Tomorrow’s budget is a massively political event. Unlike almost all pre-election budgets for a long time there are no freebies to give away: the government's finances are too tight for that. But this does not mean the event lacks interest; far from it — this only adds to the piquancy.
So what is needed? Bu heading, I suggest the following.
The Economy
A programme for growth. The Treasury admit that for every £1 billion invested in the economy more than £1 billion is recovered by HM Treasury. So now is the time for significant public spending. This is the moment for the Green New Deal.
Particular needs:
1) A ‘Green’ investment bank
2) More lending to small and medium size business
3) Direct stimulus through short term projects. We still have an enormous back log of small infrastructure projects to do. Now is the time to do them.
The Exchange Rate
Don’t do anything to increase the value of the pound — we have to price ourselves into work.
Cuts
We have well over 2 million unemployed. We don’t need cuts until this number is tumbling.
Then we’ll need cuts.
Until then cutting increases government costs and borrowing. And what is the economic logic of paying a teacher to sit at home when they could be teaching?
So, quite simply — say there are no0ne for now and the budget will be rebalanced by growth — which will pay for itself, as Keynes not only said, but which history has proved.
Savings
Cut Trident.
Cut aircraft carries.
We can’t afford either and don’t need them.
Tax increases
We do need them. This is the only acceptable way to re-balance the books right now ad reduce inequality. We need:
1) 50% tax rate at £100,000
2) Maximum of £5,000 of allowances per annum for all earning over £100,000 to stop avoidance
3) A General Anti-Avoidance Principle
4) Abolition of the domicile rule
5) New rules for tax residency — I favour a passport based scheme
6) Reform of small business taxation to stop income shifting abuse
7) A Robin Hood Tax
8 ) Withdrawal of tax relief on all wages paid over ten times UK median wage — i.e. about £230,000 a year
9) A 2% increase in corporation tax to pay for increased investment in our universities
10) Enhanced tax penalties for tax evaders — the one thing we know we’ve been promised.
11) Capital gains taxed at income tax rates
12) A restriction on bank loss carry forward
13) A 10% additional tax on bank profits
14) Restrictions on ISAs so only green ISAs get relief in future
and most importantly:
15) At a minimum reintroduce the 10% tax band but with no benefit to those on higher rate
We definitely do not need:
a) VAT increases
b) Anything that makes the UK look like a tax haven
c) Corporation tax cuts
Chances?
If Labour wants to win, high.
If they want the Tories to win because they want them to carry the can for the mess their banking friends made, low.
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Oh, what you’ve forgotten is a plan to replace Council Tax, NNDR and stamp duty with LVT on all land – to increase the tax base substantially and prevent a property price bubble from ever forming again. See yesterday’s FT Lex Column re bubbling commercial real estate. Just the ‘threat’ of LVT will have an immediate effect on the land market.
Carol
I was doing short term thing!
Richard
“The Treasury admit that for every £1 billion invested in the economy more than £1 billion is recovered by HM Treasury.”
Apart from the obvious “well, they would say that, wouldn’t they” comment, one glaring fault with this stands out.
If it as true, then after the growth in investment over the past 12 years, why has Britain never been swimming in money? Isn’t this a bit like a fat bloke eating lots of bananas and saying “fruit helps you lose weight, you know”? Well, maybe, but that’s not the whole story.
On spending, you’re right re Trident and Aircraft Carriers. But I would go further and say that we should recognise we are no longer a major world player (China, Russia, Brazil and India will soon rank above us on any sensible measure) and stop subsidising the EU as well. Our long aim should be to end up a comfortable, low-profile state: we should aim to be Belgium or Holland rather than “hitting above our weight”, which is pure vanity.
Sensible ideas, all.
@mad foetus – another anti-EU obsessive. Had to laugh at we should aim to be Belgium or Holland rather than “hitting above our weight”, which is pure vanity.
Last time I looked, Holland and Belgium were very cooperative members of the, er, EU!
[…] such as a “green new deal” and housing investment, points echoed by Richard Murphy at Tax Research UK and Varun Chandra at Progress. Second, we need to ensure that support is targeted at the […]
BenM
Name calling is a very weak argument. But if you believe that it is right, and just, and ethically sound to give to a farmer in the EU a grant per COW that than the average third world wage then I would say you have lost your moral compass.
Richard has his views about tax havens, but in my view nothing has caused more hardship to the third world than agricultural subsidies in the EU and US to farmers who are already wealthy. I am sorry if holding such extreme views means I am an “anti-EU obsessive” worthy of contempt. I must have missed the lesson in school where they taught that French cows were more valuable than African children.
I agree that we should use taxation to reduce inequality. However, we do not need to rebalance the books, now or in the future. However, the idea that we should do so now is insane. We are either in or just leaving a recession. And the government’s fiscal balance is endogenous. It is not within the govt’s power to reduce the deficit. Any attempt to do so will reduce aggregate demand and drive up the deficit. The govt’s fiscal balance should be the residual of the private sector’s saving preferences and the current account balance.
@madfoetus
I believe that EU farm subsidies nowadays are based on acreage and are for the benefit of landowners not the actual farmers. Needless to say the subsidy is then capitalised into the selling price of land. We need an annual land value tax to feed the subsidy back to govt coffers.