Sunday, 18 March 2012

How I'd Do The Budget

Wednesday is Budget Day in the UK. Since I have absolutely no influence whatsoever, I thought I'd blog about what I'd do, if I was Chancellor.  Most of it is to do with tidying up the tax system:-
  • Make everyone file a tax return annually and link the receipt of as many benefits as possible to that.  At the moment, less than a quarter of the UK population files a tax return.  HM Revenue and Customs spends a lot of its time chasing it's tail, collecting tax information from multiple sources and trying to cross reference it without a main data key (i.e. a unique tax number for each person).  In addition, we have multiple different regimes dishing out benefits such as tax credits for low income earners (HMRC), housing benefit (local councils), pension credit (Department of Work and Pensions), etc, etc. Each regime requires yet another set of forms, often duplicating each other. Many people don't claim benefits to which they are entitled. Others get take advantage of the lack of joined up dots and claim things to which they are not entitled or dodge taxes altogether. This will be eliminated if you use an annual tax return as the basis for all benefit allocations without the need for further applications, i.e. if you are a pensioner on a very low income, you would automatically receive pension credit without needing to apply for it separately. It will also eliminate a raft of bureaucracy since a lot of the benefit assessments can be handled automatically by the tax return software. (HMRC provides free electronic tax return filing, which automatically calculates your tax liability/refund.)
  • All couples, both married and cohabiting, to quote each other's unique tax reference numbers on their tax returns. This would allow benefits to be assessed that require information on both incomes without compromising privacy or the principles of independent taxation (eg working families tax credit).
  • Automatic transfer of unused personal tax allowances between couples.
  • Increase the personal allowance to £10,000. That was an election promise. It will increase people's disposable incomes by £100 a month and, therefore, stimulate the economy. In addition it'd take the poorest section of the population out of the tax net.
  • Increase the threshold for the 40% tax band to £50,000 to help the "squeezed middle".  Again, this would put hard-earned Pounds into people's pockets, stimulating the economy.
  • Decrease fuel duty by 8p per litre.  Once you factor in VAT, the total decrease would be 10p.  This would lower inflation, since over 90% of everything is transported by road.  (Note, today I paid 147.9p/litre for diesel.  A year ago, it was 131p.  That is money that is being sucked out of everyone's pockets but it is particularly felt by the poorer sections of society since food prices are being inflated to cover transportation costs.)
  • Impose stamp duty on the sellers of homes as well as on the buyers.
  • Remove the exemption from stamp duty on property that companies currently enjoy.
  • Change the basis for funding the NHS. (This is a whole rant on its own.). I'd scrap the current unpopular proposals and, instead, just change the basis on which the NHS is funded. The change is simple: hospitals, doctors and other NHS services only get paid when they treat patients. The current model pays out whether patients are treated or not so patient care isn't the primary focus - maintaining their budgets is. In addition, companies and units are awarded expensive contracts to provide services exclusively in an area.  Under my model, any licensed medical organisation could do NHS work, so long as it was prepared to accept NHS pay rates and deliver the accepted levels of care. Nobody gets awarded expensive contracts. Bureaucracy is automatically discouraged because it doesn't treat patients and, therefore, doesn't bring in money. Expensive PCTCTs can be disbanded because they will have no further purpose.  (You could keep one to work out what rates to pay for treatments and to administer the payment of bills, but you don't need the other 50+ "commissioning bodies".)
  • Increase tax relief for research and development.
  • Give tax breaks to companies which develop and manufacture goods in this country.
  • Change the basis of local government funding from the current Council Tax, which is levied at a series of banded rates depending on property values, to an income tax levy which is collected centrally and then distributed based on a formula determined by population and land area.  This would be fairer.
  • Decrease employer's National Insurance, which is nothing more than a tax on payrolls, by 1% to encourage hiring more staff.
That's what I'd put in my "Budget for growth".

- Pam

No comments: