Boris the Tax-Slayer

It is quite hard to consider the Tory party leadership election at all. We always think that today we are ruled by political pygmies - peoples' reputations take a while to settle in and most often not when they are in office. For example. Ed Balls was considered a fairly mid-level politician by now in comparison to the current Opposition front bench he is a colossus.


However, many of the runners and riders in the current Tory party are obviously not good Conservative Prime Minister material. From the Lilb Dem Rory Stewart, to the unhinged Andrea Leadsom (who is a good minister though, being of strong enough will to stop the civil service from doing nothing as per). It is not a very edifying field and the only good thing one can see is that for the Tories it allows them to hog the headlines.


But, there is Boris. I have serious doubts about his ability to be Prime Minister - I think it still says it all that Gove knifed him and ruined his own career, plus let in May, rather than let Boris who he knew so well grab the Crown. At least, by default, he is better than Corbyn.


Also there is his tax cut grab. Very sharp this, reducing taxes on people who earn £80k or less- just like the MP's that vote for him per chance? More seriously, it is a long time since anyone in the UK public arena seriously talked about cutting the high-burden of taxes. And high they are by all historical standards. Faced with Corbyn pledging to tax and spend, this is really the Tory answer that will resonate on the doorstep in an election with a big chunk of swing votes. Add it to the Northern leave vote if he can Brexit through and Boris is home and hosed. Of course, once he has got power, perhaps delivered a compromise Brexit, he will then have literally no idea what to do.


A peaceable couple of years of Government is long-overdue and will be most welcome to many.

The most politically astute tax cut for Budget 2014: Employers NI

With an election coming up and a budget to plan for in a few weeks time, the Government is scratching around for candy to offer the masses in a desperate, if doomed, attempt to prevent a Labour Government coming to power next year.

Whilst the Liberal Democrats are all too keen on raising the tax free threshold to £12,500, there is precious little the Government can do in terms of the basic or higher rates of income tax. Changing these thresholds costs billions, as does raising the tax free threshold. Far more than any offset that will come through higher growth.

Plus tax cuts like these fail on some of the basics, they don't really encourage new jobs or investment. Whilst being a success for the very low paid - few of whom vote for either Tories or the Lib Dems if we are being honest - the benefits are very limited for those on average incomes. Worse, on higher incomes, all sorts of manoeuvres such as withdrawal of child tax benefit, removal of the free allowance at £100,000 anyway, conspire to push the tax ceiling to nearer 50% in any event.

The small return of cash to people is always welcome, however it is limited in its impact to help the 'cost of living crisis' as the vast sums returned are spread over so many millions that it ends up being a few pounds a week here or there. How this will turn into an election winning formula is unclear.

However, there is a saviour at hand in the form of removing another stealth tax. All employers pay this and it is a bewilderingly complicated formula to work out who should pay what. A classic example of the mess that our tax system has become with constant fiddling.

Nonetheless, companies pay around 12% on each employee they employ and this is a direct tax on employment. Not only that, it is a direct tax on salaries as companies staff costs are by default higher and they have a negative incentive to pay people more, as it has a double cost for them to give pay rise.

Cutting this rate by 2% would reduce companies costs of employment and potentially increase growth in the job market. Furthermore, with the right kind of 'nudge' messaging to the business community which is firmly behind the Government, it can also be used as a way to begin the process of increasing pay in a more sustainable way than has happened over the past couple of years. Companies would not be expected to pass on all of the saving, but sharing the benefit with employees would be a win-win compromise.

It's the only pro-growth cut that can please business and all employees at the same time.

Whither the taxes?

Government borrowing for May is at record levels. Instead of a drop we are seeing a big increase over last year, from £15.2 billion to 17.9 billion. Simply put, although the austerity drive is seeking to curb the growth of the Government, the weak economy is reducing tax receipts at an even faster rate.

We are running very hard to go nowhere at all it seems. The only good news is that the continuing low gilt rates means that higher borrowing can be absorbed more easily than expected; but as the Government's headline goal is to shrink the deficit, this will be seen as failure.

Not that even more spending is going to help boosts tax receipts. Hopefully this goose is cooked once and for all. More Government spending is not helping boost the short-term economy substantially and payments made to pensions and benefits are a drain. An argument should be made for more capital investment as this should stimulate the economy - but with such opposition to HS2 and Heathrow expansion the Government is scared of large infrastructure programmes.

So how do we raise tax receipts - the contrarian view would be to lower taxes. Less taxes means more spending which in turn stimulates the economy and also increases consumption taxes like VAT. With such as high tax burden coupled with no return on savings people are not spending but trying to save and deleverage. Lower taxes would help to speed up this process and so bring forward eventual economic recovery. We need an emergency budget to start making some radical changes and probably a new Chancellor too.