15% income tax may be just around the corner

Dominic Raab
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Philip Fisher runs the rule over Dominic Raab's headline-grabbing pledge to cut the basic rate of income tax to 15% if he becomes PM and asks: can anyone see a downside?

This article should start with an apology, since it may be way out of date having been penned 24-hours before publication.

At the time of writing, there were still a meagre 13 Tory MPs (stop press - down to 11 this morning) who had formally confirmed they would be entering the race to become leader of the party and, by extension, Prime Minister. In the fullness of time, one imagines that this will increase to a healthily democratic number, perhaps a couple of hundred.

Ignoring the European question and the underlying politicking, the subject that will interest most accountants is the fiscal plans, to the extent that any of the prospective PMs realise tax is one of the areas which will come within their remit, should they have the misfortune to be elected to a poisoned chalice that has killed the careers of the last two incumbents stone dead.

One man who apparently knows his tax onions is Dominic Raab. However, even he might require the talents of the best magician in order to pull the promised rabbits out of his traditional Tory top hat.

The former Brexit secretary, a role that has at least given him experience of political appointments that are impossible to hold down, is already on the record as stating that he is a big fan of the most extreme form of European exit possible.

In order to increase his appeal, Mr Raab has additionally pledged to cut the basic rate of income tax to 15% and at the same time as increasing the NIC threshold to £12,500.

If that isn’t enough to win your vote, this columnist doesn’t know what will.

Can anybody see a downside? Well, Paul Johnson from the Institute for Fiscal Studies can. He has rather unkindly pointed out that these generous proposals will cost the Exchequer £40 billion each year.

While Dominic disputes these figures, he probably isn’t that concerned, since this Europhobe comes from the Boris Johnson school of economics, which believes Britain will benefit to the tune of tens of billions of pounds each year from exiting Europe.

While there seems to be no obvious statistical justification for such optimism at present and the vast majority of economists have expressed concerns that, at least in the early years, we will be greatly out of pocket following a cliff edge exit, voting for Raab at least promises great hope for the future, if you can believe the hype.

More importantly, this announcement should also set readers thinking about the consequences should various different candidates win the Tory leadership election.

There must be a very strong possibility that Philip Hammond will fall out of favour, given his strong support for a conservative (with the tiniest “c” imaginable) European transition and departure.

A change of Chancellor could spell the end of austerity and also lead to a completely new outlook on tax policy.

Without having a crystal ball as big as any prospective Tory leader’s ego, it is impossible to guess what an unknown Chancellor of the Exchequer connected to a new Prime Minister might have in mind.

However, the best bet is probably that almost everyone will go for headline-grabbing tax cuts, probably funded by a whole raft of stealth taxes that will undoubtedly be necessary to pay for them, especially if the projected euro hit exacerbates the tax black hole.

On the other hand, this might be a perfect time for a new set of eyes to completely revamp, simplify and perhaps even bring greater equality into an antiquated tax system that is in desperate need of an overhaul.

I leave readers to ponder an alternative future in which the new Prime Minister calls a general election and Jeremy Corbyn takes over with John McDonnell as Chancellor.

Whatever happens, there are fun times ahead so what this space for future developments.

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05th Jun 2019 22:36

Johnson v Corbyn, great. It's like being asked whether you want to die by the axe or the rope.

Thanks (3)
06th Jun 2019 12:03

Always a big deal being made out of £40b. In the scheme of things and based on what the govt receives in revenue not a massive sum. As the collumnist has pointed out no doubt be clawed back anotherway.

That having said how much Govt spending achieves nothing except fame for the person proposing it.

The first thing I would do if appointed as prime minster is to severely reduce the size of the cabinet. Secondly I would downsize the home office perhaps into smaller ministries because it makes many cockups and is run by career politicians (Mrs May for instance) and thus looses its way.

Then I would have a bank holiday in October because its a long gap between Aug 31 to DEc 25th

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06th Jun 2019 14:13

Hmm, given the huge underfunding of pretty much every service, cutting taxes is none too bright. I think he would get more votes by promising to tax properly, and fund things properly.

Then again Raab is a bit thick. Despite being "at the table" during the Brexit negotiations he doesn't seem to grasp much about it or how poor a position the UK is in terms of leverage over the EU, and how much damage is being caused to the UK economy with the dithering about. All this wont hit tax revenues for another year or two.

Edited to add, our chancellor seems to paint climate emergency adjustments to the economy as being unaffordable, at £50-70bn a year, depending on who's figures you use.

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07th Jun 2019 08:37

Another of his "plans" has been roundly put down by John Bercow - https://www.theguardian.com/politics/2019/jun/06/next-tory-pm-will-not-b...

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By trecar
07th Jun 2019 12:18

Might I just point out that a bigger gain if Raab becomes Premier will that in the rush to prorogue Parliament he might omit to renew the taxing ability of the Exchequer and that we could all end up with a nil rate band in its entirety.

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