Budget for recovery
Tina Riches provides her personal ideas about what the Chancellor should say in his Spring Budget. This does not represent the views of organisations she is involved with.
Madam Deputy Speaker - today, I present to the House a Budget for recovery;
A Budget that shows that the British people can begin to move forward from the Covid pandemic to a brighter future;
A Budget that starts to sand down the rough edges on our tax system and encourages everyone to pay a fair share.
First, so that tax advisers do not have to wait any longer, I shall address some necessary tax changes.
We are indeed living in unprecedented times. It has been necessary for the state to look after as many people as possible, given the available resources and data.
This has led to exceptional levels of Budget deficit, which will be addressed in the OBR’s predictions.
We are firmly stuck on the horns of a dilemma, whether we
- abandon levelling up; or
- look after people, meaning the deficit grows or we seek help from those with deep pockets.
I have decided to introduce a one-off wealth tax. It will be broad brush. It will make use of data that can’t easily be manipulated and will use algorithms currently being developed by a new team of industry specialists and the Treasury.
This will be an opportunity for those with wealth over £1m (including their main home and pension pots) to help the less well off. The charge will be spread over five years and will amount to merely 1% of the taxpayer’s wealth as at 31 December 2020, which will prevent forestalling.
Following a short consultation, I plan to introduce this wealth tax swiftly, with the first yearly payments due on 31 March 2022. Time to pay over 60 months will be available to everyone as will an e-medal to mark their contribution.
Secondly, I want to return to my statement on 26 March 2020: “If we all want to benefit equally from state support, we must all pay in equally in future.”
But I do not intend to break the Conservative manifesto promises.
We all know that National Insurance, or NI, is really a tax, not insurance. The state should not be using tax and NI rates to incentivise particular work structures nor compensate for risks taken – the market should do that in its pricing of goods and services.
I therefore plan over the next five years to introduce a new inclusive tax, replacing income tax and NI, with identical tax rates across the board, and the best of all the legacy rules. CGT rates will mirror the inclusive tax rates, to discourage the alchemy of turning income into gains.
We will consult on the details of these and other proposals in the recent IFS report on taxing work and investment, with a view to vastly improving the tax system.
I hope this will lead to quiet cheers from everyone who has been paying more all along. We need to do this to help equality, fairness, simplification and levelling up, that otherwise will persist for decades.
Thirdly, I am aware of increasing problems for many people, a large proportion of whom are on low incomes, who have been put into loan schemes caught by the disguised remuneration legislation. I do not plan to reverse previous decisions.
However, HMRC has received reports that some of the so called ‘lenders’ of these ‘loans’ have sold them to third parties, who are pursuing the employees for repayment.
We aim to stop this abomination.
We will introduce legislation that for once uses the phrase ‘HMRC thinks’, a phrase that was rightly deleted from the 2007 Finance Bill.
It will be illegal to recover such ‘loans’ caught, or where HMRC thinks the loans are caught, by the disguised remuneration legislation, and where the taxpayer has either settled with HMRC or is paying the loan charge.
Fourthly and finally, I turn to our tax system, which needs to be improved.
The tax system needs to be easier for everyone to use, to provide government with more real time data and retire its antiquated systems such as call centres with diabolical call waiting times and electronic forms that require posting in letter boxes.
MTD is helping move us down this road, but we need to accelerate the progress. This requires more investment, more recognition of the work tax agents do, more help for the digitally challenged and new ideas.
I am therefore putting aside an extra £1bn to progress this and I have asked an eminent panel of innovators, supported by people from HMRC, the professional bodies, the software industry, business and charities to develop a plan.
We will move the tax system into the 21st century.
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Tina is a volunteer for TaxAid, the charity that helps vulnerable individuals on a low income with their tax affairs. She acts as a liaison with HMRC, particularly on recent tax developments and digital matters. She is helping the charity look forward as tax evolves, particularly in digitalisation.
Before her retirement from practice,...