Lord Flight is Chairman of Flight & Partners Recovery Fund, and is a former Shadow Chief Secretary to the Treasury.
One of the criticisms of our bureaucracy is that it takes so long to address tax injustices which are blindingly obvious to citizen tax payers. I refer to retail property taxes, IHT, the non-allowability of expenses and in particular of child care costs for working mothers; and lastly, property taxation and VAT.
Perhaps the most pressing is the treatment of local high street shops’ business rates versus out of town stores property taxation. The latter remains modest, while high streets are closing down because the businesses – large and small – do not support the prevailing high levels of business rates and rental costs. Out of town stores should pay a great deal more and high street shops a great deal less tax to achieve a fair balance and to save our high streets.
I believe it was also wrong, and the wrong time, to reduce so substantially the tax deductibility of interest costs on domestic rental incomes. The provision of much needed accommodation over that last decade has depended substantially on the buy to let market. We are moving towards a position where it is no longer an attractive investment and the supply will ebb, because of the sharp reduction in the tax allowance of interest as an expense against rental income.
Recent polls have shown that a significant majority of voters dislike inheritance tax, and think that the 45 per cent flat rate is too high and that the level of £350,000 at which it applies is far too low compared with the US, where IHT only applies at levels of substantial wealth.
Most citizens would like to get rid of IHT, which I hope the Government will consider seriously. For British citizens, it is a punishment for saving. In the meantime, there are also particular aspects which are unfair – for example a brother and sister who have shared the same house for many years ought to be treated the same as a married couple. At present, when one dies the survivor is often forced to realise their half of the property they have lived in together, and may not be able to afford suitable alternative housing.
Where both partners in a marriage or relationship work full time, as is now usually the case, (more women than men are employed), any children below school age have to be looked after in some form of nursery. The Government has partially addressed this issue by providing limited amounts of free nursery facilities – that is if you can get into one near where you live.
The free care may cover the morning, but the afternoon care has to be paid for, and the costs of it are alarmingly high. This issue mostly applies to the mothers. The point is that they cannot work without incurring the costs of nursery facilities. These should surely be a tax-deductible expense.
The individual cannot work unless they are paying for childminding services. Those justifying the present regime have argued that having children is the choice of the parents, and so couples with or without children should be treated alike. The weakness here is that if everyone decided not to have children, mankind would die out.
Essentially the same issue applies to self-employed individuals needing to hire an assistant in order to deal with their requirements. While the individual cannot run their business without such assistance, the cost of this is not tax deductible against the employer individual’s income, where their remuneration is paid via PAYE. This means that the individual is having to pay for such assistance out of after-tax income.
Where VAT does and does not apply on building works is a mystery to most people. It is determined by what was agreed when we joined the EU and is in need of rationalisation, especially as it can affect charities. This was impossible whilst we were EU members, but could soon be rationalised.
Finally, the television licence is in the news. The principle ought to be that those who wish to watch the BBC pay a fee for it and those who do not do so, but may watch other channels, do not pay a licence fee. It ought to be possible to monitor any houses watching the corporation’s programmes, but not paying the fee, who can then be billed. Possibly the easiest way of dealing with people being able to receive the BBC for paying nothing would be for it to be required to copy the type of arrangements which other fee-paying channels already operate?