The tax revenue pours in – but not from all taxes

Mr Osborne’s policy of cutting the budget deficit always relied primarily on a big boost to tax revenues. That is also the policy of his successor, Mr Hammond. Total tax revenue of £604bn in 2014-15 is expected to rise to £699bn in 2017-18. By 2022-23 they want to be taking £815bn from us. In 2009-10, the last Labour year, they collected just £476.4bn. Tax revenue in 2017-18 will be a massive 47% higher.

They expect Capital Gains tax receipts, Stamp duty on shares and self assessment Income tax to fall in 2017-18.The main gains in 2017-18 are forecast to come from National Insurance and environmental levies assisted by PAYE Income Tax and VAT. There is a substantial reduction in forecast for all years for Capital Gains Tax, reaching a £2.3bn fall in 2022-23. Capital Gains will bring in not much more than in the last Labour year before the crash, when rates were lower. There is a reduction in the Stamp Duty land tax forecast revenue in every year as well, reaching a £0.6bn cut in 2022-23.

This is no surprise. The Treasury underestimates how sensitive to the rate of tax these sources of revenue are. Rich people who pay much of the CGT and all of the top end Stamp Duty do not have to undertake a transaction, and are clearly in many cases not doing so because they do not intend to pay the combined high CGT and Stamp Duty charge. The higher rates of Stamp Duty and the maintained higher rate of CGT on property have brought about a substantial reduction in higher priced property turnover, hitting the revenues.

If you want to follow a higher tax revenue strategy on this scale successfully it is important to fix rates that maximise the revenue from each tax source. The Treasury is still struggling with finding out that revenue maximising rates are lower than they think.

This entry was posted in Uncategorized. Bookmark the permalink. Both comments and trackbacks are currently closed.

97 Comments

  1. Peter D Gardner
    Posted March 16, 2018 at 7:46 am | Permalink

    The key to liberty, economic growth and international trade is to have smaller government. Governments do not innovate. Public expenditure in UK is becoming obscenely high. It needs to be cut bak. A cut of 50% over 5 years would be a good start.

    • jerry
      Posted March 16, 2018 at 8:10 am | Permalink

      @PDG; “Governments do not innovate.”

      Of course they don’t!….

      Had the Federal govt. of the USA not backed manned space flight to the moon NASA would have been a much smaller agency, meaning that they would not have contracted so much out private industry, we might never have had Teflon and all the other stuff that Government innovation brought about.

      • mickc
        Posted March 17, 2018 at 11:04 am | Permalink

        Teflon was invented prior to the space race. It should also be noted that at one stage the space race absorbed the en tired US production of transistors. …which could have been better used elsewhere.

        I would further note that much innovation has come from private sources. Microsoft was not funded by the US government…..

        • Peter Martin
          Posted March 17, 2018 at 11:27 am | Permalink

          “Microsoft was not funded by the US government…..”

          But the internet was!

          And so was the development of much the high tech electronics that makes PCs and the internet work. It’s all very much of a spin off from Govt military spending.

          • libertarian
            Posted March 18, 2018 at 4:23 pm | Permalink

            Peter Martin

            “But the internet was!” ha ha ha no IT WAS NOT….

            We were ( i.e. that would be me and others) building global data comms networks in the private sector way back then too. Arpanet ( which is what you are refering too ) was a government network using packet switching. Packet switching was a system invented by Paul Barand in the early 1960’s at the RAND corporation. Arpanet used modems, TDM’s and Switches made by the private sector and telecoms lines provided by many private suppliers including ATT, Bell, Western Union etc. Vint Cerf & Bob Kahn of Bolt Beranek and Newman invented TCP/IP and incorporated it into the ARANET hardware.

            Nearly all the electronic and components for the early digital revolution where invented, developed and deployed by Bell labs and Xerox Park, followed by motorola and Intel

            shakes head at these myths.

        • jerry
          Posted March 17, 2018 at 2:39 pm | Permalink

          @mickc; “It should also be noted that at one stage the space race absorbed the en tired US production of transistors. …which could have been better used elsewhere.”

          A vacuous argument, a bit like asking what came first, the Chicken or Egg. Government defence expenditure, of which space flight is a part, has always been a major route that private companies have exploited used to fund innovation. In the 1950s here in the UK defence drove our own electronics industry (of which both my grandfather and Uncle were involved), whilst away from defence the govts. post WW2 building programme drove innovation in the build various environments.

          Oh and how many Govts around the world have used Microsoft products, like IBM etc. before them, I suppose none had impact in IT innovation either. Govts. might not innovate but it is churlish to say that they do not drive innovation either!

        • Rien Huizer
          Posted March 18, 2018 at 9:20 am | Permalink

          Microsoft (MS DOS) was commissioned by IBM that wanted to protect its business in business computing using mainframes and dumb terminals. They forgot to buy the copyright off Bill Gates cs and then Microsoft sperad out through licensing, with Intel finally finding output for its microprocessors outside the then existing very narrow market.

          Of course IBM “created” Microsoft in response to the surge of Apple “Mac” personal computers. So the innovation was private sector (but enabled by tageted defense spending) but not Microsoft’s. There were personal computing operating systems aplenty then, mainly used for gaming.

    • Bob
      Posted March 16, 2018 at 8:31 am | Permalink

      @Peter D Gardiner

      “Public expenditure in UK is becoming obscenely high. It needs to be cut bak. A cut of 50% over 5 years would be a good start.”

      I agree. Why don’t we have a bonfire of the quangos to start with and stop shelling out £138,000,000 a year for a department that gives money raised from tax to charity. Surely the charities should be raising money directly from people who want to voluntarily give to causes which they support, it shouldn’t be the government’s job to enforce charitable donations?

      • Lifelogic
        Posted March 17, 2018 at 7:29 am | Permalink

        Exactly what is the point of these government middle men in forcing people to may “charitable” donations? Let people give if they want to and where they want to.

    • Bryan Harris
      Posted March 16, 2018 at 8:33 am | Permalink

      Most definitely agree Peter …

    • Lifelogic.
      Posted March 16, 2018 at 8:48 am | Permalink

      25% of GDP is more than enough for the few thing governments actually need to do. Defence, law and order, property rights and a safety net for the rather few who really do need one for genuine health reasons. Circa 45% is totally absurd and for rather dire and rationed public services too.

