Who is Chancellor of the Exchequer?
Our mystery accountant wonders whether Sajid Javid will ever get serious about taxes.
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.