The run up to the budget

It will soon be time for me to put in my suggestions for the July 8th budget. I would therefore welcome your comments on what you would like to see.

So far I have said I want to see progress on raising the threshold for Income Tax and raising the threshold for the 40% rate of tax, as promised in the Conservative Manifesto.

I also want to see the rich contribute more. To bring this about I suggest bringing Gordon Brown’s rate of CGT and top rate of Income tax back in, as I think he had got it right in working out optimum rates for maximising tax from the rich. At 18% he collected much more CGT than we are currently doing at 28%. Many rich people now simply defer taking taxable profits or find offsetting losses to take with the rate at 28%. The rate of 45% on income is bringing in substantially more tax revenue than 50% did, and I would expect 40% to bring in more.

Mr Osborne also needs to explain his timetable and approach to Inheritance Tax. The detail on the extra tax free amount promised against a family home will require careful drafting and thought.

As all political parties now understand they need to speak up for strivers and hard workers as well as for the dispossessed and down, they need to grasp that means not just those on modest incomes but also those higher up the income scale. There is less jealousy around than political commentators imagine. Every higher earner has parents or children, brothers and sisters, friends and other relatives who earn less but who not resent their success. Someone may be earning £30,000 a year today, but still think it right to raise the 40% threshold to £50,000, as they hope to be earning that in the future or thin k someone they know or are related to might.


  1. petermartin2001
    May 24, 2015

    To benefit both business and workers in those businesses, there needs to be enough aggregate demand to pay for the products on offer. Anyone setting up a business installing new kitchens or bathrooms, for example, will need to know they have enough paying customers who are able to afford those kitchens and bathrooms. It’s not enough to know that there are lots of people out there who would like to have a new kitchen or bathroom.

    Previous governments, both Labour and Conservative, have managed to temporarily create the ability to pay by for those kitchens etc by lowering interest rates and encouraging the private sector to create credit. That works for a little while but its all on borrowed money. Unlike Government which issues money, rather than borrow it, that money has to be repaid. Those private sector debts are at least twice as high as public sector ‘debt’. (Four time if you count the financial sector too).

    The private sector can’t create its own net financial assets but it can create its own debt. Anyone who doubts the validity of that comment might like to explain where else they may have come from! Those debts are depressing the economy and forcing Govts to keep interest rates low. The PS can create real assets, like those kitchens etc, but it needs the help of govt to create the right conditions. It needs govt to press the fiscal accelerator. Govt can no longer rely on the Central Bank to do the job it should be doing by lowering interest rates any further.

    Just one more comment:

    “At 18% he collected much more CGT than we are currently doing at 28%”

    Yes that’s possible. That’s Laffer’s theory. Laffer’s theory works with one tax. But does it work with all taxes combined? That’s the real test. How much tax shifting, in other words, went on between income tax, corporation tax, and CGT to obtain the lowest rates?

    1. Jerry
      May 25, 2015

      @petermartin2001; Are you trying to suggest that VAT on home improvements and products should be reduced to 5%?……

    2. Edward2
      May 25, 2015

      You say the private sector cannot create its own financial assets it can (only)create its own debt etc
      Odd how most companies I know have no debts, cash in the bank and have been profitable for many years.

      1. petermartin2001
        May 25, 2015

        You are right. The non-government sector has net financial assets overall. It can only have net financial assets because the governments sector assumes the position of holding net financial liabilities. If you receive a payment from government, for any reason, say £99.99, your financial assets rise by that amount, to the exact penny. Equally government liabilities rise too by the same amount. To the exact penny.

        So when economists talk about about private sector debt they mean debts within the private sector. Simply, if large numbers of households and businesses are struggling under a burden of debt and can’t spend, at the same time as other households and businesses are hoarding cash and won’t spend, the economy is going to be depressed. That’s the situation we are in right now.

        1. Edward2
          May 26, 2015

          As usual you assume an inevitable trading relationship between all the private sector and the State.
          Most private sector businesses have no commercial contact with the State trading happily among themselves.
          Creating wealth and profits totally unconnected to debts the State may develop.

          Private sector debt is statistically overstated by the almost cashless modern society.
          On any one day there may be billions of this debt but over a longer timescale all this debt gets paid off.
          eg over half of credit card accounts are paid off in full on the due date.
          Most cars are now leased or on monthly contract hire.
          This is another way debt is said to have risen but it is just a tax efficient method of buying a car often subsidised by the car companies themselves.
          I have “debts” on my credit cards and on my monthly car lease but I clear my cards each month in full and have enough savings invested to clear this car lease any time I like.
          Yet according to you I am in debt.

          1. petermartin2001
            May 28, 2015

            I’m saying that the non-government sector is not in net debt overall. If the government sector has net liability of P pounds and N pence, the non-government sector will have a net surplus of P pounds and N pence too.

            But within the non-government sector there will be those who hold net financial assets and those who hold net financial debts. When economists talk about the debt levels of the private sector they mean just that. If you owe Barclay’s bank on your credit card they have a net asset of that debt. Unless you default. So debts and assets held entirely within the non-government sector sum to zero.

          2. Edward2
            May 28, 2015

            I think your economic theory is based more on a tendency towards balance rather than your assertion that it must always be in balance.
            Your equation is neat and mathematically difficult to argue with as a piece of algebra but that is all it is.
            A theory like dozens of others economists hold dear.

    3. Denis Cooper
      May 25, 2015

      “Those private sector debts are at least twice as high as public sector ‘debt’.”

      Firstly there is no need or justification for the inverted commas around the word “debt” in its second occurrence in that sentence. Just because a debt is incurred by the government on behalf of the whole population that does not change the fact that it is a debt and it will have to be repaid.

      Secondly there is a difference between the private sector debt incurred for the purchase of a new kitchen and the private sector debt incurred for the purchase of the house wherein that kitchen will be installed. And there is also a difference between debt which is long term, and short term debt such as the balance on a credit card which will normally be cleared within a few weeks. So I would like you to clarify how much of the private sector debt is both long term and unmatched by assets such as property, if you would be so kind.

