Only the very oldest readers will remember the question with which the Liberals taunted the two major parties way back in the 1950s: “Which twin is the Tory and which has the expensive perm?”*
Well, the chancellor, Jeremy Hunt, certainly has the nicer smile, and the better jokes. In his introduction to his autumn statement, he painted a bright and optimistic picture of a growing economy with falling public debt, inflation well under control and a country that is absolutely the place to be for ambitious, innovative and enterprising go-getters of all ages.
Autumn statement
After a deluge of tempting possibilities unleashed over the weekend to whet our appetites – income and inheritance tax cuts, just maybe lower-than-justified increases in pension and social security payments – his changes were quite modest and eminently sensible.
Pensioners and those receiving universal credit are to get the full whack of increases, at 8.7% and 6.7% respectively, and the minimum wage is to rise by 9.8%. The super deduction (a 25% exemption for taxation for every £1mn invested) is to become permanent, which will encourage investment. And national insurance contributions (NICs) are to be abolished or reduced for the self-employed and reduced by not one but two percentage points for the bulk of the workforce. These are sensible proposals, because NICs are a tax on employment which is a ‘good’ and should be encouraged.
With similar skill but a grimmer face, the shadow chancellor Rachel Reeves painted a picture of a very different economy, with a sky-high tax take, the slowest growth in the G7, out-performed by two-thirds of the OECD members and with the level of employment not yet back to pre-pandemic levels. She had only one joke: that the world looked different at ground level than it appeared to do from a helicopter.
Parliamentary pantomime
Presumably the comfortable among us will believe the Hunt version and the not-quite managing the Reeves.
Many of the most desperate will ignore both.
They have a point. Frankly this parliamentary pantomime is depressingly irrelevant to the real needs of the country. We have crumbling schools, a health service on its knees, a totally inadequate care service, local councils on the brink of bankruptcy, prisons overcrowded beyond the level of decency, outrageous rents for inadequate housing, an unprecedented backlog in our courts, pothole-pitted road, and worst of all, according to the Institute of Government and Public Policy, 14.5 million of our population, 22%, of which 4.3 million are children, enduring poverty or destitution.
It beggars belief that our government dares to talk in terms of tax cuts rather than rises to remedy the situation. And the only rise the Opposition dare mention is the taxation of non-doms, presumably because it’s a convenient jibe in the direction of the Sunak family.
Is the UK over-taxed?
The two largest parties are frightened that currently the proportion of national income or GDP the government takes in tax, the ‘tax take’ (a phrase I prefer to ‘tax burden’ – I’d like to see a society in which paying taxes is regarded as a privilege, but maybe that’s over-optimistic), is the highest for 70 years.
That is undoubtedly true. But it does not mean that the UK is over-taxed. Figures from the impartial Office for Budgetary Responsibility for 2021 (the most recent year available) show the UK’s percentage of GDP taken in tax is 33.5%. This is 3.3% BELOW the G7 average, and 6.4% BELOW the average for the EU14 (similarly advanced developed countries).
There is therefore an urgent need for our politicians to have the courage to grasp the nettle and tell us that repairing our broken society and making it fit for the 21st century will cost money and we need to be prepared to pay the taxes to pay for it.
Two days ago in Yorkshire Bylines, John Cole spelt out ‘An autumn statement that would actually transform Britain’. His proposals included a genuinely progressive income tax right up to the highest levels, wealth taxes and land value taxation.
It is too much to expect that, in the fervour of the next 12 to 18 months of electioneering, such radical proposals will gain any traction. But the progressives among the parties could suggest the setting up of a royal commission to study taxation and ways to make the present system – which, like Topsy, has “just growed” and is full of anomalies – fairer, less distorting, and more effective.
Potential taxation reforms
In the meantime, a Professor Richard Murphy has identified a list of some 30 ‘reforms’ which the parties have not yet ruled out but could raise up to £50bn a year. They include:
- Restricting tax relief on pension to the standard rate
- Subjecting landlords to NICs
- Subjecting financial services to paying VAT.
If they daren’t mention these and his other suggestions before the election for fear of the Tory-supporting press pouring poison on them, Ms Reeves and other putative chancellors should consult Prof Murphy’s works and, as Gordon Brown did with the independence of the Bank of England, be ready to strike as soon as the electorate grants them power.
If they don’t, but carry on as usual, then our UK will slip further down the league of mature liberal democracies in which a decent quality of life can be enjoyed by everyone.
* A ‘Tony’ was, maybe still is, a home perm just as effective, so the advert claimed, as the much more expensive ‘salon creation’.
