“Tax the rich, not the poor” is a mantra of the left which fell out of fashion in the UK during the 1980s. It has remained thoroughly out of vogue with the first ten years of New Labour. But now, out of nowhere, there’s a clamour surrounding the fat cats and politicians eager for votes are responding - but they are playing a dangerous game.  

 

The noise began during the summer with trade unions launching a crusade against private equity bosses. These mega-rich individuals were an easy target especially when they could be linked with job cuts and the trade unions score a ‘victory’. It was hard to argue with the logic that millionaires should pay more tax than their cleaners, but the government put its head in the sand. However, more recently it is the Tories of all people that are behind this current scramble. In a bid to find a way to pay for proposals on stamp duty and inheritance tax they want to charge non-domiciled residents £25,000 to stay here. Bounced into action, today the chancellor Alistair Darling used his pre-Budget speech to call for changes to the rules on both non-domiciles, private equity bosses and, yes, inheritance tax too. Most people have never even heard of taper relief and are unlikely to be concerned now that it's been scrapped. But the full ramifications of these big changes have barely been debated and the consequences not thought through. Sadly, it is businesses looking for investment first and this will have knock-on consequences for the wider economy. 

 

The UK currently leads Europe in terms of investment and it is something that entrepreneurs have enjoyed as a result. A business in the UK with a good plan, and a reasonable amount of tenacity should be able to gain backing for its venture. Indeed, there are scores of European entrepreneurs who come to these shores for exactly that reason. It is something we should be proud of and an economic benefit that we would be unwise to take for granted. But the moneymen don’t plough their fortunes into countries where the taxman punishes them for their troubles. They are rational beings and if there’s a better deal elsewhere then they are going to go for it.

 

The UK’s biggest investor networks, such as Beer and Partners and Hotbed, are already issuing dark warnings about the effect that clampdowns on investors could have. The banks, following Northern Rock, are looking wobbly right now and businesses might find it harder to attract investment from them. It is indeed a strange time for politicians to be chasing after private investors, especially when both political parties claim they want to have an entrepreneurial economy.