Ten Chancellors and counting…

In my tax career I’ve seen 10 Chancellors of the Exchequer come and go. Some have made a lasting impression on the tax system, and not always in a good way. 

Nigel Lawson 

Lawson occupied Number 11 Downing Street when I first joined the tax department of KPMG, and we were still calculating income tax on large paper forms with a column for 60% tax. He reduced the top tax rate to 40%, and removed a lot of the rates in between, which cut the number of columns I had to grapple with. 

However, at the same time, he raised the rate of capital gains tax (CGT) from a flat 30% to align with the taxpayer’s highest income tax rate – simplifying with one hand and complexifying with the other. I remember some grumbling about the CGT hike, but the indexation relief (introduced by Chancellor Geoffrey Howe) took the edge off that. 

Lawson should be remembered for pushing through independent taxation, proposed in the 1988 Budget, which finally came into effect from 6 April 1991. Lawson was a great friend of prime minister Margaret Thatcher (until they fell out) and it is rumoured that Thatcher was not impressed that her husband had to include her income on his tax return. 

John Major 

Major was only Chancellor for just over a year, and I thank him for introducing the tax-exempt special savings account (TESSA), which I used to save up for my first sports car.

Norman Lamont 

Lamont had three years in the Chancellor job with Major as PM, and mercifully had minimal impact on the tax system as they were too busy battling inflation and recession (plus ça change!). 

Ken Clarke

Clarke should be remembered for introducing self assessment for individuals, announced in his first Budget in 1993, coming into effect from 6 April 1996. He also moved the Budget from spring to autumn, so 1993 had two Budgets. 

Gordon Brown

Gordon Brown was the longest serving Chancellor of the Exchequer since 1832, serving for over ten years under PM Tony Blair. And boy did Brown have a big effect on the tax system! 

In his first Budget in 1997 he removed the ability of pension funds to reclaim dividend tax credits, which at a stroke cut their income by millions. He also abolished advance corporation tax and cut the tax credit on dividends to 10%. 

The last press release in his 1999 Budget pack was numbered IR35, and we all know what became of that.

Other low points for Brown were the 10% starting rate of corporation tax from 2000 to 2002 followed by the zero rate of corporation tax from 2002. This resulted in massive numbers of businesses incorporating, as coupled with zero tax on dividends within the basic rate band, those with profits of around £50,000 could pay no tax at all. Genius (not!).

Brown should also be remembered for introducing working and child tax credits – state benefits administered by HMRC but which otherwise had nothing to do with tax, and landed lots of claimants with unexpected debt.

Alistair Darling 

Darling’s term as Chancellor was dominated by the financial crisis of 2007 to 2009, and he had to raise taxes to pay for the clean-up. The 10% starting rate of income tax had to go, but this was going to cost low earners up to £200 per year. Finally, the penny dropped and in early May 2008 Darling announced a £600 increase in the personal allowance for the current year to compensate those on low pay. I recall tax experts at the Chartered Tax Advisers address that evening could hardly believe it. 

Darling clearly had a thing about the personal allowance as he also introduced tapering of the allowance where income exceeds £100,000 (an effective tax rate of 60%), and he added the 50% addition rate on income over £150,000. These changes came in from 6 April 2010, and may have contributed to Labour losing the next general election on 6 May 2010. 

George Osborne 

I can never forgive Osborne for dreaming up Making Tax Digital (MTD), billed as the “end of the tax return”. Over seven years later MTD for income tax self assessment (ITSA) is still to be launched.

Osborne must also be remembered for his “omishambles” Budget in 2012 when he attempted to charge 20% VAT on hot pasties and reduce tax relief on charitable donations. These proposals did not survive the bad press, but the new Employee Shareholder Scheme did, to be later quietly abolished when it became a vehicle for tax avoidance. 

Phil Hammond 

Hammond was a boring Chancellor, and after Brown, Darling and Osborne that was a relief. Although he did have his wobbles when he proposed increasing class 2 NIC with a view to merging with class 4, but the Daily Mail protested and it never happened. 

Sajid Javid 

Javid is the Chancellor who never presented a Budget, as he walked out just weeks before his big day after clashes with the prime minister’s adviser Dominic Cummings. Perhaps he will return to Number 11 under the new prime minister. 

Rishi Sunak

Chancellor Sunak has had a love/hate relationship with the British public. They loved him while he was shaking his magic money tree to give away loads-a-money during the pandemic, but came to hate him for the national insurance contribution increases, which hit just as inflation took off. 

Sunak has also messed around with the income tax bands mid tax year, taking a lesson from Darling perhaps. 

Nadhim Zahawi

Zahawi is another Chancellor who hasn’t presented a Budget and probably never will. Although he has been in the role for merely weeks, scandal is already knocking on his door and I suspect he will be gone by the end of the summer. 

Who’s next?

The role of Chancellor of the Exchequer has never been taken by a woman, although Darling had a team of three female Treasury ministers. 

Perhaps the time is now right for a capable woman to take the reins of the country’s finances. But who?