This morning on Radio 4’s Today programme, George Osborne revealed, to some surprise, that he is not a 50 pence taxpayer.
The parliamentary salary is currently £65,738; the additional ministerial entitlement for the chancellor is £79,754, but ministers refused the increases in 2008 and 2009, and took a cut of five per cent in 2010, so Osborne’s total salary for his job as chancellor is £134565. So he is indeed not a 50p taxpayer, although only just.
This doesn’t really reveal anything about the Chancellor’s wealth, however. Instead, it exposes the problem with focusing on earned income as the determinant of “richness”, and the difficulties in building the national debate around income tax, rather than the broad spectrum of taxes that people pay (for an example of this at the opposite end of the spectrum, see the discussion about “thousands of people being taxen out of tax” due to the raised threshold, ignoring that these people will still be paying VAT, duty, sin taxes, council taxes, stamp duty, and so on).
George Osborne is a wealthy man. In 2009, we estimated his personal fortune as £4.3m, and in 2010, the Mail put it at £4.6m. While some of that wealth is in property, around half of it is a 15 per cent stake in his father’s wallpaper company, Osborne & Little, held through a trust fund.
It seems unlikely that the income from such a stake would come to less than £16,000 a year, and so it is a safe bet that Osborne’s total income is in excess of £150,000 a year. However, the income from dividends is taxed differently from earned income, with the top rate peaking at 42.5 per cent (an effective tax rate of 36.1 per cent, once the tax credit on dividends is taken into account). So even if his stake does bring in over £6,000 interest, he would technically not be a 50 pence taxpayer – despite being a “top rate” taxpayer.
The register of member’s interests shows no other employment for Osborne, which is unsurprising. Being chancellor is, obviously, a rather busy job. Then again, so is being Mayor of London, and Boris Johnson maintains a £250,000 a year column in the Telegraph. It may be the case that Osborne has done no other paid work, but as a backbencher he commanded fees of up to £5000 a column when he wrote for the Spectator and Associated Newspapers. Just a few fees at that level, for a column or speech, would push his income into the £150,000 – unless he was paid Ken Livingstone-style.
The national debate focuses on income tax because for the vast majority of the country, it is the most important tax we pay. But at the top end of the spectrum – the end where the Chancellor rests comfortably – they are just one part of the bill. Income can come through dividends, interest, or capital gains just as easily, and, not coincedentally, none of these are taxed at the same rate as earned income.
Is George Osborne a 50p tax payer? No. Does he receive over £150,000 a year? Almost certainly. Can he get away with fudging the difference? We shall see.
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