      Let’s get to the Swiss level of 33% at least, and have a sound, value retaining, currency like them and double our GDP per cap perhaps in say 15 years. All perfectly possible with sensible government. But what chance of sensible government? With these clowns in charge government will probably get much worse after the next election.

    • Andy
      Posted March 16, 2018 at 1:03 pm | Permalink

      Pensions are one of the biggest expenses. We could easily cut those by half tomorrow.

      • Anonymous
        Posted March 16, 2018 at 9:55 pm | Permalink

        Andy

        Thank you for reminding me every day why I voted Brexit.

        I think you should leave this country.

      • Edward2
        Posted March 16, 2018 at 10:27 pm | Permalink

        You can’t cut them easily by half because the vast majority of pensions are annuities bought from accumulated funds paid into by employers and employees over decades.
        Try not to be such a troll Andy.

      • Stred
        Posted March 17, 2018 at 9:34 am | Permalink

        Good news for Remoaning Snowflakes. The NHS has managed to kill enough pensioners to reduce the average lifespan by a year. They will be able to join the EU army and get to fight the Russians in the Ukraine if they can out vote the dead Exiteers.

      • Denis Cooper
        Posted March 17, 2018 at 11:12 am | Permalink

        Halving the pensions of your friends in the EU would certainly help to reduce the UK’s post-membership obligations, but – guess what – the UK government is not arguing that the EU should repudiate the pension commitments which people like you wanted it to make at UK taxpayers’ expense.

    • Ed Mahony
      Posted March 16, 2018 at 1:25 pm | Permalink

      Ideology.

      Sweden + Denmark have relatively high government and high GDP compared to Japan and S. Korea (who also rank much lower in the UN’s Happiness index).

      Why are some people bent on ideology instead of looking at the evidence and working it out properly!

      It simply doesn’t make sense (the exact same can be said for left-wing ideologues and social liberal ideologues).

      Let’s unburden our great country from ideology, whether from the left, right or social liberal. (As well as unburden our country from relativism and nihilism).

      • Rien Huizer
        Posted March 18, 2018 at 9:12 am | Permalink

        It would be boring and the betting shops would complain.

  2. Nig l
    Posted March 16, 2018 at 7:49 am | Permalink

    And you go on punishing the middle classes that can do nothing about it. Conservative Government Should be prosecuted under the Trades Description Act.

  3. alan jutson
    Posted March 16, 2018 at 7:50 am | Permalink

    If you know how much each element brings in, then so does the Chancellor.

    The only difference being that he has the power to alter it.

    If he does not alter some of the rates downwards to maximise tax take, then I guess we must assume the decision has not been taken on economic grounds, but for political reasons, or he simply does not agree with your logic/reasoning.

  4. formula57
    Posted March 16, 2018 at 7:57 am | Permalink

    The rich can run from crystallizing CGT liability but they cannot hide, for eventually a taxable transaction will result. Accordingly, from the perspective of the Exchequer, is it not a question of delaying gratification in order to receive more in due course?

    I acknowledge the objection that arises is that economic activity that might otherwise be generally beneficial is delayed if asset holders opt out with a view to avoiding CGT.

    A further objection of course is that CGT may never arise, rather IHT that this government (in common with its predecessors) is content to make it a voluntary tax for the very rich whilst allowing it to clobber the middle classes, thereby promoting extremes of inequality.

  5. agricola
    Posted March 16, 2018 at 7:59 am | Permalink

    PAYE, Green Levies, NI, VAT are all difficult to avoid but can be minimised by joining the black economy as is the norm in Southern Europe. The more government squeeze, the blacker it will get. As to CGT, don’t do it or do it outside the UK.

  6. agricola
    Posted March 16, 2018 at 8:04 am | Permalink

    If the Daily Express is right today, we need an urgent full parliamentary enquiry into the actions of our civil service and their promises made to the EU outside the framework of Brexit negotiations.

    • Denis Cooper
      Posted March 17, 2018 at 11:14 am | Permalink

      Correct. I wonder whether any MP will be raising this next week?

  7. Stred
    Posted March 16, 2018 at 8:05 am | Permalink

    The removal of the inflation allowance for CGT more than doubles the real rate at the increased 28% introduced by the coalition. Many owners of long term investments would like to sell and retire. Re instating the inflation allowance, which was simple to calculate, would increase tax take. Brown’s excuse that it was too complicated was a cynical lie. Other countries have far lower rates.
    Sweden found that high IHT had a bad effect on the economy and dropped it. Swedes are hard headed in business, not socially conscious give away softies a la Baloney.

  8. jerry
    Posted March 16, 2018 at 8:06 am | Permalink

    A startling admission from our host; the Conservatives are now the party of high taxation, whilst the last Labour govt. (post the 2007-8 banking crash) were the party of low taxation! I don’t expect that is what he meant to say or imply but never the less…

    The reason why revenue from self assessment Income tax is falling is because of HMT, DWP and BEIS policies since 2010, sure unemployment is down but many have been forced into the Gig, zero hours or self-employment that whilst keeping them off JSA doesn’t do much else for govt. finances.

    No one is asking for a Roosevelt styled New Deal but this country needs to get back to full time work, and that would have been a better use (with better returns long term) for QE, to follow up upon a debate the other day, we could have has the best roads in the world with all the new bridges we want too!

  9. Ian wragg
    Posted March 16, 2018 at 8:34 am | Permalink

    You have lost all credibility of being the government of low tax and fiscal prudence. Much of the inactivity you undertake is wasteful and counter productive.
    We pay ever increasing council tax for less and less services.
    Meanwhile congratulations to HMS/M Trenchant for surfacing in Putins playground. Despite Hammonds best efforts the military continues to step up. How much foreign aid did we give Russia last year.

  10. Lifelogic.
    Posted March 16, 2018 at 8:36 am | Permalink

    If you look at the top UK tax rates they are absurdly high compared to nearly all successful economies. They can easily strip 90% of your wealth off you over just one generation without good, time consuming and rather expensive tax planning.

