Dan Neidle

Labour’s increase to employer National Insurance as part of the 2024 Budget may well have been the worst tax rise it was possible to come up with – leading only to lower wages and reduced employment. Now Reform UK appear determined to find the worst possible tax cut, with their proposal to exempt overtime from income tax. The party calls it a ‘hard work bonus’, says it will cost £5 billion a year, and that welfare cuts will pay for it. It is a clever and bold piece of PR. It is also, on almost any view, terrible. Reform have caught a disease normally found on the left – they’re ignoring incentives. They think their policy encourages more overtime.

Speaking today at Church House in Westminster, Nigel Farage announced that Reform will introduce a ‘Britannia card’ that will let wealthy foreigners pay a £250,000 fee to move to the UK, and live here exempt from all tax on their foreign assets. The move is an attempt to win over ‘non-doms’ alienated by Labour and Conservative governments and bring their wealth back into the country. Farage may think his policy will attract ‘talented people’ from around the world, in reality it is more likely to deter them. Farage forgot about the Laffer curve The party says the policy will raise between £1.5 and £2.5 billion annually. Our analysis of the data suggests it is more likely to cost around £34 billion over five years.

The last time a Conservative Chancellor was in the business of cutting taxes, he pointed out that they reduce the incentive to work, invest, and start a business. This was why Kwasi Kwarteng proposed to abolish the 45 per cent additional rate of income tax last year. We really, really, shouldn’t have a tax system that can have a 68 per cent marginal rate, let alone a 20,000 per cent one He was right about the impact taxes have on incentives, but he was wrong to focus on 45 per cent as the highest rate of tax people pay in the UK. In fact, there are millions of people paying a marginal tax rate (the percentage of tax you'll pay on the next pound you earn) of more than 60 per cent. And hundreds of thousands pay much more.