UK Government Budget 2010
Posted on 1:37am Thursday 10th Dec 2009
Perhaps London’s investment bankers are wishing they’d chosen a career in corporate law instead. The government looks set to come down heavily on banker bonuses in his pre-budget speech today, with commentators predicting a super tax on bonuses in excess of the impending 50% income tax for high earners. Put simply, this means that a law firm partner on, say, £1m a year will be in a better tax position than an investment banker on a £200,000 salary with an £800,000 bonus.
It doesn’t seem like there’s any love lost between lawyers and bankers – according to reports, one unnamed City law firm advised the Treasury on how to implement a bonus tax that couldn’t be avoided by the bankers. But unfortunately, if another tactical leak to the newspapers is correct, government advisory work is in for a bit of a squeeze: Gordon Brown apparently wants to cut spending on consultants by 50%. By doing this, in tandem with a 25% cut on government marketing and communications, he expects to save £650m.
More worrying for the City’s legal elite are unconfirmed reports that there will be an extra rung added on top of the new 50% top-earner income tax rate. Predictions of a 60% to 70% tax on earnings above £500,000 have been sounded in some parts of the media.
All of this could be moot – the Treasury predictably, has not pre-empted their speech by commenting on the reports, but they did have this to say: ‘You would expect the broadest shoulders to bear the greatest burden.’ Broad shoulders indeed, but hopefully not broad shoulders that have already booked their flights to pastures new.