    CGT without indexation at 28%, stamp duty at up to 15%, IHT at 40% over just £325k and taxing landlords on profits not even actually made are particularly stupid and hugely damaging. The attacks on the Non Doms have been very foolish too. All this tax and yet dire public services too.

    Italy sound rather attractive now with the new tax cap, very little inheritance tax, pleasant and quite cheap houses, excellent food, good skiing, very cheap trains, good connections and rather better weather. Hammond need to stop pushing the rich away from the UK, cut and simplify taxes substantially, cut regulation, cut government waste and go for cheap energy. A 1.5% growth rate for 5 years is totally pathetic. It has never been as low as that in post war history for any 5 years period.

    With a sensible and smaller government we could have 5% growth PA at least.

  11. Bryan Harris
    Posted March 16, 2018 at 8:38 am | Permalink

    ~
    JR – When is the well overdue rewrite of UK taxation going to take place – as you well know, we have a dastardly large confusing book of tax rules…. taxes are unfair and confusing – We badly need a simple system to reinvigorate the country …

    When is it likely to happen

  12. Mick
    Posted March 16, 2018 at 8:40 am | Permalink

    Off topic again
    Talk about the news channel RT being the mouthpiece for Russia, what about the bias bbc being the mouthpiece for the Eu
    Was watching bias question time last night and Chris Grayling was outnumbered by remoaners surprise surprise again 4-1 including the presenter, it had the mep woman McGuinness on and I thought it was the mcguinness Eu program the amount of air time she was given to spew out her bile on her beloved eu, just do what 52% voted for and get us out of the dreaded Eu NOW

  13. Adam
    Posted March 16, 2018 at 8:46 am | Permalink

    Folk might like paying tax for efficiently-delivered value, shared fairly.

    UK tax steeps in needless clumsy complexity, wasting itself within its own muddle.

    If Govt income were limited to as few as 3 fundamental sources, the immense knock-on corrections, of other added taxes & changes resulting from complicated consequences, would not occur.

    The purpose of tax is to fund Govt activity & discourage undesirable behaviour. Two such things do not require thousands of instruments with rules of explanation beyond human understanding.

    Might a tax solely on Energy consumption pose a sensible concept from which to start afresh?

  14. Lifelogic.
    Posted March 16, 2018 at 8:51 am | Permalink

    Better “than” Corbyn

  15. Bob
    Posted March 16, 2018 at 8:52 am | Permalink

    Apart from getting spending under control the Chancellor should refrain from his socialist urge to use taxation to pander to the green eyed monster. Much of the UK tax legislation is designed to punish economic activity and success rather than raising revenue.

  16. Andy Marlot
    Posted March 16, 2018 at 8:57 am | Permalink

    Taxes pour in and yet we still have massive deficits. Actually the state is never satisfied. It always wants more. More debt, more tax, more dependency, more control. The average weekly wage in the 1970s would buy you an ounce (or more) of gold. Today you’ll be one of the few if your wage will do that. In the 70’s a mans wage would look after a whole family, now it takes both parents just to keep up with the bills. Yet all we hear is how much better off we are, I say BS. The centralised planning of this fake democracy has impoverished us with inflation, taxation and disposing of our rights. I say the thinking person should do their absolute best to not pay tax at all.

    • Rien Huizer
      Posted March 18, 2018 at 9:10 am | Permalink

      In the 70s you would not have used the internet to complain. Snail mail only. If you look at the incredible improvements in cars, consumer electronics, variety available in shops, ease and cost of air travel, you would not look back, I guess. If you are in a private retirement home, that’s different. Nursing and accommodation services are, unfortunately, still in the early stages of modernisation and productivity improvement. On the other hand, healthy lifespans are in ceasing and for those who do not like the world as it is there are antidepressants, and in some countries, a painless way out. Plenty of choice for your pound or dollar then.

  17. Sir Joe Soap
    Posted March 16, 2018 at 8:57 am | Permalink

    Oh dear
    This is supposed to be the party of low tax.

  18. Andy
    Posted March 16, 2018 at 8:57 am | Permalink

    Tax is the price of a decent society.

    It pays for our schools. For our hospitals. For police. For roads and rail.

    And there is a balance as to how much individuals should be asked to contribute.

    It seems to me when they are forcing thousands of poor children to potentially starve by taking away their school dinners, the Tory hard-right pensioners have the balance wrong.

    Still – so long as the tax-avoiding multi-billionaire and Russian oligarchs who fund their party are okay I suppose that’s all that matters to them.

    • Libertarian
      Posted March 17, 2018 at 9:44 am | Permalink

      Andy

      Once again showing his total ignorance

      All the things you list aside from policing where once very well provided by the private sector

      They are actually INCREASING the number meet of children eligible for free school dinners by 50,000

      The UK has the worlds lowest tax gap . That is the amount HMRC think should be paid versus what the collect

      You have no credibility Andy , you have no awareness of the world . Get a job , get a life , embrace Brexit

  19. Narrow Shoulders
    Posted March 16, 2018 at 9:00 am | Permalink

    Rich people who pay much of the CGT and all of the top end Stamp Duty do not have to undertake a transaction,

    These people also have clever, but legal, ways of avoiding declaring income which are not available to PAYE serfs from whom a greater percentage of their total income is seized.

    I agree that government would gain greater income by reducing rates for those who self declare and choose how and when to show they have realised income but a small wealth tax on those with substantial assets would capture some of the undeclared monies too.

    If we are looking at taxing multinational corporations differently in a new age, we should also look at those with unusual wealth to capture a good percentage of all their earnings.

  20. Ghost of JB
    Posted March 16, 2018 at 9:00 am | Permalink

    I agree that the realm of government should be restricted to those areas alone which require common contribution and delivery for all citizens, such as health, defence and common infrastructure, such as roads.

    Sadly our governments since the Second World War have seen themselves as our rulers, and not as our servants, and so have appropriated ever more of our liberty and money, as they believed that they knew better how to spend it than we do.

    I see no signs that the current government see any limits on their authority, even after losing a referendum on a key plank of post-war orthodoxy. I would like to see a conservative, libertarian party start to argue for a smaller state before we agree a budget.

  21. Mockbeggar
    Posted March 16, 2018 at 9:11 am | Permalink

    I wonder how much of that revenue is VAT on tampons?

