I learned pretty soon after Margaret Thatcher came to power in 1979 that Conservative budgets were things to be feared. Tax cuts for the rich paid for by paring public services back to the bone was the order of the day. I’ve never yet met a Tory budget that I liked. There were some mitigating factors during the coalition years, but we only managed to stop the cruellest of Tory policies. Some of the ones we let through, like the Bedroom Tax, should never have seen the light of day.
My expectations of Philip Hammond tomorrow are therefore pretty low. I’ve never found a Conservative Chancellor who has done much for the poorest people in our society. It’s not always out of pure spite. They just actually don’t get the realities of life if you are on a tight budget. That’ll be why they set up Universal Credit to pay monthly because they are used to monthly salaries and the month lasting until the end of their salary.
If I were Chancellor, the first thing I’d do would be to put back at least the money George Osborne took out of Universal Credit the minute the Lib Dems were out of the picture. That would let people keep more of their benefit while they are working – and would properly end the poverty trap.
I’d also reverse the particularly cruel cut to Employment and Support Allowance made in April 2017. New applicants who were placed in the Work Related Activity Group from that date were no longer able to claim any premiums. That is an effective cut of £30 per week. That’s a huge amount of money when you are ill and necessarily have higher expenses.
Overall, I’d have us all paying more tax, with the richest paying a lot more. I’d like to see us on a more Scandinavian model of higher taxation and better public services. That’s good for social cohesion and community and would help heal our very divided society. I wouldn’t mind putting much higher taxes on things that aren’t essentials – like booze, much though I love it – in order to finance better schools, hospitals, infrastructure, house-building and dealing with the challenges of ever-increasing AI.
So those, briefly, are my priorities for the Budget. What would you like to see?
* Caron Lindsay is Editor of Liberal Democrat Voice and blogs at Caron's Musings
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25 Comments
The ultimate heresy is suggesting a rise in income tax, which has the capacity to share the load fairly while offering a serious contribution to the volume of revenue required. So put me down as a heretic.
Another vote for restoring funding to the Universal Credit scheme – a good idea in principle that has been an appalling disaster for many due to the (surely intentional?) cruel way it is now being implemented.
Paid for by abolishing higher rate tax relief on pension contributions. This may actually happen this time as it only creates a deferred hit to the better off, and won’t affect all the Tory core voters who have already retired.
I regard income tax as iniquitous, because it is a tax on a worthwhile and moral activity-working. Why should I pay the state for the fruits of my labour ? Tax should be geared to things which are generally regarded as bad-accumulated and inherited wealth, polluting activities, profits made from owning land, gambling, drinking and smoking. A radical Liberal party would look to the gradual replacement of income tax by taxes on these things.
Roger
You are not being taxed on the fruits of your labour, you are contributing to the society you live in. Most of the things you mention are already heavily taxed.
How’s this for starters? (Sorry if this causes you a problem, Mr Billins):
2p on the Basic Rate of Income Tax
45% for Higher Rate (incomes between £50k and £150k)
50% on incomes over £150k
Two extra bands on Council Tax
Means test the Winter fuel allowance and TV licences for the over 75s
Priorities for spending:
NHS
Universal Credit
Local Government Grants
This that radical enough for you?
There. Is that radical enough?
At Roger Billins. JK Galbraith once said that tax is he price you pay for a civilised society. It is therefore right and fair that your contribution to society should be a percentage of your income, because the is in proportion to your state of well being. The broadest shoulders should bear the proudest burdens. After all your taxes get you the public services that are vital to our society.
Now the doesn’t rule out taxes on pollution, scarce resources and non essential spending and certainly not taxes on unearned wealth, but it does ensure that everyone pays a share of the cost of providing public services. That means of course that our policies of increasing personal allowances has removed many from paying anything towards public services, except when they buy goods subject to VAT or consume alcohol, tobacco or fuel. It would have been far better, in my view and with hindsight, to have taken measures to increase low incomes or provide a basic minimum income rather than increase tax thresholds, because it would have ensured the everyone hd a share in providing services.
Oh, and I meant to add:
Scrap HS2 and put the money into HS3
Take a fresh look at the Overseas Aid Budget
Agree with increasing income tax to fund public services, although I would also put some money towards a stimulus to housing, as the shortage/cost of same is talked about (in my experience) far more than Brexit. Sadly, any party that suggests putting up Income Tax gets hammered by the press and the voters, but fair play to the Lib Dems, they were the only ones at the last election to be honest about it! Also, having friends in Denmark, they seem to have grasped that you only get world class public services by paying for them, maybe we will catch up one day!
