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Who is Chancellor of the Exchequer?

Our mystery accountant wonders whether Sajid Javid will ever get serious about taxes.

7th Oct 2019
Partner An unnamed firm
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Sajid Javid

This is really embarrassing, but the other day I was talking with a colleague and found myself struggling to remember the identity of the Honourable Gentlemen responsible for my sphere of professional interest.

That never happened in the days of Philip Hammond, George Osborne, Gordon Brown or Nigel Lawson. Love them or hate them, those Chancellors enjoyed a high profile and relatively good understanding of the tax system.

The answer to the question finally came to mind: Sajid Javid. Unless I have missed something until last week his only pronouncements relating to tax confirmed that he is a “low tax guy” and echoed the Prime Minister’s proposal that the threshold for higher rate taxes should be increased from £50,000-£80,000.

When the IFS recently analysed the cost of that proposal, it is an extortionate £8bn a year, which will boost the incomes of only 8% of the population. Admittedly, this is as reported in the Guardian, which is unlikely to favour such ideas.

Mr Javid did deliver a spending statement that appeared to be an election manifesto prepared in the full knowledge that many of the promises will probably never be fulfilled. At the Tory party conference, he did muse publicly about the prospect of abolishing inheritance tax.

Without wishing to sound cynical, this seems to be another manifesto promise that will be quietly forgotten. Indeed, I wouldn’t be surprised if his next-door neighbour is already offering odds of 1,000,000 to one against it ever coming off.

This might sound like a negative political diatribe but there are some far more serious issues underlying my concern about a Chancellor of the Exchequer who seems to have no real interest in, or quite possibly understanding of, UK fiscal policy.

If he and the guy next door have their way, Britain and Europe will be parting at the end of the month. A Chancellor who is on the ball would realise that this provides both tremendous threats and great opportunities.

On the threat side, it is generally recognised that the departure will leave a massive hole in the country’s finances. It would be good to hear some kind of proposals regarding the way in which this hole is to be filled. The obvious solution is to increase taxes.

The opportunities that a canny Chancellor should have identified by now maybe longer-term but are manifold.

Much of our tax legislation is built upon European law and obligations. If we are really to make the big leap, then presumably we can take the surgeon’s scalpel to swathes of legislation that will no longer be required. This would instantly provide the kind of tax simplification that everyone in the profession craves, at the same time as opening up many more opportunities for streamlining.

In many cases, the chance to offer really strong tax incentives both to companies and individuals has been constrained by anti-competitive legislation imposed from Europe. It doesn’t take a genius to work out that if we are no longer under the European flag, such legislation could be taken off the statute books overnight.

I am hardly an expert in VAT but this is a European concept that we have adopted. In principle, on 1 November we could abolish it completely.

Admittedly, on 2 November we would then probably have to introduce our own sales tax but this could be constructed along completely new lines that might help both the service and manufacturing sectors to become more competitive or, more realistically in many cases, to survive in the brave new world of isolation from their closest overseas customers.

We know that the same applies to customs legislation, although in that arena we will still be obliged to take the line laid down by international obligations.

There will be so much more that can and should be done as a matter of great urgency. However, I see no sign that whatsisname is making any effort to get up to speed in a vital area that currently appears to be a blank sheet possibly or maybe even a phobia as far as he is concerned.

Replies (6)

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By gbms
07th Oct 2019 15:16

Odd that the writer can recall the names of previous Chancellors, but not the current incumbent, and equally odd that they appear to assume Sajid Javid lacks an understanding of the tax system when he has served as a junior Treasury Minister under George Osborne for two years.

Mr Javid has also previously written on what he would do as Chancellor (see for instance: where he said he would like to:
•Slash corporation tax rates (to 12.5%)
•Burn regulations
•Give automatic relief from Business Rates for all small businesses of a certain size
•Repeal "the silly IR35 tax on providers of personal services”

As regards the thinking aloud of the Prime Minister, his pledge to increase the threshold for higher rate taxes was downgraded to an “ambition” following criticism. He also said he would increase the NIC threshold to help lower earners.

Gove's suggestion of scrapping VAT for a sales tax was quickly reversed when the disadvantages of doing so for businesses was pointed out.

The freedom of a UK government to change taxation after (if there is an after) Brexit will depend on the wording of any withdrawal agreement. The current wording includes an obligation for the UK to continue to comply with the EU's state aid rules, thereby restricting changes to such items as R&D tax credits. This may change of course.

As reported in The Times on 5 October, the Treasury has pencilled in a Budget for week beginning 21 October if there is a Brexit Deal, or week beginning 11 November in the case of no deal.

Presumably the Budget will be swiftly followed by a general election if it's voted down by Parliament.

Thanks (1)
By ireallyshouldknowthisbut
07th Oct 2019 16:54

The general game with Brexit, is to make no specific policy announcements what so ever on what you actually do after "the big day"

The theory being, if you make any, you may lose support if it affects that person.

For example you may say "slash red tape around employment" and not mention this may mean fewer employment rights.

If you make no promises apart from either vague ones, or specific to different groups (which can be contradictory if not formally made) then the idea if the person voting for "change" and project their ideas on what the change might be.

Moreover whats the point in exerting any effort what so ever in new plans, if you don't expect to be in office in the new tax year?

Thanks (2)
By Knight Rider
07th Oct 2019 19:01

Give the man a chance, fiscal and monetary policy is being overshadowed by Brexit and Saj hasn't even had a budget. The opposition is running the show with the protection of the FTPA. Once the new government has had a Queens speech and the UK has left the EU(saving £1bn a month ) Im sure the Chancellor and the new government's tax policies will have a higher profile.
Scrapping VAT (which seems to me like a tax on labour) and replacing with a flat sales tax and import duty seems like a good idea.

Thanks (1)
By vstrad
09th Oct 2019 11:11

Glad to see someone else joining my campaign to scrap VAT.

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By philaccountant
09th Oct 2019 13:43

A devout follower of Ayn Rand in number 11, if that doesn't send shivers down your spine I don't know what will.

Thanks (1)
Replying to philaccountant:
By AndyC555
10th Oct 2019 10:34

I'd take a follower of Ayn Rand over a follower of Karl Marx and Chairman Mao.

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