  22. Iago
    Posted March 16, 2018 at 9:24 am | Permalink

    Any amount of stamp duty levied on buying a dwelling for oneself is downright theft.

  23. ChrisS
    Posted March 16, 2018 at 9:35 am | Permalink

    We have had this discussion on CGT many times before here. It is a source of amazement that the Treasury has not learned the lesson that CGT is, to a large extent, a voluntary tax.

    I have been putting off selling some properties now that I am retired because the rates are simply too high. Instead I have remortgaged and taken out capital that way. It is much cheaper than paying CGT !

    Even under current rules, Inheritance tax, payable only on the net value after repaying the mortgage, remember, would be less than the CGT if I sold the properties this year !

    It’s a short sighted attitude by the Treasury because if I sold, more money would be released into the economy as we would spend some of it.

    If it wern’t for the ludicrous 3% extra stamp duty charge, I would buy other property and spend money on refurbishments and improvements, again, contributing towards growth.

    However I think the real reason CGT has not been reformed is political :

    Corbyn and his Marxist rabble would have a field day. You can see the headlines in the Guardian : the Conservatives handing more cash as a gift to their cronies. That Toynbee woman and the far left ex-Newsnight economics editor, Paul Mason would both rant and rave ad-nauseum.

    Sadly the fact that more tax would be generated would be completely lost on young, impressionable voters.

  24. Anonymous
    Posted March 16, 2018 at 9:37 am | Permalink

    Lowering the VAT threshold on trades will inhibit spending on builders etc.

    A council tax against boomers will mean less spent in the places millennials work. Moreover boomers will work into retirement keeping the jobs millennials want.

    • Anonymous
      Posted March 16, 2018 at 10:19 am | Permalink

      If you keep telling young people that old people are stealing their jobs and housing then they’ll have problems seeing the obvious that the introduction of young and feisty competitors at a rate of 350,000 a year is bad for their prospects.

      The thing that exposes Andy and Newmania’s vicious lies is that there is a schools and a commuting crisis too.

  25. Mark B
    Posted March 16, 2018 at 9:39 am | Permalink

    Good morning

    What about spending less. If we did not waste so much the government would be able to balance the books.

    Also. We need to take into account the Council Tax rises. These are in addition to what we have to pay out.

  26. Peter
    Posted March 16, 2018 at 9:44 am | Permalink

    “If you want to follow a higher tax revenue strategy on this scale successfully it is important to fix rates that maximise the revenue from each tax source. The Treasury is still struggling with finding out that revenue maximising rates are lower than they think.”

    A similar situation will soon apply to inheritance tax. Once it becomes widely apparent that this is a confiscatory tax that now hits the average person, people will gradually switch their wealth into assets that cannot be traced and evade the tax.

    Quite rightly too.

  27. Richard1
    Posted March 16, 2018 at 9:45 am | Permalink

    Another excellent illustration, if we needed it, of the Laffer Curve effect. Leftists are simply in denial. The inverse correlation of rates and receipts on stamp duty & CGT shows clearly that there is a choice between virtue signalling high taxes for ‘the rich’ and actually maximising revenues for public services. Leftists favouring high rates are humbugs if they also call for more public spending on services.

  28. acorn
    Posted March 16, 2018 at 9:47 am | Permalink

    The government wants to build a lot more small house; lots to the acre. It knows it has insufficient capacity in the residential building industry to expand current build rates without generating inflation.

    Solution. It makes buying expensive houses more expensive and people stop buying them. Hence, part of the building sector stops building expensive houses. It turns to building little houses that the government wants and there are financial wheezes to help people buy them. Simples!

    Taxation is about directing the economy to do what the government wants it to do. If government wants to divert some private sector output to the public sector, it will do it with taxation. It is not about raising maximum revenues; so please don’t make me Laffer. 😉

    • Edward2
      Posted March 17, 2018 at 10:00 am | Permalink

      The prime purpose of taxation is to raise revenues for the state to spend.
      Problem is, firstly the state spends approx 60 billion more than it gets in tax every year, secondly the voters are getting close to rebelling against the amounts they already pay.
      Tax as social engineering fails in its prime purpose because if, like with tobacco taxes the aim is to stop people smoking, the result is less revenue.

      • acorn
        Posted March 17, 2018 at 4:41 pm | Permalink

        So on day one of the economy, where did the citizens get the “money” from to pay the taxes, so the government had some “money” to spend?

        Tobacco taxes are applied for the sole purpose of stopping smoking; the government thinks it is a net vote winner. The fact that that tax is still raising £9 billion a year, is because it has failed to stop the citizens smoking!

        The most effective tax, is the tax that raises no revenue at all!

        • Edward2
          Posted March 17, 2018 at 6:55 pm | Permalink

          Day one of the economy people bartered.

          • acorn
            Posted March 18, 2018 at 8:14 am | Permalink

            Post Brexit, bartering will likely make a comeback.

          • Edward2
            Posted March 18, 2018 at 10:43 pm | Permalink

            Ridiculous

  29. mickc
    Posted March 16, 2018 at 9:48 am | Permalink

    Hammond has no idea how to get the economy going. His, and the Tory party’s only strategy is to tax the economy to death. No doubt Brexit will be blamed for the inevitable disastrous result.

    The sooner this government is gone, the better.

    • acorn
      Posted March 17, 2018 at 5:16 pm | Permalink

      Deliberately, this government changed the law so we can’t get rid of them till 2022. We have an elected dictatorship that any totalitarian state would be proud of. Unfortunately, we have a citizenry that is so poorly educated, it hasn’t got a clue; cares even less, that struggles to understand an EastEnders episode.

      The bottom line is; if EastEnders and Coronation Street, had run “remain” story lines prior to the referendum, there would have been a vote to “remain” in the EU.

      • Edward2
        Posted March 18, 2018 at 12:04 pm | Permalink

        That is not correct acorn
        The Govt can call an election before the fixed term ends.
        There are methods to do this.

        Odd how democrats like you call voters who don’t agree with your views as uneducated.

        • acorn
          Posted March 19, 2018 at 5:54 pm | Permalink

          The government can call an election; who else???

