After a slightly mixed start to the day, the FTSE 100 recovered back to the 6700 level I mentioned yesterday, helped by a steady start across the pond. Initially, UK equities could have been impacted by the headlines that Ed Balls intends to attack the city and the successful should Labour come to power in the next election. It does strike me as slightly odd that Mr Balls conveniently forgets to factor that of the £5.5bn of bonuses he quotes getting paid this year, about half goes straight to HMRC. Ed Ball’s speech received a lot of commentary, Janan Ganesh writing in the FT today points out in his article, entitled “London is more than a playground for the rich”, how much London has benefitted from the investment it has received by becoming considered the financial hub of the world. Ed Balls talks about investment in the young by further draining the successful.
The private sector is notoriously better than the public sector at meaningful job creation. The amounts raised by new taxes are usually less than anticipated, and usually disappear into the black hole of government. The best way in my opinion to help the young is to incentivise the successful entrepreneur to grow his business thereby creating wealth for himself and those around him. The best way to do this is by lowering taxes not increasing them. With this, the economy will grow in a sustained way, tax revenues will grow and the deficit will take of itself. Governments are wasteful and bureaucratic - I know who I trust to create wealth that will benefit everyone and if history is anything to go by, it’s not the public sector.
One tax benefit I would like to see introduced is taper relief from capital gains for those who hold shares in public quoted companies for an extended period of time. Until 2008, if you were an owner or employee of a company you could claim taper relief. It strikes me as a great way to encourage investment that would benefit everyone to invest in equity markets. At present the incentives are focussed on enterprise investment, which is definitely for the sophisticated and even they will often lose their capital. In my opinion, the aim of government should be to be as efficient as possible and seek to lower tax for all individuals as opposed to raising it.