      1. petermartin2001
        May 25, 2015


        To stay within JR’s guidelines, I won’t provide a link but Prof Steve Keen runs a website ‘debt deflation’ which has the theme of the problem of private sector debt within the economy which, unlike government debt, tends to be overlooked. I’ve explained why it’s a problem as best I can in simple terms in just a couple of paragraphs in my above reply to Edward2.

        You state that Government debts will have to be repaid. There is no factual evidence for thinking this to be the case. They have always increased, with the exception of just temporary blips in the opposite direction. Simply sovereign currency issuing Governments cannot repay in the normal sense. The £ is an IOU of government. If I borrow a bag of sugar from you I can give you an IOU. The parallel is govt cash. I use the sugar and need some more. You don’t want to take another IOU. So, I say OK I’ll give you an IOU this time for two bags of sugar but you’ll have to wait five years to collect. The parallel is a govt bond.

        That’s all govt ‘borrowing’ is. They can’t repay in the sense that I could repay you by giving you bags of sugar. The govt doesn’t have any sugar and can’t create the sugar. Its debts to us are the financial assets we own. It can only repay us by taking away those financial assets. I don’t have that many financial assets myself, but I for one, am happy for them not to be repaid on that basis!

        1. Denis Cooper
          May 26, 2015

          Even if the Bank of England did not object to the Treasury failing to made good on the promises it made when it sold gilts to borrow money the private investors holding most of those gilts certainly would object. And in fact the Bank would also have to object, given that a failure of the Treasury to repay on its gilts would lead to the Bank going bust in the normal understanding of that term.

          1. petermartin2001
            May 26, 2015

            Why would that ever happen? Normally the Treasury has enough cash from the sale of new gilts to ‘investors’ to cover the costs of those wishing redeeming old ones. And, if times are abnormal, the BoE, which can create as much cash as it likes, puts its hand up to be an investor too!

            The economics profession is slowly changing its thinking to recognise that both cash and bonds are both just different forms of govt IOU. The issuing of one isn’t necessarily any more inflationary than the other.

          2. Edward2
            May 27, 2015

            How well would the sale of new gilts go if your relaxed attitude towards repayment was well known, Peter?

          3. petermartin2001
            May 28, 2015


            It’s not a question of “would the sale of new gilts go” it’s a question of how they do go. For all the talk about hyperinflation if the US and UK govts went ahead with QE, and hence the potential worthlessness of US Treasuries and UK gilts, that just has not happened.

            There’s been no shortage of buyers even though the yields have been ultra low. That’s because buyers are looking for somewhere safe to park their money. There’s nothing safer.

            Those buyers don’t need me to point out how it all works and that, especially the USA, seems to have a relaxed attitude. The Chinese, German and Swiss governments , indeed all the big exporters, know the UK can never run out of pounds and the USA can never run out of dollars. They will be somewhat concerned by the number of IOUs they are accumulating though and what they are ever going to do with them. They must know that its doesn’t pay to always swap 4 pigs for 3 sheep and take an IOU to make up the difference. But their pig producers (so to speak) have a lot of internal political clout.

            That’s the way world trade seems to function. It doesn’t tend to equilibrium as we might expect. Net exporters like to net export. Net importers like to net import.

          4. petermartin2001
            May 28, 2015

            I might just add that an imbalance in trade between two countries A and B causes the liabilities (the National Debt if you like) of both A and B govts to increase too..

            Country A (net importer) runs a deficit over time of say N crowns. It issues bonds to the value of N crowns.

            Country B (net exporter) runs a surplus.It buys up those bonds and stores them. It creates M couronnes (its currency) and pays its internal exporters with them. So, its liability increases, too, in its own currency.

            True, B has N crowns worth of bonds , in storage, but they are useless to it. It can’t spend them, when they mature, and still be a net exporter at the same time.

          5. Edward2
            May 28, 2015

            There is nothing safer you say
            My point entirely Peter.
            The success of the offer for sale of government gilts to investors is based on those investors continuing confidence in the issuing governments and their attitude towards honouring that loan.

  2. Ethen Edwards
    May 24, 2015

    I hope that you will suggest to Mr. Osborne that if he feels that he can raise the IHT limit, then he should simply do so. or not do it, if the country’s finances cannot support it (which, in fact, at present they cannot). If Mr. Osborne feels that he must make a change, it would be preferable not to make IHT more complicated by introducing another exempt category, the “family home”. But if he must do that, he should refrain from introducing a further complication by limiting the value of the family home that is exempt, and then add yet another complication by clawing back the tax that is lost from IHT on homes of higher value.

    A similar complication exists in income tax. Why worry about the 45% rate? Why not first address the 60% rate on incomes above £100,000, when the personal allowance is clawed back? It may not affect many people, but by definition, more than those affected by the 45% rate.

  3. Jerry
    May 24, 2015

    “As all political parties now understand they need to speak up for strivers and hard workers as well as for the dispossessed and down”

    How about this to help the strivers (sole-traders and SMEs etc.), bring back that much lower Light Goods taxation class for use on vans and pick-up trucks under 3.5t that are insured for business use. By doing so it will correct a wrong done some 35 years ago, that was an effective tax hike for hard working people.

    Also the entire system of HGV VED needs to be reconsidered, such excessive charges are nothing but an end-user tax on every single consumer be they millionaires, workers or the “dispossessed and down”…

  4. David Williams
    May 24, 2015

    There are currently two disincentives to strive.
    Loss of child allowances at £50,000. This equates to a high marginal tax rate.
    Loss of personal allowance at £100,000. This equates to a 60% marginal tax rate.

    1. Lifelogic
      May 24, 2015

      Indeed and both introduced by Osborne, and all so that the state sector could continue to waste endless money on HS2, pointless wars, aircraft carriers with no aircraft, the EU, greencrap energy and endless other pointless drivel.