  30. Epikouros
    Posted March 16, 2018 at 9:49 am | Permalink

    Taxes are an awful use of the citizens of a nation’s money. Money is being taken out of the hands of those who know how to use it efficiently and put into the hands of those who do not. Worse is those who have been given this money extracted by the threat of force, an anathema in itself, not only waste it through poor management but on items that are not the least bit desirable or appropriate. Decisions on spending are motivated by a variety of imperatives that are mostly based on fanciful assumptions rather than absolute necessity or for personal or political gain.

    It is wonderous to observe the contortions that are enacted by those who promote taxation to convince us all of how it is such a wonderful system to further our common good, social justice and for enhancing our security and prosperity. We buy into this deception but fail to appreciate that any improvements are not because of the tax system but despite it. That can only be properly experienced when taxation is used to fund everything and we become solely reliant on income derived from that same taxation. Put simply in a state where socialism is the only economic and social driving force. We see the results of which all around us in places like Cuba, Venezuela, the USSR (now defunct because of it) and others yet we happily pursue the goal of more taxation, more state control and government doling out largess to supporters, friends and as a means of bribery(vote purchasing).

  31. Peter Cartwright
    Posted March 16, 2018 at 10:59 am | Permalink

    The “experts” at the Treasury have obviously not read about the Laffer curve.

  32. D Gardener
    Posted March 16, 2018 at 11:05 am | Permalink

    So what is new about the Treasury?
    They still think with Socialist hats on and cannot accept that the British citizens have wantonly gone against their meddling and fear mongering anti-Brexit dictates and voted to Leave their mentors in Brussels.
    The sooner a Minister takes charge of the Treasury and calls them to heel, the better for us ordinary Brits.

  33. Denis Cooper
    Posted March 16, 2018 at 11:14 am | Permalink

    “The Treasury is still struggling with finding out that revenue maximising rates are lower than they think.”

    Well, as we know that is not the only theoretical question where Treasury civil servants are still struggling with what they see as being highly inconvenient truth, as they also refuse to admit that all their models of the costs and benefits of EU membership always have been and still are being deliberately rigged to predict disaster if we leave the EU and/or leave the EU customs union and/or leave the EU Single Market.

    I myself have a number of unanswered questions around this.

    Firstly, who authorised civil servants to use public resources to produce a new edition of the Treasury’s doomladen pre-referendum forecasts of April 2016, even though any slight reputation that the Treasury may previously have had for impartial analysis and reliable prediction had been utterly destroyed in the months after the referendum.

    Secondly, who then leaked the confidential, and provisional, results of those politically motivated studies to the media, so that the opposition parties can now constantly refer to “the government’s own analysis” as if those leaked studies somehow have any more validity than the deliberately falsified studies officially published by the then Chancellor George Osborne before the referendum.

    Thirdly, how is the Cabinet Secretary getting on with his investigations to track down the sources of that and various other leaks of confidential government information designed to disrupt and if possible thwart our withdrawal from the EU? Let me guess: there have been and will be no efforts in that direction, and nobody will ever be punished for their disloyalty and contempt for our national sovereignty and democracy.

    • Denis Cooper
      Posted March 16, 2018 at 11:29 am | Permalink

      Only yesterday:

      https://hansard.parliament.uk/Commons/2018-03-15/debates/776150E8-8B4C-4A5F-835E-69F07E7ED0E2/ExitNegotiations#contribution-B8715964-A9E9-4064-9013-51294097BBD4

      Tom Brake (Carshalton and Wallington) (LD)

      “… Given that the Government’s own impact assessment points to every sector and region of the UK being damaged by Brexit … ”

      Mr Davis

      “… there is no official Government document that makes that forecast. There is work in progress, but that is not an official Government forecast – indeed, we do not believe it … ”

      And yet when one of his ministers, Steve Baker, raised an obviously valid question about the independence and impartiality of Treasury civil servants he was forced to apologise:

      http://www.bbc.co.uk/news/uk-politics-42911538

      “A Brexit minister has apologised in Parliament for comments he made about the independence of the civil service.

      Steve Baker said he had been told Treasury officials were deliberately trying to influence policy in favour of staying in the EU customs union.”

      • Denis Cooper
        Posted March 16, 2018 at 3:00 pm | Permalink

        And now look at this:

        https://www.thesun.co.uk/news/5822727/whitehall-brexit-brussels-secret-tapes/

        “DON’T HAVE A BREX, HAVE A KITKAT”

        “Bombshell tapes reveal how top Whitehall officials compared Brexit to a KitKat with chocolate layer hiding UK ties to Brussels.

        Their bizarre chocolate analogy drew laughter at a secret meeting while appearing to commit taxpayers’ cash to propping up EU defence projects”

        Last night leading Brexiteer Jacob Rees-Mogg demanded an official inquiry into the meeting, saying: “It is wrong for British civil servants to be briefing the other side in except in a formal negotiation context.”

        He hit out: “Former civil servants rounded on Brexiteers a few months ago and compared them to Nazis for questioning the traditions of the Civil Service and now we have civil servants appearing to brief against their country.”

  34. Bob
    Posted March 16, 2018 at 11:23 am | Permalink

    Mr Redwood,
    Any chance we could hear your thoughts on the tape recordings revealed in the Daily Express wherein Senior Whitehall officials and their EU counterparts are heard discussing “significant contributions” for the EU army?

  35. duncan
    Posted March 16, 2018 at 11:25 am | Permalink

    We have a Tory government in all but name. We may as well have a left wing Chancellor running the nation’s books

    We have British officials conspiring with EU officials to tie the UK into the EU political, legal and military infrastructure indefinitely

    Unless the Tory MPs stop looking after their own pay and pensions and focus on getting rid of these two plastic Tories at the helm my party is dead and this nation and its people will be betrayed

    Never have I witnessed such arrogance from my party, British civil servants betraying UK democracy..

    It is incumbent to on decent Tories to stoke some form of rebellion before we are sold down the pro-EU, socialist river

  36. nigel seymour
    Posted March 16, 2018 at 11:25 am | Permalink

    J, Well done on your commons contribution yesterday. The chamber wasn’t exactly packed to the rafters, but that may well indicate that we WILL be leaving the EU come what may in March.

