Disunited Kingdom

By Global Tax Weekly

Given the sorry state of the eurozone’s economy at the moment, the turn-around in fortunes for the United Kingdom’s economy looks remarkable, especially as the former is one of the latter’s main export markets. Prime Minister David Cameron also made the right noises on tax at the recent Conservative Party conference, calling for a substantial and long overdue increase in the threshold at which the 40 percent rate of income tax kicks in. It used to be that you had to be earning significant amounts of money before the Government took almost half of your pay. Now somebody earning not much more than 40,000 pounds is considered rich, and the UK isn’t the only offender in having intermediate and top rates of income tax applying at criminally low levels of pay. Anyway, this is something of a digression, because it’s time for a reality check, and while Cameron may pretend that all is rosy in England’s garden, the truth is that the UK remains vulnerable. The Government has fallen well short of its original deficit reduction target and the bottom line is that the UK deficit, in percentage terms, is still well above those of many eurozone countries which have received bail-outs of one description or another. And if the eurozone economy goes down, the UK will probably be dragged down with it, EU or no EU. Another, fairly predictable, worry now is that the Scottish referendum has unleashed nationalist forces across the Kingdom that London is struggling to contain. Yes, the Union might have been saved, but the price is more powers to Scotland, including over taxation. Now its Wales’s turn to get its piece of the action. And since the referendum we have heard that it is now time for an English parliament. But cities in the UK’s former industrial heartlands are also hankering for greater autonomy. How far is this going to go? Towns? Villages? Hamlets? Streets? Not that I’m a friend of highly centralized, micro-managing governments. But if you are a Brit, the way things are going you soon won’t be able to figure out what tax you are supposed to be paying to whom. In many respects, the Government doesn’t have much choice but to accept this, having let the devolution genie well and truly out of the bottle; I suppose it shows that it is prepared to listen to people who consider themselves cast to the margins of the Kingdom. But in hard economic terms, I don’t see much good coming out of it.

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