  5. Iain Gill
    May 24, 2015

    1. Work visa holders to pay full national insurance. Currently many work visa holders are exempt from both employers and employees national insurance for the first 12 months in the country, this should stop. It’s a big manipulation of the system and in many places they get buddied up in pairs, one does 12 months and goes home and swaps with his buddy, and between the two of them they never have to pay national insurance, a subsidy to permanently undercut a Brit in the workforce.
    2 Equality of “expenses” tax rules between Brits working far away from home within the UK, and foreign work visa holders in the UK away from their home country. Currently work visa holders can be paid significantly more in expenses (and tax free) than Brits away from home can, they can claim for many more things than a Brit away from home can. Change this so that the playing field is levelled, and Brits can easily claim for every single thing a foreign worker in this country can. Make it easy for Brits on PAYE to do this.
    3 Tax allowance to be pro rata with the amount of that tax year your work visa allows you to work in this country, or the amount of the tax year you were in the country. Currently folk on a 12 months work visa which starts in say October get to work 12 months but get 2 years tax allowance. Stop this manipulation which helps undercut Brits in the workplace.
    4 Housing subsidy to be tied to need and not historic allocation of social housing. Stop wealthy people getting heavily subsidised social housing, if they want to live there they can pay market rents. But at the same time give needy people who cannot get a social housing allocation access to the extra subsidy to take elsewhere in the market.
    5 Break up the sink estates by empowering the tenants to take their housing subsidy anywhere they want. Stop giving subsidy to social housing (including through planning manipulations) and give it instead to needy people, and charge market rents for social housing. This one change would allow people stuck in an island of housing built to support a long closed large employer move with their own free will to where the modern jobs market is.
    6 Disregard all savings below say a million quid in all benefits claims. Encourage a proper savings culture, put incentives back in the system to save, stop the obvious widespread hiding of savings going on (and make it fairer for the honest ones). If you really cannot afford this then disregard all savings up to the value of the average house price for all tenants! Stop another manipulation of the system that encourages folk to keep their wealth in houses because it is exempt from benefits cuts when held in this way, when compared to simple cash in the bank or investments.
    7 Stop state manipulation of house prices. Stop help to buy. And so much more.
    8 Increase price of work visas significantly.
    9 The rules re subsidy of buses to school need urgent fixing. Currently many councils are only funding buses to the nearest school as the crow flies, when often that school was not even on the list of schools you were “supposed” to be able to choose (the choice being a sham as many people are kept out of schools by religious nonsense and so have no choice in practise), or indeed you were allocated. And it’s a cliff face rule, full subsidy to that one closest school, and none to any other school. Stop all this nonsense. You need to make parental choice of schools real, and allow them to keep the same value of bus contribution whatever school the children end up in. For parents with multiple children especially this state manipulation of the system is completely out of hand. Remember cost of annual bus to school can be 800 quid a year per child, this is a big proportion of budget for many people.

  6. alan jutson
    May 24, 2015

    Raise the personal tax allowance to the minimum wage level for 40 hours a week work.

    Increase inheritance tax allowance to £1,000,000 each, and forget about complicated schemes to include primary homes.

    Reduce Capital gains tax to 25% but Introduce taper relief so tax is zero after 10 years.

    Increase the 40% tax allowance band to £50,000

    Cap child allowance to a single child allowance per person for everyone, to start in 9
    months time.

    Revise Housing Benefit rates downwards, and also make it so that it is paid directly to the landlord.

    Reduce the benefit cap to £20,000 which if it is to be tax free is still more than the average wage, Or alternatively start taxing Benefits so that all people are in, and comply and contribute under the tax system.

    Right to buy, Scrap the silly and costly Housing Association sell off.

    Scrap all schemes which subsidise house purchase, unless you are going to re introduce MIRAS for everyone with a mortgage cap of £250,000.

    Scrap HS2 and spend the money on improving the roads.

    Scrap the complicated road tax system and put 5 pence per litre on fuel.

    Scrap the £5,000 electric car allowance.

    Scrap road/bridge/tunnel tolls, to free up movement of traffic.

    Free parking for up to 4 hours in all hospital car parks.

    Thats enough before breakfast, but if you want one more, free nursing home care for all, but at a cost of your personal weekly State pension payments, for those who are retired.

    1. stred
      May 24, 2015

      A.J. If only someone in the Treasury would take notice of your list. Re CGT indexation, even the highly taxed French have a cut off point for long term assets. After 20 years we are paying 28% on a 100% unreal gain.

      1. Lifelogic
        May 25, 2015

        Exactly people usually do not mind paying a fair share of profits actually made & realised, but these are not real gains at all, it is just government confiscation of people’s assets.

        As is the 40% IHT and the absurdly high 12% stamp duty.

    2. Jerry
      May 25, 2015

      @alan jutson; “Cap child allowance to a single child allowance per person for everyone, to start in 9 months time.”

      I take it that you agreed with China’s single child policy?! Also please do find out what the whys and wherefores of child benefits were originally, withdrawing it can actually be classed as a tax hike.

      “Revise Housing Benefit rates downwards, and also make it so that it is paid directly to the landlord.”

      Laudable, but I suspect that you are not actually, in effect, suggesting a form of rent control, revising Housing Benefit rates downwards further will likely see either an increase in homelessness, over crowded accommodation, or illegal sub-lettings.

      “Or alternatively start taxing Benefits”

      Err, if you are talking about JSA type benefits then they have been “taxable” (become a part of your personal tax allowance, should you start work) since some time back in the 1980s!

      “Free parking for up to 4 hours in all hospital car parks.”

      Hospitals should have some system were parking is free to those receiving treatment and their spouse or other nominated people, 4 hours might hardly see a relative into the operating theatre if they are further down on that days treatment list (and there might be very good medical reasons for that, nothing to do with NHS efficiency) even without unforeseen complications and/or emergencies. If the fourth hours is up what should a spouse do, abandon their other half, what if they actually need to stay because the treatment is “day surgery” and thus need to take the person home after, for some the option to go home and come back might not be available for what ever reason.

      1. alan jutson
        May 26, 2015

        Hi jerry

        No not a single child policy, as a couple can have two with a State allowance , you can of course have more, but pay for them yourself.

        The idea of just one child allowance is to stop single people having two each at the States expense.

        If a single mother has two then she takes the fathers allowance for his so he does not have any left.

        Housing benefit needs to be reformed, simple.

        It needs to be paid to the landlord direct as it helps to avoid fraud, recent report suggests cases of hundreds of new european citizens, (boat people) having been given Italian papers arriving in the UK for a single job interview (looking for work) getting a National Insurance number and then claiming housing benefit.
        Reported that over 200 of these people gained housing benefit for the same address, for a year, but only stayed in the UK for one day.