  37. English Pensioner
    Posted March 16, 2018 at 11:55 am | Permalink

    The government needs to do what any individual does when short of money. We can’t just go to our employer (or pension provider in my case) and demand more, we have to make economies.

    This doesn’t mean austerity, it means cutting back on any unnecessary expenditure, ensuring that they don’t waste money on unnecessary activities whilst doing what is necessary in the most cost-efficient manner.
    Once we were promised a ‘bonfire of quangos’ but in practice they seem to be on the increase with some new commission or authority being established at regular intervals. I am astounded by the number of public appointments outside the Civil Service. If one looks at today’s “ConservativeHome” web site where they always list these appointments, today seven are listed including the Chair of HS2 Ltd at a salary of £230-250,000 pa.
    It is interesting to note that according to the TaxPayers’ Alliance, “in the last year, five times more Labour people were appointed to public bodies than Tories”.
    The message to the Chancellor should be “Stop wasting money, don’t increase taxes”.

  38. Anonymous
    Posted March 16, 2018 at 12:36 pm | Permalink

    Anna Soubry seems to think that you want to make British people poorer by her expression when you rebutted her comments on forecasting.

    We know differently.

    Newmania et al think otherwise.

    I think you’re a great bloke, John.

  39. Lifelogic
    Posted March 16, 2018 at 12:46 pm | Permalink

    Taxes by their very nature change people’s behaviour usually adversely.

    Is it worth moving nearer to work or to a larger house if you have to pay a vast sum in stamp duty? It is worth doing overtime if after tax and travel costs you only keep 30% of your earnings? Is it better to do DIY (or look after you own children) rather than working paying tax then paying someone else to do it. Usually it is not with very high Income Tax, VAT, Work place pensions taxes and NI both employee and employer.

    Is it worth expanding your business if taxes are so high, compliance costs huge, regulations so foolish and employment laws so daft?

    High taxes of themselves damage productivity and efficiency hugely. Especially when most of the tax extracted is tipped down the drain by an incompetent government – often on total absurdities and foolish religions like climate alarmism, the EU, insane regulations, HS2, Hinkley and so the called “renewables” (or expensive unreliables).

    Hammond keeps going on about the UK productivity problem – but he is the main cause of it. We could easily become as productive as say Switzerland. Just cut the state down to 30% of GDP and make that 30% deliver some real value for a change.

  40. Prigger
    Posted March 16, 2018 at 1:13 pm | Permalink

    We should rename Governments Taxments. Had they had this true demonic name right from the start, life would be much simpler and peaceful.

  41. Rien Huizer
    Posted March 16, 2018 at 1:16 pm | Permalink

    Mr Redwood,

    As usual, there is some truth in your observations. Capital gains and estate/gift/heritage taxes are not very efficient (but easy to collect) from micro-economically. Stamp duties likewise. However, to get rid of those taxes, usually only hurting the more affluent, is very hard. Better to concentrate on better collection of those taxes that are technically difficult, like profits taxes and income taxes for the non-domiciled. Too many shady foreigners are enjoying the pleasures of living in the UK without contibuting to the public purse. For the rest, find ways to connect tax to service, or better offer services on a fee basis. I suggest that a dedicated tax/fee for NHS services (with a threshold and a cap, plus a deductible,) would go a long way to change the appearance of UK public finances. If then the NHS real estate could be sold (and leased back pending relocation to industrial areas where large hospitals belong) there could be some real (and efficient) improvement. The UK public sector does not spend all that much but the scope is wrong.

  42. hefner
    Posted March 16, 2018 at 1:25 pm | Permalink

    JR might be right, but instead of pronouncing what at the end is rather vacuous phrases, could he stick his head over the parapet and tell us what the optimum (maximising) rates of CGT (on housing and shares) and Stamp Duty should be, given his long experience of those things?

  43. ian
    Posted March 16, 2018 at 1:29 pm | Permalink

    Maybe that because of people who own these assets are assured by the world system, that asset price will always go up with inflation and GDP, and if something does go wrong they will be bailed out with public money at no cost to them, and if a gov refuses they know they can rely on the banks to twist the gov arms to get their way.

  44. PrezleB
    Posted March 16, 2018 at 1:30 pm | Permalink

    Understandable..why should I sell my shares and have to pay CGT and then if I want to reinvest pay another 0.5 per cent stamp duty..better just to stay where I am and collect thd dividends…save myself a bundle..go to my grave and pay no CGT..now that’s a better idea.

    How is it the government wan’ts to take a piece of my gains but won’t share in my loss

    My friend has a second house and has been thinking of getting rid of it to invest in some other new business, but because of the CGT and stamp duty has decided to sit on it..can’t really blame him..he loses out, revenue loses out and the new business loses out

    • Edward2
      Posted March 17, 2018 at 10:05 am | Permalink

      Good examples of how taxation reduces economic activity and growth.

  45. Denis Cooper
    Posted March 16, 2018 at 1:33 pm | Permalink

    Well, it seems that if these MPs have their way we will be staying in the EU after all, because they have concluded that there is no solution to the problem of goods worth a mere 0.1% of UK GDP leaking unchecked into the continuing EU across the land border between Northern Ireland and the Irish Republic.

    https://publications.parliament.uk/pa/cm201719/cmselect/cmniaf/329/32903.htm#_idTextAnchor000

    “The UK Government’s decision to leave the Single Market and the Customs Union means that, in future, different regulatory and tariff regimes could be in force on the island of Ireland. Without an effective border, goods could cross between Ireland and Northern Ireland without paying tariffs or complying with regulations on product standards.”

    As there are zero tariffs at present that aspect does not yet arise, but the simple fact is that in the absence of any checks at the land border it is perfectly possible that any or all of the goods which cross now, in both directions, could already be illicit in the sense that they do not comply with regulations on product standards.

    The only guarantee that this will not be a common occurrence depends not on physical checks at the border, because with the advent of the EU Single Market in 1993 it was agreed there should be no such routine checks at this or any other of the EU’s internal borders, but instead on mutually agreed legal arrangements, with both the Irish Republic and the UK having passed, and moreover having undertaken to effectively enforce, all EU Single Market legislation.

