UK Budget predictions 2016: What do free marketeers want from chancellor George Osborne?

 
James Nickerson
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Chancellor of the Exchequer George Osborne Visits Crossrail Station Construction Site
Expectations were that the chancellor would make changes to pensions (Source: Getty)

Chancellor George Osborne normally pulls something out of his hat on Budget day, but with pensions seemingly pressured off the table, his choices are restricted.

But in an ideal world, what do free marketeers want from him next week?

Corporation tax

This, the TaxPayers' Alliance says, is undermining what is already weak public confidence in the tax system. It says there's no conceptual basis on which the profits of multinationals can be allocated across jurisdictions. So, scrap it and place a single tax on income distributed from capital.

Stamp duty on shares

The verdict is unequivocal: scrap this. The Adam Smith Institute (ASI) says this is one of the most harmful taxes and raises relatively little.

The ASI says it raises the cost of investment, while the TPA adds that it reduces liquidity and depresses prices. Both think it's more harmful than the £3bn it raises.

"With UK pension fund deficits reaching their highest levels for five years and companies paying less to cover these shortfalls, the abolition of stamp duty on shares would lift a significant burden from pension schemes," said Alex Wild of the TPA.

And scrapping it would give a boost to businesses need of investment, the groups say.

Property taxation

For the Institute of Economic Affairs (IEA), this is the solution: Property taxation should be completely overhauled, with the long-term aim of abolishing council tax, business rates and stamp duty, and replacing them with a Land Value Tax on commercial land and a tax on imputed rent for residential property.

Business rates

The ASI wants business rates to be stopped from taxing capital. Its reasoning is as follows: business rates tax property values, so they effectively tax both the land a property is built on, and what sits on top of the land (bricks, mortar, machinery).

"Taxing land values is a relatively good way of raising revenue, because it does not discourage production. But taxing property discourages construction, improvements and investments in new machinery," it says.

Spending

The tax system, says the TPA, is struggling under the weight of expenditure. But because the only tax increases possible would be largely regressive, spending should be cut.

Meanwhile, the IEA wants to see the end of ringfencing to hit arbitrary savings targets, pointing particularly to the triple-lock for state pension increases and NHS, per-pupil funding for schools, international aid and the defence budget, which are all protected.

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