        Pensions are taxed, so are those on JSA, but a host of other Benefits are not including the heating allowance.

        Free parking for 4 hours to save people parking in hospital car parks all day when at work.

        1. Jerry
          May 26, 2015

          @alan jutson; “Free parking for 4 hours to save people parking in hospital car parks all day when at work.”

          So you expect, often, already poorly paid people to take a pay cut in effect as they are expected to pay for at least 4 hours parking?…

          Parking at hospitals should ideal be free, period, any restrictions should be to prevent people who have valid reason to use the facilities from abusing them. After all no one chooses to be ion hospital whilst the staff would almost certainly prefer if there was no need for their professions.

    3. Edward2
      May 25, 2015

      Had you been Conservative leader, Alan, I think you would have received a much larger election majority with that list.

  7. Matt
    May 24, 2015

    I favour moving the tax burden from indirect to direct taxes as far as possible and the overall simplification of the tax system.
    There was talk a few years ago (I think from the chancellor) of rolling NI into income tax. It would be good to revisit this. It’s not clear why we need 2 essentially identical taxes with different rates and thresholds.
    I realise that the deficit needs to be brought under control through a combination of spending restraint and revenue increases, but direct taxes are clearer, more just and simpler.
    Over the long term, I would favour the elimination of VAT and as far as possible, other duties and taxes which show up at point of sale.
    I also think that council tax could be rolled into income tax as a local add-on rate.
    Direct taxes are in my view more open, more just, and reducing the number of taxes would reduce the number of administrative staff, both in the public and private sectors, required to administer tax matters.

    1. Bob
      May 24, 2015


      ” reduce the number of administrative staff, both in the public and private sectors, required to administer tax matters.”

      But then they might have to find something useful to do!

      1. Lifelogic
        May 25, 2015

        Surely they would be happier doing something productive rather than mainly destructive for a change?

    2. Jerry
      May 25, 2015

      @Matt; “There was talk a few years ago (I think from the chancellor) of rolling NI into income tax. It would be good to revisit this. It’s not clear why we need 2 essentially identical taxes with different rates and thresholds.”

      Yes, scrapping NI and increasing Income Tax to make up the shortfall will make it far easier to privatise both the NHS and (state) pensions in the future, after all average Pleb will soon forget that they are already paying for both via their taxes…

  8. Lifelogic
    May 24, 2015

    It was 2007 when Osborne made his pledge to increase IHT thresholds to £1M for each person. Now about eight years later we have a hugely watered down and restricted version suggested. Worse still paid for by further pension muggings. Yet you only suggest “Mr Osborne also needs to explain his timetable and approach to Inheritance Tax”.

    No, he should just stick to his promise and implement it now this budget. It would give a huge boost to the confidence and given so belated honesty in politics. It should be nearly £1.2M each now with inflation.

    Above all we need tax simplification tax compliance cost people and companies a fortune in dead money and time. Creating endless parasitic jobs in the state sector and the private sector. Tax rates are simply far too high even for maximum revenue raising.

    CGT need to be no more than 20% and after indexation against inflation.
    Income tax 20% + 40% top more than high enough.
    The IHT rate of 40% is also far too high personally I would just abolish IHT is it double taxation anyway and a tax on the prudent.
    Stamp due at 12% (or even more in some cases) is hugely damaging too.
    Something that says the UK welcome the rich to live in the UK be they nondom or British and will not charge them X million a year for the privilege and rob them of 40% when they die. Also further force them to pay endless tax planner.

    He should also abolish his “Mugabe” GAAR regime. Companies need certainty and to know their taxes in advance not have HMRC deciding on them randomly after the event.

    1. Lifelogic
      May 24, 2015

      Of course to do this they need to stop wasting so much money on endless insanities like greencrap, HS2, quack medicine and vanity treatment in the NHS and endless other damaging drivel and pointless parasitic jobs.

      Above all he should reverse his continued pension muggings. People in the private wealth creating sector deserve good pension too (not just MPs and bureaucrats). Restore the original caps, say circa £1.7M each now and give full tax relief. In fact it is mainly tax deferral anyway the government still get the tax when the pension is paid.

      Also give some tax relief or vouchers to encourage people to use private education and private medicine to relieve pressure on the state provision and thus encourage more private provision.

      Reduce what the state does hugely it will benefit everyone.

    2. Lifelogic
      May 24, 2015

      More vacuous waffle from Cameron in the Telegraph today:-

      The two-speed society stops right here: this is one nation.

      Alas Cameron’s vision seems to be to ignore the real issues and full steam ahead for no nation.

      The real issues are the EU, UK democracy, selective immigration, a fair deal for the English, fewer regulations, cheaper energy, smaller government, improved productively, simpler and far lower taxes.

      1. Lifelogic
        May 24, 2015

        Sorry the Sunday Times!

  9. Richard1
    May 24, 2015

    In general it would be best if Mr Osborne’s direction of travel was towards a much simpler, flatter tax system. Unfortunately he does seem to have a rather Brownite tendancy to tinker. I suggest he brings back Nigel Lawson’s excellent practice of abolishing a tax each budget. It’s a good discipline. I certainly agree with you that both CGT at 28% and income tax at a marginal 47% are revenue losers. CGT should go back to 18% where Labour had it, and income tax at the tape rate to a max of 42% inches NI. It would be best to get these moves in early in the Parliament, it will be more difficult later with all the bleating about ‘tax cuts for millionaires’. But it’s clearly the right thing to do based on UK and international experience.

  10. bluedog
    May 24, 2015

    ‘The detail on the extra tax free amount promised against a family home will require careful drafting and thought. ‘ Incredibly simple, just take the whole edifice off the statute book.

    Anyway, why is IHT charged at 40% when CGT is charged at 28%? If the British government needs to tax the effects of its own deliberately created inflation, it could at least make a nod in the general direction of consistency.

  11. Brian Tomkinson
    May 24, 2015

    I look forward to seeing how Osborne will cut £12bn from the welfare budget and £13bn from other budgets by simply saving £1 in every £100 spent as your leaders told us ad nauseam in the election. Whenever I mentioned it to you here you seemed to have a deaf ear to their utterances.