    The Republic will of course maintain those EU laws after the UK has withdrawn from the EU, but there is no reason why the UK should not pass and enforce alternative laws to ensure that all goods exported across the land border to the Republic will continue to comply with all relevant EU regulations, even while those EU laws no longer applied to the other 99.9% of the UK economy.

    However if people don’t want to find a solution, in the hope of keeping us locked in the EU and/or in the EU Customs Union and/or in the EU Single Market then doubtless they will be unable to find a solution – “There are none so blind as those who will not see”.

    • acorn
      Posted March 17, 2018 at 4:18 pm | Permalink

      So how come the other 40 (forty) bilateral land borders the EU has with non-EU countries, have not already adopted your idea Denis?

      Remember, you will need also to apply it to Spain – Gibraltar; Cyprus – Northern Cyprus and each of the last two with the UK Sovereign Bases we have on that Island.

      BTW. Post Brexit, it would be wise to think Falkland Islands. The USA will not be happy about losing its UK stepping stone into the EU; Trump is not that keen on NATO; the US CIA, has made a lot of enemies in South America, trying to install puppet governments in States with lots of Oil reserves.

      • Denis Cooper
        Posted March 17, 2018 at 5:32 pm | Permalink

        I suggest that we start with the particular border which is supposedly going to present an insuperable problem. If the solution of that problem offers useful lessons for other borders, then good. I notice that you have nothing to say for or against my proposal other than that it has never been done before.

        • acorn
          Posted March 18, 2018 at 10:00 am | Permalink

          What is wrong with putting the EU border at the Northern Ireland ports? It is not a land grab; nobody is giving up teritory. It might just cement in the Northern Ireland Good Friday Agreement for ever.

          The EU has a lot of Protocol 3 agreements, that get around such problems like: https://publications.parliament.uk/pa/ld201617/ldselect/ldeucom/136/13605.htm

          • Denis Cooper
            Posted March 19, 2018 at 9:07 am | Permalink

            The answer to that is “no”, as you well know.

  46. Narrow Shoulders
    Posted March 16, 2018 at 1:47 pm | Permalink

    The main gains in 2017-18 are forecast to come from National Insurance

    And still the sleight of hand where your government gives to higher rate taxpayers by increasing the threshold from which 40% tax is paid and then takes it away with the other hand by increasing the secondary NI threshold by twice the rate of the increased tax threshold does not get coverage in the media.

    Party of low taxation? Where’s my child benefit?

  47. mancunius
    Posted March 16, 2018 at 2:53 pm | Permalink

    Given Hammond’s reversal of Osborne’s share dividend allowance, it is scarcely surprising that investors are holding off from investing outside tax-free ISA and SIPP wrappers. In 2016 Osborne scrapped the tax credit system and gave the equity investor an allowance of £5,000 before tax is due, which stimulated many lower rate taxpayer PIs into investing more in taxable accounts.
    But the HMRC’s software could not cope(!), so they overcharged the amount of tax due –
    often by a factor of 25% – forcing taxpayers to file paper returns to have the correct tax applied (Google “PTP – Osborne’s dividend tax changes too complicated for HMRC to compute”).
    Hammond came along after investors had already invested in what they thought were long-term investments in productive companies, and promptly slashed the dividend allowance from £5,000 to £2,000.
    Now, I ask you, would you expect any investor to trust a government that behaved with such a mixture of stupid incompetence, unfairness and wilful greed?
    I am now rescuing all my taxable investments into tax-free accounts. It will take a few years and cost me in SD, but the Treasury clearly cannot be trusted to exert a modicum of common sense. Most investments are made with disposable income that has already been income-taxed, they pay 0.5% SD plus dealing costs, they risk loss, inaccessibility of capital for a long period, and they invest in business and industry. To risk further depredations by Hammond and his bunch of overpaid Treasury mandarins is a risk too far.
    Perhaps, John, you could ask the Treasury if they really want people to invest in British business and industry, and if they want the UK financial sector to flourish – or not? Or would they prefer everyone just buys a hovel in London or sits on the street with their hands out?

  48. Richard
    Posted March 16, 2018 at 2:55 pm | Permalink

    “to follow a higher tax revenue strategy on this scale successfully it is important to fix rates that maximise the revenue from each tax source. The Treasury is still struggling with finding out that revenue maximising rates are lower than they think.”
    This is a good point, but there is also the economic harm that tax distortions do to the UK economy. A simple example would be stamp duty causes people to delay downsizing when their offspring leave home.
    HMT forget that both stamp duty and CGT are often ‘voluntary taxes’ since rich people can often borrow to raise cash when necessary.
    And if Labour’s various whiz ideas of a wealth tax & similar new taxes were likely, many billionaires, entrepreneurs & high earners will simply quickly exit the UK – greatly harming our economy & (as John says) probably a lower overall tax take.
    http://citywire.co.uk/wealth-manager/news/labour-unveils-tax-raid-on-wealthy-in-48-6bn-plan/a1016955
    https://www.telegraph.co.uk/news/2017/03/09/revealed-john-mcdonnell-calls-20-per-cent-wealth-tax-richest/
    As John says

  49. James murphy
    Posted March 16, 2018 at 4:17 pm | Permalink

    The Russians conti ue to put out the old line they have used for a long time now – we didn’t do it becausr you can’t prove we did- same old line co ing from all quarters..they forget that only a couple of years ago they denied the ownetship of the armed green army with no uniform flashes that appeared on the streets of the crimea until it was all over..they continue to deny tney have no connection with the urest in eastetn Ukraine? They should be told in no uncettain tetms that fake news might work in america but iy is not going to work here

  50. Ken Moore
    Posted March 16, 2018 at 6:12 pm | Permalink

    Logic doesn’t come into it. Dr Redwoods now deceased formally conservative party is all about virtue signalling following the loony ‘fairness’ grievance stoking agenda.

    Redwood is a political nomad – hemmed in on one side by political correctness and on the other by the socialist blair copying dominant wing of his party.

  51. getahead
    Posted March 16, 2018 at 7:49 pm | Permalink

    This is the same Treasury that wants to keep us tied to the EU. Another loss-making enterprise.

  52. Prigger
    Posted March 16, 2018 at 9:04 pm | Permalink

    “Jeremy Corbyn again refuses to directly blame Russia for Salisbury poison attack
    Sky News · 11 hours ago”
    No. He is on the sane side of the Universe for once.