Just to make it clear. I have no problem with paying my fair share of taxes but it is tax on what ? I disagree that the things I habe mentioned are properly taxed. Capital Gains and taxes on inheritance are a joke in this country and there are no proper taxes on land or pollution. If I am a day late paying my self assessment tax HMRC are down on me like a ton of bricks whilst Amazon etc pay f… all. It is this sort of unfairness which drives people mad. We will never get anywhere by increasing tax on income but we will attract widespread support by taxing wealth.
I agree with Roger that we should be taxing wealth but I also agree with John that we need to take a good look at income tax. Conde Nast which publishes various magazines recently surveyed its readers about their use of technology. I was fascinated that they divided earners above £100000 into 7 more groups ending with £1million and over. Even John’s tax proposals lumps together those who earn over £150000 but it seems to me that if a company believes they will get better results from a survey by grouping people in this way we might get better tax returns if we did the same.
I know about the Laffer curve and people avoiding tax through using accountants, but I’m very suspicious about the income rich avoiding higher taxes in this way. I think it’s a well kept secret about how many people earn salaries above £150000 so we tend to think it’s only a few people who won’t provide much tax anyway so why bother.
In the Conde Nast grouping there are only 4 groups for those who earn less than £100000, in other words, most of us, and we bring in most of the tax take. So I can’t say what I’d like to see in the budget because I think we should be looking at the tax system as a whole and make sure that it’s fair and will encourage the economy to grow.
@John Marriott
Either integrate employee NI with income tax (thus raising the standard rate to 32%, the higher rate to 42% and additional rate to 47%) or introduce an equivalent unearned income surcharge (as we used to have back in the 1970s). Earned income should not be taxed more highly than unearned income, indeed the reverse should be the case.
@Sue Sutherland
My suggestions were very much ‘back of an envelope’ musings.
My basic point is that I am quite frankly fed up with people who think that just soaking the rich is the answer to all our problems. No. With the exception of those on the lowest incomes, who are largely exempt from Income Tax, thanks, by the way, to a Lib Dem manifesto proposal circa 2010 that was highjacked by their Tory Coalition ‘partners’, we should all be paying a bit more.
I remember canvassing in a County Council election a few years ago when a middle aged resident came to the door and said he objected to paying more for education as he had no children at school. “What about grandchildren?” I asked. “Well, that’s different, isn’t it?” he replied. “Not really”, I said, bidding him good evening and marking him down as ‘Tory’.
Allocative efficiency implies an economic state in which every resource is allocated to serve each individual or entity in the best way possible. Economic theory assumes that in a market economy the price mechanism will deliver the optimal allocative efficiency.
However, when conventional taxes are imposed on production and trade they begin to distort prices. This in intentional in some cases e.g. alcohol and tobacco taxes. However, taxes on labour and production generate distortions that decrease allocative efficiency ,
The loss of efficiency is known as the deadweight loss of taxation and is often measured as foregone GDP per unit of total tax revenue raised, also known as the marginal excess burden (MEB) of taxation.
So Roger Billins is right to say “Tax should be geared to things which are generally regarded as bad-accumulated and inherited wealth, polluting activities, profits made from owning land, gambling, drinking and smoking. A radical Liberal party would look to the gradual replacement of income tax by taxes on these thing.”
Only when we have exhausted these sources of public revenue collection (including tax collections from the revenues generated by the tech giants in the UK) should we be considering increasing taxes on income and production that impact on disposable incomes and the level of investment in the economy. Any only to the extent that the additional taxes raised can be efficiently used in delivering necessary public services and welfare provision.
Just as important as efficient allocation of the tax burden is the efficient management of public spending – the two go hand in hand and are a necessary prerequisite to developing and maintaining public support for an economic program.
Amen to putting funds into Universal Credit, Caron …………….. but it would still be a lousy system with huge delays and systemic faults such as a single payment in cases of domestic violence, the need to access computers to make an application, and pernicious sanctions (all of which should have been scrutinised out in 2013) – and it is relentlessly driving up homelessness..
Revealed: How universal credit is fuelling Britain’s homelessness crisis : The Guardian-27 October, 2018
For Lib Dems it is still a case of ‘First take the beam out of your own eye, and then you will see clearly to remove the speck from your brother’s eye’. Matthew 7.5
@ John Marriott I don’t know what response you got to your Clarke, Balls, Davey question, John – (I’ve been away in France) – but I do know (unlike D.H. Lawrence) they were not taught by Rev Theodore Bayley Hardy VC DSO MC. at their Alma Mater
(Is that a ‘Pointless’ answer ?)