    Reply Not so . I told you what I think the figures are. This is not Mr Osborne’s site. I suggest you ask him. As I explained the Red Book shows the government planning to spend 1000 pounds per person per year more by 2020 than last year

    1. Denis Cooper
      May 25, 2015

      I suppose it would be not just a single 1% saving but 1% shaved off each year for a period of five years, 5% in total or about £35 billion of present spending.

  12. oldtimer
    May 24, 2015

    The income tax regime needs to be simplified and modified to improve incentives to earn. My suggestions are to settle on two primary rates of tax at 20% and 40%, and to raise the thresholds as you suggest. Past evidence shows that this will raise the income tax take – something mostly absent in the the last government`s efforts and the pricipal reason the government failed to achieve its deficit reduction target.

    I would also set CGT at 20%. The present unindexed rate of 28% is iniquitous. I liked the UKIP manifesto proposal that IHT should be abolished. The Conservatives should take this opportunity to raise the threshold to at least £500 per person (£! million would be more appropriate), with the transferable allowance between couples, and set the rate at 20%. The current 40% rate is an exhorbitant rate of tax on inflationary gains and a huge disincentive to save and invest. Fiddling with the rules about the property element is a typical of the waste of time and added complexity that disfigures the current UK tax regime. We need greater simplicity not greater complexity.

    1. oldtimer
      May 24, 2015

      £! million should read £1 million! Some will think the exclamation mark an appropriate description of this idea.

  13. Mike Stallard
    May 24, 2015

    Let’s just take a look at the alternatives offered to the bright young man shall we?
    My son lives in Singapore with a wife and one toddler son. He opened his annual tax letter and found to his surprise that he had received a demand for just 15%. Of course, there is a swinging purchase tax and the idea of buying a car is well beyond even the richest. But then there is a working and clean and efficient public transport system.
    In Dubai, another place where English people live, there is pretty well no taxation at all as far as I can see. My son turned down a well-paid offer to work in Australia when he discovered the tax would be 50%.
    So, get busy Mr Redwood!

    1. Lifelogic
      May 25, 2015

      Indeed 20% income tax, 20% inflation indexed gains and 20% sales tax should be more than enough to run an efficient government. Especially as the GDP would be so very much higher with these lower taxes anyway.

  14. agricola
    May 24, 2015

    I have a basic belief that lower taxes are a good thing. First they should lead to lower government interference in our lives. Apart from government being incompetent at spending our money wisely it would also hand back spending decisions to individuals and create greater self sufficiency. This reduction can be achieved for the good across the whole spectrum of tax taking, so let’s see what the real attitude of this newly elected conservative government actually is.

    One aspect of government spending that I have been highly suspicious of for a long time is overseas aid. First I would like to see a detailed annual audit published. If you only half believe the newspaper stories appearing this weekend it has become big business for a small number of largely UK companies to make large profits and salaries for their executives with little benefit actually reaching the World’s poor. Cameron might be sincere in his desire to help the impoverished, but on his watch it is being exploited to a very large degree.

    It is I believe mirrored by charities in the private sector who must be spending vast sums on TV advertising, telling us about poor little Joanna who has to walk ten miles a day to get polluted water, so cough up gullible public and we will change all that. I would like to see more emphasis on Joanna’s government being shamed into providing village wells themselves. They have had their sovereignty for at least fifty years and seemingly cannot even provide clean water. Then we need to look at the accounts of these so called charities to see just where all the contributions from our generous public are going.

    Finally in terms of government policy on finance, I wish to see a very strong late payment law introduced to ensure that small businesses do not have to wait for more than thirty days to get invoices paid. Big business is in the habit of using small business as a banking loan system. It must be a very tough law that excludes big business from imposing late payment contracts. If government proposes this in it’s budget, stand by for a lot of lobbying from the CBI to water it down. How will government react, watch this space.

  15. PeterA5145
    May 24, 2015

    He should also remove the absurd “allowance restriction” which leads to people in a band of income paying a marginal tax rate of 62%.

    The manifesto proposal on inheritance tax – limiting the rise to family homes left to children – is complex and restrictive, and I’d prefer to see just a general rise in the threshold.

    1. Lifelogic
      May 24, 2015

      Indeed and worse it is paid for by further pension muggings and restrictions anyway.

  16. JoeSoap
    May 24, 2015

    Well, all good ideas, and good starting places.

    The pension system is a mess, meanwhile.

    We have workers in their 20s on minimum wage who need all the money they can get now, still living with parents, but who are (as good as) forced to contribute to this NEST scheme. This might never help them, and if it does it will be in 50 years’ time.

    Meanwhile workers at the other end of their working life, with higher salaries, are capped at £40’000 a year contribution, which will net them about £2’000 a year in retirement.

    1. Lifelogic
      May 24, 2015

      Exactly total insanity for the government as usual.

  17. Bert Young
    May 24, 2015

    Those who create wealth and employment must be encouraged to go on doing so . The anomalies that do occur in the creation of wealth can , and should – like tax evasion , be stamped out . We do not want to encourage a “benefits” society – getting and having a paid job is an honourable and worthwhile thing ; layabouts and those who come here to enjoy benefits have to be discouraged , certainly not those who maintain and expand the economy.

    The coming budget should be a signal to the world that Britain is a good place to do business and our shores are open to enterprise of all sorts . We do not wish to emulate the mistakes that Hollande made sending the French economy backwards ; we need to admire and encourage “wealth” in all its forms . Those of considerable wealth who do reside here but whose wealth was not and is not currently related to here , ought – and should be exposed to our taxation system ( Russian oligarchs take note ).

    The Labour Party has just learnt to its cost that socialism does not wash in this country ; we want a fair society where effort and its results are rewarded ; the system of taxation is the only means by which this is communicated .

    May 24, 2015

    One hopes I do not press numerous wrong keys on my keyboard and inadvertently send this comment to a very long-winded newspaper but it does seem true the Bank of England for the past couple of years has been continually wrong in its predictions of the rate of interest rates it would need to apply and the level of inflation that would be reached at any one time.

    Negative inflation as opposed to the term De-flation probably was not a BoE invention but by this nor any other name it was not predicted. Now the prediction is that we should enjoy a relative period of milk and honey which “British” people should enjoy and the 2% inflation target, continually missed, should be expected by and by.

