The debate over the removal of the 50p tax rate is an interesting example from the political world of whether we manage for actuality or for image. Often, as is the purported case here, the two conflict. To recap: It sounds reasonable to tax any earnings over and above £150,000 a year at 50p in the pound, the trouble is, say some experts, it doesn’t actually raise any money. In fact, some people in the Treasury are nervous that the tax has actually lost the Exchequer money because very high earners have taken steps to avoid paying it, through a range of legal wheezes designed to reallocate their income. Although it should be noted that it is hard to prove this – we have no real-life control test of what would have happened to Treasury revenue were the rate never imposed – assuming the tax is as flawed as described, you can see the conundrum the government is in.
If it removes the 50p rate, it stands accused of offering thumping tax breaks to the very highest earners while hammering the middle-classes – such as through the now infamous plan to remove child benefit for those who pay the 40p rate. If, however, the government doesn’t remove the 50p rate – and the Treasury number-crunchers are right – the government would be willfully continuing with a counterproductive tax purely to keep up appearances.
How might this conflict between managing for actuality and appearances manifest itself in the office? Well, some might refrain from allowing one worker to work from home – even if they know she is certain to be more efficient there – because they would be accused of favourtism by other staffers. It isn’t favouritism, you would have been doing it for sound business reasons, but you may refuse the request to work from home anyway purely because it looks bad.
You could argue that managing for image is wrong, but is not always irrational. In fact, that’s why I think the Chancellor will think very hard about removing the 50p rate even though he deems it counterproductive – he is scared of the effect the reaction from the electorate will have on Tory support.
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