Scrap corporation tax. Scrap council tax. Scrap capital gains tax. And inheritance tax too. And business rates, the TV licence fee, the apprenticeship levy, all stamp duties, alcohol duties, tobacco duties – get rid of them all!
These are the somewhat provocative proposals from a new report covered on today’s front page of City A.M. Floating even half of these suggestions would be enough to get you permanently barred from your local dinner party circuit, and, coming from the ultra-free-market Institute of Economic Affairs, one can be sure that many people, of different political perspectives, will dismiss the report as positively barmy.
But there’s a reason why conservatives and social democrats alike should take some time to peruse the IEA’s work. The current fiscal system in the UK is not working. We have recently waved goodbye to a chancellor who spent more than half a decade pledging to eliminate the government’s annual deficit, yet who has left it borrowing in excess of £70bn every year.
Borrowing in the last recorded month, September, was even higher (£1.3bn higher) than at the same point a year ago. Growth has become sluggish, we are seemingly incapable of significantly reducing spending, and our complex web of taxes are failing to make up the difference.
Some economists argue the government is right to be borrowing money at a time when debt is very affordable. But recent increases in gilt yields remind us of the risks of such a strategy and, moreover, even cheap borrowing adds to the overall debt pile – and the government’s debt is now equivalent to 84 per cent of the country’s GDP, and rising.
The IEA’s report claims to offer a viable alternative. Its wonks have crunched the numbers and argue that lower and simpler taxes would provide enough of a boost to economic growth to keep the welfare state in place while dramatically improving the fortunes of people on low incomes.
Its plan is unlikely to be wholly adopted by Theresa May’s government, but as Philip Hammond works on his first “fiscal event” (this month’s Autumn Statement) he could do worse than to dabble with some radical tax simplification. It would mark a departure from his predecessor's approach and, you never know – it might just work. Besides, the IEA has done the hard work for him.