    To the point, the July 8th Budget should not be based on the BoE’s oil price predictions nor its predictions on likely interest and inflation figures. Equally the government’s own OBR predictions of oil prices and likely fuel/heating costs should be discarded. ( they got it wrong ).

    So where should Mr Osborne find useful figures and advice on which to base his budget?
    I feel he should base the Budget on the fast decreasing ability of EU nations to provide their own intelligensia and medical and other skilled workers for the UK. They are running out of those assets.Therefore the UK is running out of such assets in unpredictable proportions.

    A massive slowdown in UK economic growth appears to me, at least, inevitable. There is a glut of commodities across the board including wheat, oil, iron ore with worldwide demand not increasing in lockstep.

    The Budget might be a good time to get some cross-party consensus on how to explain to the British people, jointly, what must be done with the NHS as doctors and nurses do not grow on trees and international supply of those particular “commodities” is in downward spiral.

  19. Kenneth
    May 24, 2015

    John, I think your ideas are fine.

    However, my aspiration is for the total taken from us by the state to be no more than 20%, whether this is from direct or indirect taxation but I know that this is politically impossible in this Parliament.

    I think the state needs to aspire to prune its activities back so that it is mainly providing good internal and external security, a national health service and facilitating network services such as utilities and transport.

    I think it should aspire to withdraw from most social provision as state intervention in this area has, in my opinion, made us a less caring society. However it should look after the destitute and disabled where this help is needed and wanted.

    It should also convert the BBC licence fee to a subscription (phased over a few years). However this last point is a major challenge as it will make temporarily make the government very unpopular.

    1. Jerry
      May 25, 2015

      @Kenneth; “It should also convert the BBC licence fee to a subscription”

      Someone else who doesn’t understand what PBS is… 🙁

      1. Edward2
        May 25, 2015

        You have already told us Jerry several times, it is programmes we dont want to watch but are told by people who think they know what is good for us that we must watch.
        Do you see yourself in the role of PSB commissar?

        1. APL
          May 25, 2015

          Edward2: “Do you see yourself in the role of PSB commissar?”

          A rhetorical question no doubt, Edward?

          1. Edward2
            May 26, 2015


        2. Jerry
          May 26, 2015

          @Edward2; How do you know that you don’t want to watch such PSB programmes if you never get a chance of doing so! Your argument is like that of a young child telling his mother that he doesn’t like Green Beans even though this is the first time the child has been given them, might even be the first time he has ever seen them.

          Tell me, is there never anything on a subscription channel that you don’t want to watch, if there is do you demand a refund?

          1. Edward2
            May 27, 2015

            I haven’t a clue what you are on about Jerry.

          2. Jerry
            May 27, 2015

            @Edward2; More likely you choose not to understand. Oh well, what ever. 🙁

  20. JJE
    May 24, 2015

    Please fair treatment for final salary and defined contribution pensions when it comes to the lifetime allowance. People with final salary schemes can have twice the income before triggering the lifetime allowance.
    I wonder which type of pension civil servants and MPs get?

  21. Pauline Jorgensen
    May 24, 2015

    How about increasing the pensions LTA and AA to encourage people to be self sufficient and not depend on the state in retirement – the current level of AA hits those in final salary pension funds particularly hard and of course when the pension is finally in payment the government recoups its money through income tax.

  22. DaveM
    May 24, 2015

    I’d like to go to the next stage beyond raising the money. I want to see the defence budget ringfenced at 2.5% of GDP. More money for policing and transport infrastructure. More money for real apprenticeships and govt assistance to encourage firms such as JCB to establish technical academies. And a comprehensive rethink on university fees for English students.

  23. Pauline Jorgensen
    May 24, 2015

    The other thing I would like consideration of is something to help get working people out of the housing trap – I get a lot of postbag from people (usually single parents with children) who work and pay tax but who depend on housing benefit to bridge the gap to rented accommodation in our high cost area and find it difficult to find landlords willing to rent to HB claimants. I am not sure what the answer is but it needs some thought.

  24. William Long
    May 24, 2015

    I should like to see a real commitment to simplifying the personal taxation system. Osborne has contributed nothing to this; instead he has shown himself a true heir to Brown with ever more stealth taxation. His proposed reduction in ITH for houses is just such a point: why not just reduce the rate/raise the threshold for everyone? I am quite sure major simplification of this tax coupled with lower rates would result in just the increases in revenue that you are positting for CGT and Income tax. For the latter Osborne should remove the effective 60% rate for incomes above £100k by restoring the personal allowance. His lack of opposition to this when it happened and subsequently, shows clearly that he is not at heart a low tax Conservative.
    While the liberation of pension money has been much feted it must not be overlooked that it was expected to result in an increase in revenue. While at the point of paying into pensions,Osborne has done much damage to pension saving, reducing the lifetime allowance to a paltry figure and makeing more, and unecessary complication with the linkage to the IHT reduction. Some real joined up thinking is needed on the pension front, but I have no confidence we will get it. When I heard Osborne was to remain Chancellor my heart sank.

  25. Lifelogic
    May 24, 2015

    The more I read of Steve Hilton then the more I assume Cameron appointed him to make Cameron ‘s daft ideas seem relatively sensible in comparison. Yet another Oxford PPE man I note.

    Meanwhile on any questions we had (Cameron foolish choice for the BBC chair of trustees) Lord Patten saying that Ed Miliband was a decent intelligent man? What on earth is decent and/or intelligent about pushing policies that would make another complete mess of the UK economy? Also proposing to thieve of landlords to attempt to buy the votes of tenant?

    To add to the complete nonsense he went on to say he himself was a “dyed in the wool conservative Tory” year sure.

    He also said that we needed a credible centre left party. Well Cameron and Patten types clearly are of the centre left, but not alas very credible.

  26. behindthefrogs
    May 24, 2015

    I wold prefer to see a raising of the National Insurance thresholds to some of the proposed income tax changes. In particular I would like the lower threshold raised by £3k and the upper threshold by £5k. These are not so incompatible as at first might seem as above the upper threshold there is still a 2% rate.

