4th August 2019
Last week we called on the new prime minister to cut 5 taxes in order to boost the economy. This week we are looking at how productivity can be improved. Writing for CapX our policy analyst, Ben Ramanauskas identified 5 policies for chancellor Sajid Javid to sink his teeth into.
Housing - The most pressing issue is a housing crisis born out of a restrictive and outdated planning system. Allowing supply to keep up with the demand for new homes would bring huge economic benefits and take the pressure off households struggling to get by.
Business taxes - The Conservatives have cut the headline rate of corporation tax and have pledged to continue to do so. However, they have also reduced the value of what are known as the depreciation deductions for investments. As a result, the effective marginal tax rate has actually increased. Again, this discourages investment and so keeps productivity low.
Transport - The first order of business for new Transport Secretary Grant Shapps should be to scrap HS2, and spend the tens of billions of pounds on transport infrastructure that would actually increase productivity.
Reform income tax - The government should combine income tax and national insurance contributions into a single flat rate of 30 per cent. The threshold should also be linked to inflation, to avoid the lowest earners being dragged in to paying income tax.
Automation - The government should also encourage businesses to embrace automation. Automation is a key driver of productivity growth. It is estimated that widespread adoption of automation using AI technologies has the potential to increase productivity in the UK by 25 per cent.
Rich List Roadshow: Bath
On a glorious Friday lunchtime the TPA visited Bath as part of the Rich List Roadshow tour to highlight the very large remuneration paid to its council bosses. Data from our Town Hall Rich List shows the Strategic Director for Resources was paid £424,250 in 2017/18. The bulk of the pay is made up of a pension and loss of office contributions but shows exactly why a cap of £95,000 should be introduced on exit payments.
Worse still, "only" 9 bosses were paid more than £100,000 in 2017/18 but for 2018/19 the figure has risen to 12!
Many locals we spoke to were stunned that council staff are paid such large salaries and questioned why the money wasn't spent on improving front line services and improving the high street.
Cuts to stamp duty ahead?
It seems the prime minister may already be heeding our calls for tax cuts. Last week Boris Johnson suggested drastically raising the threshold for paying stamp duty from its current level of £125,000 to £500,000. At the same time the top rate should be cut from 12 per cent to 7 per cent.
Commenting in The Daily Express on the promising news our researcher Scott Simmonds said:
"Many taxpayers were over the moon to hear Boris talk of raising the stamp duty threshold, as well as lowering the top rate. Stamp duty is one of the main reasons housing costs have gone through the roof.
"There’s a housing crisis in this country, with many people unable to afford to buy their own home. But stamp duty land tax wacks up costs for buyers and means that people who would like to downsize are stuck in large houses, while young families are trapped in homes which are too small. The new Prime Minister should throw the kitchen sink at this issue, with real reform of the planning system and even abolishing this hated tax completely."
HS2 splashes the cash
A Freedom of Information (FOI) request by the TPA revealed that HS2 Ltd spent £5 million of taxpayers' money on 'community engagement' for the last three financial years. The FOI also revealed that "nearly 3,000 pupils attended construction safety workshops at 37 schools". No explanation was offered as to what relevance this has to the construction of HS2.
Unfortunately there was more bad news for taxpayers as the bill for HS2 consultants has risen to £1.2 billion. The total spent so far on the entire project is thought to be £6.6 billion and yet not a single piece of track has been laid.
Commenting on the news in The Sun our political director James Roberts was quick to criticise the vanity project, "The HS2 gravy train is dishing out mega money to professional consultants and top bosses, all at taxpayers' expense."
Don't sugar-coat sin taxes
The searing heat of recent weeks has seen many people enjoying refreshing sugary drinks and ice creams to keep cool. There's a bitter taste on the horizon though as nanny state 'experts' are pushing for a pudding tax in addition to the deeply unpopular sugar tax. Our volunteer Michael Ward examined why another 'sin tax' would be a terrible idea.
On the effectiveness of sin taxes he writes:
"One study found that only 1 per cent of consumers actually stopped drinking soft drinks after the introduction of the UK sugar tax. This is indicative of the effects of sin taxes around the world. For example, in Mexico, a sugar tax was introduced in 2014. The annual sales of soft drinks averaged 160 litres between 2007-13, rising to 162 litres in 2014 and only slightly decreasing to 161 litres post-tax."
And these taxes impact those on the lowest incomes most of all:
"The fairness and regressive nature of sin taxes must also be questioned, as according to the Office for National Statistics, around 30 per cent of the poorest households’ disposable income goes on indirect taxes such as VAT and alcohol duty."
The TaxPayers' Alliance will continue to campaign for the abolition of the Soft Drink Industry Levy (sugar tax) and fight against any future nanny state taxes/policies.
Taxpayers will foot the bill, you can bank on it
More controversy from Scotland as the new state-owned bank will use public cash to pay its chairman £1,250 per day. The Scottish Mail on Sunday reports that the Scottish National Investment Bank will spend taxpayers' money in an attempt to boost the economy. A job advertisement for the 'Chair of the Board' of the bank promises the successful applicant up to £60,000 a year for only 48 days work.
Our policy analyst Ben Ramanauskas was less than impressed with the news, "When the SNP has increased taxes on the people of Scotland and has had to be bailed out by the UK Government to the tune of over £700 million, now is not the time to set up an investment bank."
"People in Scotland should not be forced to pay for this vanity project and certainly should not be paying some unelected bureaucrat £60,000 for 48 days' work."
Instead of seeing taxpayers as cash cows, the Scottish Government should get its finances in order and focus on providing the high-quality public services the people of Scotland deserve.
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