This is the twelfth of fifteen draft Bills in an Alternative Queen's Speech that sets out what a legislative programme might have looked like if a majority Conservative government had been elected. Read more about the initiative here.
The UK has gone beyond the tax saturation point. The figures for Income Tax receipts last year show they fell compared with a year earlier. Self assessment income tax, which includes large sums paid by top rate taxpayers, fell sharply, showing that the 50% tax rate cuts the amount of tax the rich pay. The last budget revealed growing resistance to VAT, with increases on some hot take away food and on caravans causing trouble. Next year the Red Book forecasts a drop in Capital Gains Tax revenue, as we feel the full impact of the higher rates being charged.
The next Finance Bill should set rates that increase the amount of tax the rich pay, and which ease the burden on people lower down the income scale. People’s budgets have become very stretched by higher tax rates and inflation in recent years, limiting demand for a private sector led recovery. The Bill needs to take more people out of 40% tax, as that rate kicks in too early, as well as taking more people out of tax altogether. This can complement the benefit withdrawal policies avoiding losses to hard working families from benefit withdrawal. The top rate of tax should be set at 40%, the rate Mr Brown always used as Chancellor in the belief that such a rate maximised revenue from the rich. Capital Gains Tax should be set at 20%, not 28%, to stimulate more transactions and raise more revenue.
The low-paid should be the priority for tax relief and that means lower fuel duty should be at the top of the Chancellor's list.