Wednesday, 16 March 2016

Budget day!

These days we are spoiled, two budgets in 2015 and an Autumn Statement. Now it's March already and so it's tiiiiiiime for another budget! Thank George for that!

Aren't Budgets fun?! Millions of column inches spilled in the run-up, interviews with the Chancellor and quotes from "sources", official leaks, unofficial leaks, pure speculation. Then there is the analysis, the online calculators, the poring over the detail, the revealing of the bits which weren't in the speech itself. Then we get the moaning from the left, right and centre that their pet projects weren't included; we are moving in the wrong direction! Debt is too high! Austerity is too harsh!

With the government currently caught between the EU referendum and slow growth and the consequences for the public finances, this Budget is unlikely to involve much more than a bit of tweaking here and there. This tweakfest is much to the disappointment of Capitalists, who prefer simple, flat, transparent taxes and regulations that are easy for everyone to understand and hard to avoid. We do not want to become France. 

Given the likelihood that Osborne is not about to give a radical reform Budget to match Barber or Howe, I thought it would be fun for readers to suggest what they would do, without the constraints that politics places on real-life Chancellors, especially those with a slim majority behind them and a risky referendum in front of them.

My big reform would be the introduction of a "progressive consumption tax", which has been discussed before on this site. Essentially, we would all have a flexible pension pot with money taxed only on the way out of it. So our incomes would be paid in to the pot and we would be taxed as we took money out to spend. Income tax rates would rise and flatten, to encourage people to save rather than spend. This would rebalance the economy away from consumption and towards investment, which is something we are often told ought to happen. The new tax regime could replace VAT, national insurance and some other duties. I would also simplify business taxes, abolishing corporation tax and employers' national insurance contributions, aligning capital gains and dividend taxes with income tax - although investments within the pension envelopes would, obviously, be free of such a burden. I would get rid of the crazy income-offset schemes which help high-paid staff in large corporations to cut their tax bills at the expense of everyone else who doesn't have huge HR and accounts departments behind them.

Once the system is established, I would encourage people to opt out of the state pension system. People would be encouraged to make their own plans for the future, with only a minimal safety net for those who don't make any provision.

I would also devolve huge tracts of public services to the new super-duper-devolution regions. Why should London, Manchester et al. not run their own health services, for example? There is no reason for the Health Secretary to be in charge of every last detail of every last contract of employment with every last doctor and nurse in the country. Such devolution would hopefully mean better oversight of services, and more efficiency.

On the subject of devolution, I would like to see local government raise its own money for spending. At the moment, central government hands about half of local spending to councils - with the accompanying controls. This undermines local democracy by disconnecting spending from taxes and local accountability. That would probably mean a big rise in council tax and service charges, but with offsetting tax-cuts from central government.

Over to you, readers.


Anonymous said...

This brave new world that you wish for runs contrary to the will of Parliament. When faced with loosening their grip on power or finance, the centre fights back.

Why should they not spend your money for you, and why should you not tell them about every pound you have or earn or save or transfer abroad.

And why should they devolve any powers away from their remit. They are the supreme law making body of the UK - voted for by (some of) the people.

Raedwald said...

I've been banging on about this for years. Governments when in power only want 'localism lite' - devolving the unpopular resource rationing decisions but not tax raising and tax application decisions.

In Switzerland only a third of taxes are determined and levied by central government - these pay for 'state goods' such as defence and air traffic control. In the UK 94% of tax is levied centrally and because of council tax capping 99% is effectively determined centrally. This unprecedented control over local administration and the castration of local democracy has been the norm since 1945 - but was particularly prevalent in the years 1979 - 1997, during which time it was no coincidence that the Conservative party lost over a million members.

Sebastian Weetabix said...

Having met my local (Libdem, so he's not as big a mentalist as the Labour twats) councillor I have to say I wouldn't trust him to sit the right way round on the lavatory. Giving him tax raising powers just boggles the mind.

Demetrius said...

It is a little late to complain, but with the benefit of hindsight the Heath reorganisation of forty odd years ago was a disaster that has led to other disasters. If the rating system had been tackled and sensible local forms of taxation put in place, effective audit and inspection done coupled with some localised adjustments that made sense, we would be a lot better off today and perhaps even better governed.

BE said...

Anon: "This brave new world that you wish for runs contrary to the will of Parliament."

I think you mis-understood the premise of my post. But thanks for visiting anyway.

andrew said...

get rid of the green belt within 5m of a city > 0.5m population

legalise class C drugs and tax the pants off them. Indeed it has been shown cannabis is a dangerous gateway path to tobacco.

reduce VAT on things you need to live (food, clothes, heating, internet(!), housing) to 0

unify income tax and NI

devolve all spending within a county's borders that are primarially for the benefit of those who live in that county to that county

recognise that you cannot tax companies as it unfairly advantages large (international) ones that can exploit economies of scale to pretty much pay what they want unless you do something different.
make the tax calc to be the larger of the existing calc and our share of worldwide profits as a % of global turnover.
(so no extra burden if you only trade in the UK).

free bananas for all (Morecambe and Wise)

dearieme said...

Yes, we have no bananas
We have no bananas today.

Electro-Kevin said...

"Once the system is established, I would encourage people to opt out of the state pension system. People would be encouraged to make their own plans for the future, with only a minimal safety net for those who don't make any provision."

And what of those who had already contributed 30 years of NI payments to it ?

formertory said...

@EK - offer a actuarial transfer value to those who want it?

Laban Tall said...

I think the Churchillian phrase is "the acme of gullibility".

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