Rafe Fletcher: Can broad shoulders bear the UK’s tax burden? | Conservative Home

Rafe Fletcher is the founder of CWG.

What is a “fair share” when it comes to tax? The top ten per cent of the UK’s income taxpayers already cover 60 per cent of income tax receipts. Yet, as Chancellor Rachel Reeves prepares her November budget, the broad-shouldered brigade prepares for another shake-down. They might wonder when the government will finally be satisfied that their contribution is proportionate.  

So-called HENRYs (High Earners, Not Rich Yet) may also ponder their exemption from the “working people” Reeves talks of shielding from tax increases. A lot of those earning £125,000 work quite hard too. But, paying an effective 60 per cent tax rate on that last £25,000, these earners are forsaking 38 per cent of their total income once National Insurance is included. Parents in this pay bracket also lose tax-free and free childcare. Net-take home pay of £78,000 doesn’t feel so lavish when you’re spending a third of it on nursery costs alone.  

This attack on aspiration is disastrous in the long-term. Families supported by a single high earner end up with similar levels of disposable income to non-working parents on Universal Credit. But there is a cold logic in the short-term. You can squeeze this group until the pips squeak without too much risk of flight. These are largely salaried workers with jobs tied to the UK. They might lobby HR for oversubscribed transfers to the Dubai office, but homes, families and schools make leaving an arduous affair.  

That friction doesn’t exist for the UK’s richest. This top one percent are all multi-millionaires in the truest sense. Financial resources are freely available rather than tied up in houses or other illiquid assets. The Times reports that this group represent about a third of the total income and capital gains tax collected by HMRC. The wealthiest 100,000 individuals alone cover around a fifth of total tax receipts.  

Still, some recent rhetoric suggests this group should pay more or bugger off. On LBC, Oli Dugmore of the New Statesman argued for a marginal 100 per cent inheritance tax on anything over £10 million. When Shadow Home Secretary Chris Philip said applicable families would just leave, Dugmore replied, “Let them”. Similarly, Ash Sarkar refuted the risks of a wealth exodus on Question Time, saying the rich couldn’t take property with them. As if freeing up a few Chelsea mansions is the solution to the housing crisis. Or that they would give them up at all, rather than keep as bases for the 90 days they could still enjoy in the UK tax-free as expats elsewhere.   

That this one per cent hasn’t left already refutes the caricature of pathological gluttony. Any true Silas Marner packed up long ago for any of the abundant jurisdictions that ask for little or nothing in tax. Instead, the UK’s wealthiest clearly see life as more than a game of hoarding money. But it doesn’t mean they will indulge in an indefinite game of jump and how high with the government. Patience is wearing thin, and UBS predicts the UK will lose the most millionaires of any country by 2028.   

While the UK confronts this exodus, Singapore’s share of millionaires has increased by 62 per cent over the last 10 years. It’s part of a charm offensive as its Economic Development Board (EDB) actively courts high net worth individuals and family offices. Singapore’s tax regime promises no capital gains, estate or inheritance tax. But it requires the wealthy to contribute in other ways. Tax-exemptions are contingent upon minimum local spending requirements, local hiring and deploying at least S$10 million (c.£5.8 million) into Singapore-based investments. 

Instead of taxing wealth, Singapore monetises its presence. It believes private capital can be better deployed by its owners than under the auspices of the state. This isn’t limited to the for-profit realm. Its Philanthropy Tax Incentive Scheme (PTIS) offers tax deductions for donations made through Singapore intermediaries. The country’s biggest charitable donor is the eponymous foundation established by Indonesian billionaire Low Tuck Kwong. In 2023 alone, it disbursed S$127.6 million (c.£73 million) to educational and healthcare causes. Call it vanity if you wish, but the rich are rather happier parting with large sums of cash when they get a bit of control and recognition.  

Places like Singapore aren’t just promising a fresh domicile to protect your cash but a place to get things done. A global hub with infrastructure that is built quickly and works. Good schools. Law and order. In contrast, the UK’s most recent demonstration of its competence with your money is to provide listening circles for triggered civil servants and put sex-offending asylum seekers back on the streets.  

Social media financial influencer Codie Sanchez warns business owners about customer concentration. When one client represents 15 percent of revenue, “it’s a hostage situation”. The UK is similarly beholden to its wealthiest demographic, playing a very precarious game of Jenga. Keep pulling from the same blocks and the whole tower falls. The individuals concerned are so few but their contribution so great. While Reeves’ November budget lines them up as perpetual cash cows, competitors are circling. Not only Singapore or Dubai but nations closer to home, like Greece and Italy, offering a fixed annual tax. 

I understand fawning over millionaires doesn’t play well terribly well with the public. But neither will the actions required to plug a new fiscal hole if a lot of them leave. So, what can the UK do to stem the tide and be an attractive hub once more? One, offer long-term reliability in the tax regime. Given Gary Stevenson devotees believe the rich enjoy various tax loopholes, one big headline fee like Italy’s €200,000 is more tangible anyway. Two, encourage philanthropy. Offer more generous tax-deductibility than the UK’s current gift aid scheme. Why shouldn’t a new hospital wing carry a donor’s name? Three, competence. Offer some return on investment and people resent paying taxes a little less.