The British government’s latest Finance Bill runs to 417 pages and the explanatory material which purports to guide us through it another 349.
Whatever happened to tax simplification?
Whatever became of the government’s policy of lower, flatter, fairer, simpler taxes? A policy grounded in the belief that individuals, families and companies will make better investment decisions than governments and that wealth creation is essential to the support of key public services like health, education and social care.
Of course we are facing the biggest financial crisis of our lifetimes. The Covid measures continue to destroy our productive economy and like a scorpion the virus leaves its sting behind it in a huge backlog of patients requiring serious procedures in the health service. Then there is the damage done to our young people’s education and career prospects and the impending crisis in housing caused by rent arrears and the unemployment currently disguised by the furlough scheme.
Major industries have haemorrhaged cash on an enormous scale and substantial debt taken on will never be repaid. Are we seriously going to take £20 a week from some of the poorest folk in the land – reversing the increase in benefits – just as electricity and food costs are rising?
What is the government’s strategy for facing these challenges?
Tax and spend is not the answer. Nor can we continue selling IOUs to ourselves. Already inflation is coming down the track with the costs of raw materials soaring and pressure on wages because of labour shortages. The Bank of England’s reassuring messages that there is nothing to worry about and that it will delay interest rate rises as it will be a short term increase worries me. I remember as a young man first engaging in politics how quickly inflation got out of control as people started pricing for anticipated rates. It ended at over 20% and interest rates of 15%. Inflation may be convenient for governments with large debt burdens but as Jim Callaghan put it: inflation is the father and mother of unemployment.
The only way we can get through this crisis is by getting our economy growing again and that means recognising that the current long term growth projections of under 2% are not acceptable and we need to change our strategy.
Increasing corporation tax, as the government proposes, is the very opposite of what is needed if we want to see more investment. Entering a cartel to set a minimum level of corporation tax may be good news for the United States to get revenues from its increasingly over mighty tech companies but what happened to the vision of Global Britain, the place to invest and create jobs and prosperity?
The thinking embodied in the Chancellor’s vision for Freeports needs to be applied to the nation as a whole. If we believe in competition as the way to secure innovation and prosperity why are we suddenly abandoning competition in taxation?
Take back control – the message of the referendum campaign – was as much about setting our own taxes and laws as it was about regulation. It is for House of Commons to decide tax matters and tax policy not the President of the United States.
Boris Johnson should be seeking to unleash the talents of the British people. That means supporting the self employed and encouraging companies to use outsourcing, to expand and award contracts for work.
While it is commendable that HMRC tackles tax dodgers and abusers this should not be at the expense of strangling self employed business and imposing additional costs. The self employed are not the same as those on PAYE. There is no statutory sick pay for them, no holiday entitlement and getting paid depends on identifying the next customer.
IR 35 – the restrictions introduced to make working on contract more difficult – is having a severe impact and will discourage others to set up on their own. Yes these businesses are the seed corn for future growth and the government should honour its longstanding promise to bring forward a new status for self employment following the Taylor report and Conservative manifesto commitments.
It seems now every finance bill brings forward new powers for HMRC even before the review of the use of existing powers is completed. This latest bill is no exception, taking away a right of appeal to a tribunal for financial institutions to provide specific information about a taxpayer. The disgraceful and effectively retrospective treatment of loan charge victims such as local authority and health service workers placed in schemes by their employers has not been matched with the same zeal in pursuing those responsible for marketing these schemes now languishing on their super yachts with their ill gotten gains. It is beyond belief that these schemes are still being promoted and some are targeting workers returning to the NHS. HMRC themselves have even employed firms using them.
We need a clear strategy from the Prime Minister and the Chancellor to get our economy growing sustainably again if we are to meet our duty to secure a safety net for the most vulnerable and disadvantaged in our country. Higher taxes, more bureaucracy and continuing uncertainty are anathema to achieving that. For as the book of Proverbs reminds us: “Where there is no vision, the people perish.”
Lord Forsyth of Drumlean is chairman of the House of Lords Economic Affair Committee.