People will support the Government – if it does the right thing
THE UK Budget will be delivered this week. There are some special factors on this occasion that mean the new Chancellor Rishi Sunak could – and should – be bold.
A stuttering economy now facing the adverse impact of the coronavirus means growth needs to be supported rather than snuffed out.
Along with low interest rates this makes a compelling argument to invest more in our infrastructure.
Socially, more and more of the population have seen the impact of an over-stretched social care system that cannot properly look after their parents and grandparents. The middle aged fear for themselves as they look ahead.
People are waking up to the growing crisis in social care, they know something needs to be done and it will need money.
Politically, too, things are not as they have been. In parts of England that returned Labour MPS for 50 years voters, no longer confident Labour stood for them, have placed their faith in the Conservative Party.
We are divided by age, education and geography more than we have been for many, many years. Action is required. The UK Government needs to deliver.
If the new Chancellor does the right thing for the United Kingdom he should want, after he has delivered his Budget, to hear behind him the quiet shock of the privileged who have had their advantages pared back.
Across in the opposition benches and out in the country there needs to be surprise and delight that a Conservative Chancellor has reached far beyond his natural constituency to deliver change that increases fairness without crushing enterprise.
Here is what he should do: l Income Tax: Nobody should ever have to give more than 50 per cent of what they earn to the state – in England 47% is the top rate (combining Income Tax and National Insurance), in Scotland it’s 48%. Income tax and NI should be merged to create combined rates of 10% (after a tax free personal allowance that everybody actually gets), 30% and 50% that apply to all income for everyone.
Set the thresholds right and this is a significant tax cut for poorer workers paid for by the higher paid and especially those with unearned income. l Capital Gains Tax: This raises too little and is charged at too low a rate but is levied on nominal rather than real increases in value.
The rate should be increased to 30% but indexation relief re-introduced. l Entrepreneurs tax relief: This much-abused relief should be cut back to £1 million of gains and given only to real entrepreneurs. l Inheritance Tax: Probably the worst-designed tax we have and should be turned into a Capital Transfer Tax. Whhy should living for seven years after you give something away make any difference? Everything – farms, businesses, the lot – should be covered but the rate should be cut to 10%. Less squealing, more revenue. l Pensions tax relief: This is a huge cost benefiting mostly the wrong people.
Those who call for a reduction in the rate of tax relief when you put money in are misguided because if you might be taxed at a higher rate when you take your money out why would anybody save for a pension?
Instead, the amount anybody can save each year should be restricted to £20,000 and the maximum tax free lump sum should be £100,000 rather than 25% of your pension pot. More tax raised but actually better for those with smaller pension pots.
Will these things happen? No, they probably won’t but can you really say they are not steps towards greater fairness?
“Boris The Bold” should have faith the British people would support a Government that did the right thing.