Tax increases are profoundly un-Conservative

It is starting to feel as if Treasury mandarins have forgotten who won the election. They have been busy in the past few weeks dusting off every absurd anti-Tory and anti-supply side idea cooked up by Left-wing think tanks and technocrats these past 20 years, and trying to convince the Chancellor and the Government to adopt them. They are using Sajid Javid’s fiscal rules as an excuse to call for the kinds of tax increases that even Gordon Brown wouldn’t have dreamt of.

Readers will have been shocked by our front-page story today that one idea under discussion includes an Ed Miliband-style so-called mansion tax. A substantial number of families would be hit by this, principally in the south of the country, where property prices are higher. It is not clear exactly what form the tax would take if it were included in the Budget, but options might range from an annual wealth tax to a higher band of council tax, with an impact that would be highly negative at best and catastrophic at worst. No decision has been taken, fortunately, but this idea has been discussed at the highest levels, repeatedly, as we reveal.

Last time we checked, the electorate had rejected such absurd proposals in 2015, 2017 and 2019, but apparently that doesn’t matter to the nomenklatura running this country. It is vital that Mr Javid and Boris Johnson veto this ridiculous project before the housing market – which is currently riding a Boris bounce – slumps back into despair.

In fact, Treasury officials have been privately compiling an almost unbelievably destructive list of tax hikes, many of them utterly crippling, dressed up, as ever, under the guise of closing loopholes. The current system of pensions tax relief could be for the chop, in a £10 billion raid that could hammer the income of 40p taxpayers and see their marginal and average tax rates shoot up. This (large) group includes the core, traditional Tory voters and activists that make up Mr Johnson’s base, and who have spent the past few years fighting for him.

There is also talk of stealth increases to inheritance tax – in other words, an assault on the family – and to hike or extend the scope of capital gains tax, which would reduce incentives to invest and accumulate, with deleterious effects on savings and economic growth. We already know that there is going to be a reduction in entrepreneurs’ relief.

There is, of course, a strong case to reform the entire tax system. But this should be done in a spirit of revenue-neutrality and with the aim of boosting economic incentives and growth. Under such a root and branch revolution, pension relief could be axed, but replaced with a lower overall tax rate. Mr Javid should appoint a tax reform commission to investigate this. Meanwhile, he should slap down the officials who just want to raise tax receipts in indiscriminate, haphazard fashion, regardless of the damage caused to the economy and personal finances.

But there is certainly no case whatsoever for imposing Britain’s first ever wealth tax, however it is dressed up. One idea would be to cut stamp duty on those seeking to buy homes, while simultaneously imposing a mansion tax on existing homeowners – but this would be equally wrong. By all means slash stamp duty, a very bad tax that depresses transactions and activity; but it shouldn’t be replaced by anything else.

A mansion tax would hit older residents on low incomes. Do we want to force them to move out of their family home? It crosses a line of principle. We don’t tax wealth. We tax transactions, spending, income, profits, flows of all kinds, but once you’ve earned something and it’s yours, it is private property and none of the business of the state. A property tax is essentially a form of rent paid to the government: it transforms the homeowner from a freeholder to a leaseholder. This runs entirely counter to our tradition and would undermine one of our key selling points as a country. Britain must become more competitive, not less so, or else Brexit will be undermined.

What the Government has correctly spoken about is “levelling up” – helping the Midlands and North to achieve prosperity by promoting business creation, investment and infrastructure, by cutting red tape and taxes via free ports, and turning these areas into a magnet for research and innovation. It’s an incredibly exciting agenda. But what these tax proposals amount to is “levelling down”. This is the sort of thing Conservative governments, including the first nationally representative one since the Eighties, are elected to stop, not to encourage.

Had the new Tory voters in the North and Midlands wanted a virtue-signalling “squeeze the rich” government, they would have voted for Jeremy Corbyn. Traditional (and new) Conservative voters might eventually come to terms with HS2 (a horrendous waste of money) or Huawei playing a role in the 5G network, but these tax plans being pushed by Whitehall technocrats are beyond the pale. Mr Johnson and Mr Javid must make sure they never see the light of day.