anyone flees the country just because they have to shoulder a fairer share of tax, good riddance, because they're not people we want here anyway.
The 2011 increase to 45% will lift our combined top rate - including the employee National Insurance contribution - to 46%. Which is almost exactly in line with the current OECD average of 46.2%. But that doesn't mean we can get away with it:
- The trend among most OECD competitors is down
- Tax levels in many of the big emerging economies are much lower than in the old OECD
The big picture is that under the cover of a reflationary budget, Brown is unpicking even more of his Thatcherite supply side inheritance. It's back to good old "Keynesian" demand management, the very thing that failed so catastrophically in the 70s.
There's a very real question as whether the fiscal boost will actually work in the short-term, given that we are all being told we'll have to pay it back in a couple of years. But in the long-term it will leave a legacy of high debt and high tax that will undermine our prosperity for years to come.
Just like Old Labour always did.
PS If you've got any spare cash at all, you should put in a bid for the final remnants of the Georgian silver and Canaletto collection Brown will be auctioning off. For obvious reasons, bidders for the new wave of asset sales will be thin on the ground, and Brown is a desperate forced seller.