The government needs to lift the squeeze on the private sector partly by revising its tax strategy. It should introduce a 20% Capital Gains Tax rate instead of the 28% of the 2010 budget. This is likely to yield more revenue than the current higher rate.Treasury figures show CGT revenue falling in 2012-13 by £500 million when we have the first full year impact of the higher rate.
It should cut the Corporation Tax rate to 20%, to take the UK lower than most of the the western rival locations for inward investment. There will be some revenue loss for a the first two or three years, but thereafter there should be compensation from the additional jobs and profits located here to tax.
It should return Income Tax to the top rate of 40% imposed by the last Labour government for most of its term. This like the CGT change should increase revenues.
The government needs to tell the Revenue and Customs to stop hounding small and medium sized firms and entrepreneurs. There has been a big increase in reported fishing expeditions or enquiries into anyone who earns above average and has some business interests. Very often the enquiries are worrying and time consuming for the taxpayer, only to result in agreement that everything has been properly declared and accounted for.
To have a strong private sector led recovery the government has to impose fair taxes fairly. It needs to set competitive tax rates, at least vis a vis the higher tax advanced countries. That way the UK can keep more business here, and attract more business here. That way as well we can get some of the many serial entrepreneurs who are on strike back into creating businesses and jobs. There is a lot of successful entrepreneurial talent in this country sitting idle with cash to invest. They need positive signals that they are wanted and they will be allowed to keep a decent proportion of anything they make.
More people should be taken out of Income Tax altogether, to cut the tax and benefit merry go round on lower incomes. It is cheaper to let people keep more of what they earn, than to take it off them in tax and then give some of it back in credits and benefits. These tax changes taken together should mean the rich pay more the poor pay less.
I am glad Mr Clegg likes the John Lewis model of employee ownership and participation. It would be good if the government revisited policies, to promote everyone an owner. That will require more and better tax breaks for equity participation in the business you work for.