I’d like to see fuel tax increased to cover the externalities (congestion, pollution etc) of driving. Excise duty on motor cycles increased to cover the costs to the NHS of the accidents. Remove inheritance tax, but tax any income from inheritances as income – possibly spread over 10 years or so.
Sell HMS HighValueTarget and HMS Delusions of Grandeur. (aircraft carriers, allegedly )
Cancel HS2, Trident replacement, Hinkley point C.
Properly fund councils, NHS, social care, UC, or cancel UC.
Reducing VAT to 15% would be a good move. If Laffer’s theory applies to the higher rates of income tax why not with VAT too?
Anything which stimulates the economy will increase the tax take overall.
Spending needs to be targetted to where it won’t cause higher inflation rather than the SE of England where it probably will.
Sadly, it won’t happen!
https://www.ft.com/content/91530110-ab88-11e8-89a1-e5de165fa619
‘Land accounts for £5tn out of a total of £9.8tn worth of net wealth at market value in the UK, the ONS said, meaning it makes up about 51 per cent of the country’s total wealth.’
A progressive land tax might be a good idea.
@David Raw
The answer was none. After all, LDV is a serious site, isn’t it?
I think you have spotted the connection. Besides being from Nottingham they were all ex pupils of Nottingham High School. One of my former colleagues taught PE there and Ed B was in one of his Rugby fifteens. He used to advise young Ed that, were he ever to be asked his name by the referee, to make sure that he didn’t just give him his surname!
I agree with you Caron, restore the Osborne 2015 cuts to Universal Credit and restore the extra money received for those on Employment and Support Allowance. I would want Philip Hammond to go further and increase the Universal Credit child amount for all children to the current Jobseekers Allowance rate for children of £66.90 per week (£289.90 per month) plus increasing it in line with this year’s inflation. And increase all benefits in line with inflation. Restore the Benefit Cap to £26,000 and £18,200 outside London and increase if for London to £29,000 and £20,500. Also Universal Credit should be paid either every two weeks or every month as the person receiving it wants.
Increase the Income Tax Personal Allowance by £350 to £11,850, introduce a new rate of 22% payable on income of over £30,000, increase the £46,350 threshold to £46,500. Increase the 40% rate to 41% and the 45% rate to 46% rate. Increase the National Insurance threshold of £162 a week to £172 a week and decrease the £892 threshold to £891.35 so it is the same as my higher rate threshold (£46,350), increase the higher rate by 1% to 3% and make National Insurance payable on all income.
I agree with John Marriott that having two higher bands for Council Tax would be a good thing. I would want that to be part of a reform package to change it to a percentage rate. Also the national Council Tax Benefit scheme should be restored so those of working age who are not working who receive benefits pay no Council Tax as it was before 2010.
From the increases in government income I too would like the money left from the benefit changes above to go to the NHS and local government. Also the restraints on public servant wage increases need to be relaxed.
The National Living Wage should be increased to £8.20, the minimum wage to £7.80, the 18 to 21 rate to £6.30, the under 18 rate to £4.60 and £4.20 for apprentices (I would restrict this rate just to the first year of an apprenticeship).
Michael BG,
the Income Tax Personal Allowance is currently £11,850. Setting the allowance at that rate for 2019-20 would be a freeze. Quite possibly what the Chancellor has in mind!
Joe, thank you for pointing out my mistake. I meant increasing the Income Tax Personal Allowance by £350 to £12,200.
Radical UC policy….
Claim UC and get your first payment 7 days after successful claim. Then monthly, 4 weekly, fortnightly or weekly based on your pay frequency from work.
A welfare system to help those that need a safety net.
Could we lower the tax rate for those on low incomes and raise it for those above £150000? Would this work financially? That would increase the spending power of those on low incomes which would help the economy. At the moment high st stores are suffering but the picture is mixed. High end stores are doing well presumably because those on high incomes are doing well, low end stores are doing OK but the middle range stores are the ones that are suffering. It seems that those on middle incomes are switching to buying items that are cheaper, but those on higher incomes aren’t feeling the pinch and can continue to spend on luxury goods.
This may also indicate that our society is indeed creating a new aristocracy and a new large group of plebs like me. Everyone’s lifestyle has improved since this was last the case but there is a great divide between the very wealthy and the rest of us. Liberals fought to improve conditions under the last divided society and hopefully are committed to doing the same now.
Real admiration for David Raw and his ongoing efforts against the wretchedness that is universal credit, my budget would abolish it and revert to the excellent tax credits system, that was the one , of a good few, standout of the Brown era, much in fact missed.
I would also bring in a universal basic income , phased in.