    I would also like to see some further reductions in the contributions made by employers even if this has to be balanced by an increase in corporation tax. These changes effectively act as a tax on imports and a discount on exports thus raising the country’s competitiveness. It also increases the cash flow of employers by delaying the stage in the business cycle when the tax is paid. These changes could be targeted to increase employment on groups of people where unemployment is at the highest rate.

    There also needs to be a close look at whether the higher retirement age is being reflected in taxes like employees NICs and all benefits available to the retired.

  27. Bob
    May 24, 2015

    I hope that the Tories will concentrate their minds on how our money is spent and encourage people to take more responsibility for themselves.

    Here are some suggestions in no particular order:
    • Non means tested long term care for the elderly
    • Reverse the coalition’s defence spending cuts
    • TV Licence revenue to go into the general tax pot same as VED
    • TV Licence not applicable to anyone on state pension
    • Repeal Foreign Aid Law (it should have clear measurable objectives)
    • Slash welfare esp. housing benefit (it drives house prices and rents)
    • Abolish Child Benefit (anachronism – we do not have under-population)
    • Restore personal allowance to all taxpayers (don’t discriminate against success)
    • Abolish employers NI (job tax- wrong headed)
    • Replace Workplace Pensions with Personal Pensions (admin burden for small employers)
    • Abolish IHT (the little it raises can be offset by reducing wasteful spending)
    • SDLT 1% flat rate (get liquidity back into the property market)
    • Abolish “Help To Buy” and bring back MIRAS
    • Abolish road tolls – (motorist pay more than enough to provide adequate roads)

    1. Jerry
      May 25, 2015

      @Bob; “TV Licence revenue to go into the general tax pot same as VED”

      So you want a state controlled broadcast media then do you?! Or is this just going to be a tax on people watching broadcast TV, with no added benefits, then with the need to pay extra to actually watch anything, or perhaps you plan to subsidies private television/radio companies with tax payer money….

      “Slash welfare esp. housing benefit (it drives house prices and rents)”

      Err, no, profiteering in the private rental/purchase sectors does that whilst housing shortages allows it to happen, not the mere fact that some people claim HB.

      “Abolish Child Benefit (anachronism – we do not have under-population)”

      CB had nothing to do with under-population! It’s basic function was to take money (at source, via the tax system) from the wage earner and to give it directly to the mother via the Post Office Counter, thus by-passing the risk that the children(s) father would have no ‘house-keeping money’ left after calling upon the Public House or what ever on pay-day. Unfortunately this a function still required today in some instances.

      1. Bob
        May 25, 2015

        No Jerry. I don’t want a state controlled broadcast media.
        Just like VED a large proportion of the TVL could be diverted to reducing our national deficit.

        Of course HB drive rents. It creates demand for properties that the beneficiaries could otherwise not afford, which would mean they would have to venture away from the London hot-spots to find something within their budget, in the same way that working people do.

        Finally, CB is clearly an incentive to (mainly the uneducated and underachievers) to have kids. Do I need to remind you of the tragic Philpot case? I repeat, under-population is not our problem.

        1. Jerry
          May 25, 2015

          @Bob; Your reply was ill-informed nonsense as usual.

          Wrong on the TVL fee and thus PSB – you seriously want to tax the watching of TV? (what will companies like Sky will say to that!).

          Wrong on HB – stop trying to put the cart before the horse, the cost of private sector rents drive up HB costs, even more so if housing stocks are limited. If the state were to impose rant controls (and logically, the supply of housing as much social housing would become unprofitable to the private sector) then HB costs would merely follow inflation trends.

          Wrong on CB – if people are having kids to get ‘welfare’ it is to get access to a scarce housing I suspect, not a mere ~£21 pw for the first and ~£14 each for any further children, that most likely barley covers the basic cost of “bring up baby” these days!

          Reply I think many of us look forward to effective rant controls – perhaps you could lead the way on this.

    2. b
      May 25, 2015

      The overheads of the TV licence in terms of the collection costs monitoring of non-payers, court costs etc. are such that it should be abandoned. The required revenue should be collected by an increase in council tax. Government grants to councils should be reduced by extra council tax collected.

      We should similarly see the winter fuel allowance replaced by an increase in the old age pension during winter months.

      There are many licences that should be abandoned or combined. These result in in a huge red tape overhead for small businesses, shops in particular.
      On the more personal front there are other licences like the fishing rod licence that are hardly cost effective when one includes the cost of employing bailiffs to monitor them.

      There is a strong case for replacing vehicle tax by an increase in fuel duty.

      1. Jerry
        May 25, 2015

        @b; “The required revenue should be collected by an increase in council tax.”

        That would amount to a tax hike for those who survive without or have no need for as TV service.

        Apologies to John, I know we debated such details the other day. If the TVL is abandoned then I would prefer the UK to move towards a fully subscription TV service bar any fully, tightly regulated, PSB channels [1], funded via a surcharge on each subscription channels. All subscription channels should be available for subscription singly without needing to take a package deal (thus keeping the end-user surcharge to a minimum). The parliamentary television service should be FTA ideally under the responsibility of the Houses of Westminster authorities and devolved administrations or at least based upon C-SPAN in the USA broadcaster, there needs to be more than the one channel.

        [1] here I’m thinking of pre-school programming, a basic news service, plus such content that the subscription broadcasters can not or choose not to provide.

  28. Sam
    May 24, 2015

    With all the talk of aspiration surely abolishing IHT must be top of the list. This would put the uk in line with other countries such as Canada, Australia, New Zealand and India.

  29. Leslie Singleton
    May 24, 2015

    Take any and all burdens off employers and instead of benefits to workers pay employers for the unpaid work they are forced to do for the State. If it is decided that workers must have benefits and uplifts, fine, but I do not see what that has to do with employers. This means that the State alone should pay. I for one have never understood what pension provision has got to do with employers, though of course if the employer chooses to provide that or anything else that is up to him. This of course would require higher taxes but the resulting increase in number of employers with the associated employment of many more people would mitigate or nullify the extra tax. The Conservative Party begging employers to pay more is demeaning, indeed ridiculous.

  30. L Irving
    May 24, 2015

    In order to balance the economy, the Laws of the Land need to be adhered too, a full audit of accounts need to be done in every council and surcharges need to be brought back in order to control the spend.

    Is is important councils abide by the Charter’s set in place.