    Boris says it is “overwhelmingly likely ” Russia is to blame for Salisbury.
    For the uninitiated into journo-jargon the move from the sick repetitive “highly” to “overwhelmingly…” is a journalists way of telling his world “This is the most highly overwhelmingly ..and dare I say absolutely a load of cobblers I have ever had to say!!”

    Meanwhile Russia “raised $1.5 billion (1.08 billion pounds) worth of a Eurobond maturing in 2029 and $2.5 billion worth of a top-up Eurobond maturing in 2047.” That is, selling like hotcakes to international investors and “Japan Tobacco has agreed to buy Russia’s Donskoy Tabak for $1.56 billion to strengthen its leading position in the world’s third-largest tobacco market.”

    Another month of Mrs May in power and we really will need to remain in the EU for a bite to eat.

    • Rien Huizer
      Posted March 17, 2018 at 9:58 am | Permalink

      Russia has adopted an extreme austerity regime, initiated by a strong depreciation of the rouble and followed by very tight monetary and fiscal policy, preventing inflation cancelling out the depreciation benefits. That has resulted in a return to “investment grade”. Anyone studying that case will come to the conslusion that such a policy mix would have been unavailable in a democracy. Not really an example to follow then..

    • hefner
      Posted March 17, 2018 at 10:17 am | Permalink

      Aren’t these figures another proof of how the City of London is essential to the success of the U.K.?

    • Mitchel
      Posted March 17, 2018 at 1:14 pm | Permalink

      Capital has been flooding back into Russia.Over the Christmas break I took note of the following:-

      “Reuters,29/12/17 :Demand soars for Russian bond issue seen aiding repatriation.

      Initial bids from wealthy Russians for sovereign Eurobonds due to be issued next year had come in at $200m,but demand has now topped $3bn,the Finance Ministry said,declining to speculate on the reason….crucially unlike bank accounts,holders would remain anonymous under the proposal.”

      As far as liquid assets are concerned the steppe ponies may have already bolted!

  53. Ed Mahony
    Posted March 17, 2018 at 12:25 am | Permalink

    Please don’t encourage Utopianism!

    If the Tories followed your advice, they’d never get into power (and then we’d be left with Labour).

    Ultimately, the only way you can get low taxation is through culture NOT politics (important as politics is). By culture, I mean religion, the arts and education (including the ancient Greeks on philosophy / virtue / heroism / beauty). Where culture inspires people to have dignity in themselves (and for others). To have work ethic. Be self-reliant. Sense of responsibility towards others and country (patriotism). Sense of public service. Respect towards elders and to employers (and employees). Loyalty to the Crown. And love of Family.

    We do achieve this to a degree. And have done so to more of a degree (and to less of a degree) in the past.

    But it’s ultimately only through culture (religion, the arts and education) that we can bring about the changes you and all-right thinking people want.

    Best wishes.

    • Ed Mahony
      Posted March 17, 2018 at 12:31 am | Permalink

      I also think the Conservatives need to look at more of the subject of HAPPINESS.

      True happiness, based on virtue (and things like the arts).

      Because Happy People make the right choices. They work harder. They’re more responsible. They’re more loyal. They’re more healthy. They’re able to love more (both soft + tough love). They’re more fun to be around. They’re more creative. And, yes, more spiritual. A lack of spirituality leads to violence and aggression and depression and division and war.

      How do we make our people more happy? Ultimately, through culture (religion, the arts and education).

  54. dennis perrin
    Posted March 17, 2018 at 1:58 am | Permalink

    Strangely silent on the “poisoning”. To go along with Mrs May would obviously pre-judge a situation with no evidence except possible state planning. Should we follow the leader out of loyalty or should we do some independent thinking?

  55. Ron Olden
    Posted March 17, 2018 at 4:12 am | Permalink

    Where a tax is levied on transactions, (which in reality, nearly all taxes are, one way or another), they invariably raise more money when rate is lowered.

    It’s only when the rate gets too low that revenue starts diminishing again. As John Redwood observes, this optimum rate is probably lower than we think.

    And on top of that, you have to add in the extra revenues that lower tax rates raise, owing, to the additional transaction activity.

    I am 100% certain that if Inheritance Tax were cut to the same rates as CGT, it would raise more money that it does now.

    We do however need some other serious tax reforms, otherwise the ‘gig economy’ will shrink the tax base relentlessly. We should cut Corporation Tax to 10%, scrap employers NIC, and Business Rates, and have businesses pay a flat rate of input tax (say 7%) on all their inputs, rather than pay these taxes.

    The simplest way of achieving this, however, would be to make the necessary proportion of the VAT businesses pay on their inputs, non reclaimable. It would also reduce the large amount of tax that’s lost through things like import, and ‘carousel’ VAT fraud.

  56. Peter Martin
    Posted March 17, 2018 at 11:21 am | Permalink

    “If you want to follow a higher tax revenue strategy on this scale successfully it is important to fix rates that maximise the revenue from each tax source”

    I’d say it was a mistake to look at each tax individually. If we maximise the revenue from income tax, for example, everyone will probably have less to spend meaning that the revenue from VAT will fall. Similarly if we maximise the revenue from Capital gains tax it could just mean that clever accountants over the country are moving towards CGT and away from declaring income in other more highly taxed ways.

    What really matters is the total tax take, which is also a function of what the Govt spends into the economy in the first place.

  57. Dozey
    Posted March 18, 2018 at 12:36 pm | Permalink

    A small but welcome contribution to the exchequer would come from unravelling one of the most foolish pieces of legislation in my lifetime, and the Tories may gain some kudos for admitting they made a mistake. I refer to Mr Osborne’s Inheritance Tax Relief singling out wealthy property owners who leave their houses to offspring. Complicated in execution, unfair, illogical – everything a tax innovation should not be. Just get rid of it.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

  • John’s Books

  • Email Alerts

    You can sign up to receive John's blog posts by e-mail by entering your e-mail address in the box below.

    Enter your email address:

    Delivered by FeedBurner

    The e-mail service is powered by Google's FeedBurner service. Your information is not shared.

  • Map of Visitors

    Locations of visitors to this page