CentreForum: Osborne must ask the wealthy to pay their fair share in the Autumn Statement


 

Tom Frostick is co-author of CentreForum’s submission to the Autumn Statement 2012; the submission can be viewed here

Closing an enormous fiscal deficit hurts. But there are ways that the chancellor can mitigate the pain.

George-OsborneAhead of the autumn statement on December 5th, we urge George Osborne to take a look at our £17 billion savings package containing progressive tax reforms and marginal welfare cuts targeted at those who don’t need handouts.

Seventeen billion pounds is a lot of money. Delivered in full, our package would allow the coalition to stick closer to its fiscal target of debt as a proportion of GDP falling in this parliament, whilst steering clear of the most vulnerable in society.

We accept the need to reduce the deficit through a mix of cuts and revenue raisers, but it must be done in the fairest manner possible. That means asking wealthier individuals to make an appropriate contribution.

The biggest savings we have identified would come from rebalancing the tax system. We call for a clampdown on outdated and unjustified tax exemptions and reliefs, and for the introduction of tax on items that are not currently – but should be – subject to tax.

At a time of fiscal consolidation, you have to ask why the richest pensioners with incomes well above the tax threshold should first enjoy a tax free lump sum of up to £375,000 and then be exempt from paying National Insurance like everybody else.

You also have to ask why capital gains are treated more generously by the taxman than wage income. And why business and agricultural property attracts inheritance tax relief of between 50 and 100 per cent. Addressing these four anomalies alone could raise more than £9 billion a year.

We agree with the director general of Saga that universal pensioner benefits should be taxable, and disagree with the Conservative policy enshrined by Gordon Brown that cars manufactured before 1973 should be exempt from vehicle excise duty. Indeed, we have previously argued vehicle excise duty should be replaced entirely with an upfront purchase tax on all new cars. The latter could result in a short term revenue boost of at least £3.4 billion.

Elsewhere, we call for red diesel to be phased out (realising £2.4 billion) and for the self employed to pay national insurance at rates closer to those of other workers (£1.4 billion).

Marginal savings would come from ending the council tax freeze for top band properties and introducing new bands I and J.

We also think it is right to place a cap on statutory maternity pay given a mother with an income of £150,000 currently gets the pro rata equivalent of £135,000 a year. Remember the coalition’s £26,000 benefits cap?

Our package of measures is by no means exhaustive, but we believe it highlights some of the absurdities of the current tax and benefits system. Asking more affluent sections of the population to pay their fair share is not only sensible given the amount of revenue that could be raised; it will also help to convince critics the coalition has not forgotten “we are all in this together”.

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  • LB

    So lets see.

    Middle classes and up pay all the taxes.

    Middle classes and up get none of the services.

    That’s the absurdity.

    Taxes are for services.

    However with the massive debts, hidden off the books, its going to be tax tax and more tax, but if you want a service? Bugger off. We haven’t got the cash.

    So don’t give me, “We’re all in it together”. If that were the case, we would all get equal treatment.

    The latter could result in a short term revenue boost of at least £3.4 billion.

    Really? Whose got the money? End result screw what’s left of the car industry. Want a new car? Yep, no problem. Go to Europe. Buy a car. Put it in a garage for 6 months. No tax. Bingo. Great for Belgium. Crap for the UK.

  • LB

    Secondly. Why should people be ‘in it together’?

    Just like the bankers who messed up, should be fined, jailed and bankrupted. Why shouldn’t those in government who’ve created the mess be the ones that suffer the consequences of their actions?

    Ah, not the case. We want other’s to pay the price so we can carry on living in the style to which we are entitled.

    OBJ.

    What’s the first rule of MP’s expenses club?

    There are no rules for MP’s expenses club.

  • robertcp

    Some sensible ideas that are worth considering. They may, however, be too progressive for a Conservative-led government.

  • Newsbot9

    That’s right, you expect your class to be immune to taxation.

  • Newsbot9

    That’s right, you plan on abolishing the services for the middle classes along with everyone else when you abolish them all. And you keep referring to the known debts as hidden to justify your war on society.

    And equal treatment doesn’t mean that you pay the same amount of tax, it means you pay the same % of tax. Control 75% of the wealth? Pay 75% of the tax. Indeed more, because you can’t be equal if you’ve starved to death, your plan for the poor.

  • Newsbot9

    How about “if you’re working, you pay NI”? It can be fed back into contributions for poorer people.

    “universal pensioner benefits should be taxable”

    So long as the system basically pays them out and reclaims the cash for higher earners, sure.

    “You also have to ask why capital gains are treated more generously by the taxman than wage income.”

    Indeed. But simply raising capital gains alone could discourage some beneficial kinds of investment – taxing capital in other ways needs to be considered too.