  31. Ads
    May 24, 2015

    Dear John,

    How about removing corporation tax (CT) for small to medium sized businesses. Tax receipts show in the period 2012-13 under 1% of the total liable to pay CT (~6,300 companies) had liabilities of greater than £500,000 accounting for over 62% of total CT revenue (taken by the government). However, companies with less than £10,000 in CT liabilities made up approx. 65% of the total number liable to pay CT, but only accounted for ~6% of the total CT revenue.

    The above figures suggest that the removal of the majority of companies from CT would have a small impact on the total tax take from CT (which is admittedly large overall). However, the benefits of being able to not worry that long-term investment in your company is going to cost you 20% (small business owners will know what I mean!) and, if possible, the reduction of the administration involved would more than compensate for this. In addition, the money saved would likely only be taxed elsewhere.

    Given the difficulty of getting larger, usually multinational companies, to act within what we might call the “spirit” of the CT law, perhaps it would be better to release small companies from this burden rather than trying to get the larger companies to pay up.

    As a footnote, if you feel that a great challenge to removing this tax would be the reduction in taxes paid when small business owners use their share options (i.e., pay themselves through dividends), you could always keep the tax on money leaving the company in this manner. Indeed, I believe historically, there was a difference in tax rate between money invested and money removed.

    1. JoeSoap
      May 24, 2015

      Yes indeed, it is no way to encourage SME growth when your Corporation Tax is charged on the profit which has gone into increased inventory, increased debtors less creditors, increased plant and equipment (less AIA)…. for those companies unwilling to borrow at silly rates and help prop up the banks, they have to have very good cash control and actually re-invest or lend hard-earned salary or dividends back just to pay Corporation Tax.

    2. behindthefrogs
      May 25, 2015

      There is a much stronger case for removing employers’ NICs for small and medium companies rather than corporation tax. as this helps to improve cash flow. It also has a positive effect on employment and imports and exports.

  32. DaveK
    May 24, 2015

    John, I agree with all your suggestions and do not in fact have any to add. I would however like to suggest that what I would like to see is better presentation. When Mr Osborne gives his long speech I imagine a vast section of the countries eyes rolling in their heads and then waiting for the soundbite info from the media. This is inevitably a “parade of the bleeding stumps” format from the likes of the BBC. To forestall this I would get some creative staff to provide for example a simple graph from independant sources of the last 10 years of Tax Rates and Tax Take and possibly even a simple end graphic of the totals. Then give this a punchy name UK Tax Graph (obviously I’m not creative) and ensure that this is referred to by the MSM. Then the promise should be to review the graph after say 2 years with a view to adjusting if necessary. I strongly believe this approach would go down well with the public who although have access to the internet prefer someone else to give them the information and that it applies to many more topics such as EU/Climate Change/Immigration etc.

  33. ian wragg
    May 24, 2015

    It would be good if housing benefit was reduced significantly. In work benefits frozen and child benefit for UK nationals only and 2 children only.
    He could also selloff the Blair Broadcasting Club and freeze all contributions to Europe.
    There is plenty of low hanging fruit to target and he should stop the relentless cuts to the armed forces.
    I see you are already back tracking on scrapping the hated HRA, this is of course as expected.

    1. Jerry
      May 25, 2015

      @ian wragg; “There is plenty of low hanging fruit to target”

      But it’s not the low hanging branches that are at risk of going through the hot-house roof and thus spoiling the entire crop…

  34. Bob
    May 24, 2015

    @Mr Redwood
    Why do guide dogs not receive any govt funding?

  35. Narrow Shoulders
    May 24, 2015

    Full transferable household tax allowance for those either married, in civil partnership or sharing the upbringing of children in the same house. This can be paid for by not further subsidising childcare.

    Return of universal child benefit which is after all a tax offset.

    Increase in the 40% threshold at last and those earning £100,000 or more (I am not one) should no longer lose the tax free allowance in a 60% marginal rate of tax between £100K and £120K

    Scrap tax credits and make the firms being subsidised by this payment payment pay proper wages.

    Phase out housing benefit (see above) it forces up the price of housing and encourages buy to let.

  36. formula57
    May 24, 2015

    The promised timid and meagre step in relation to IHT must be taken at this first opportunity. If only the Conservatives had had courage enough to propose a simple and long-overdue threshold increase, the ridiculous extra complexity in IHT law that must now be contemplated to provide for such an increase would not be necessary.

    Otherwise, surprising though it was, Mr Miliband’s attack on non-domiciled tax status had some validity and the Chancellor would do well to undertake like measures. A London tax accountant (for a top 4 firm) I spoke to ventured the view that of some one hundred client individuals enjoying non-domiciled status, less than three were what might be reasonably viewed as truly making their lives elsewhere than the UK.

  37. John
    May 24, 2015

    Could you please ask why Nicola Sturgeon’s cohorts are getting to decide where the paltry amount allocated to England is spent. After all, all of those Scottish MPs cannot decide where the vastly superior Scottish allocation is spent on devolved issues. Plus, this will be a UK budget; where is the budget for the English or are we beneath contempt and ignored at all costs.

  38. Richard Hobbs
    May 25, 2015

    Thinking of myself and my wife, how about justice for those of us expats who have paid our full NI Contributions and taxes but now find ourselves stuck with frozen State Pensions!!

  39. Nick
    May 25, 2015

    I support the previous comments on the principle of simplifying the overall tax system.

    National Insurance should be eliminated, with the burden being shifted to income tax. This may need to be phased in over several years, but the first step has already been taken with the removal of employer’s NI contributions for younger workers.

    As stated earlier on this thread, road tax should be transferred from ownership to fuel.

    As an aside, the TV licence fee should not be moved into general taxation.

    Finally, and possibly against my general principle of simplifying taxation, a married / civil partnered couple should have the option of being treated as a single entity for tax purposes. This would reduce the distortions caused by tapered rates for certain allowances.

  40. sm
    May 25, 2015

    1) Merge NI & PAYE. 2) Eliminate the BBC licence fee and privatize or close BBC. Tender & contract Public Service TV. 3) Reduce vat on essentials (small domestic user) or extend exemptions.

  41. William Gruff
    May 25, 2015

    Ask your constituents, not the world at large.

Comments are closed.