If I Were Chancellor...I'd Cut Down on Budgets

Last Updated Mar 22, 2010 8:19 AM EDT

If I were Chancellor...

I suspect I would be incredibly busy. The main items on the agenda? Now there's a question.

Finding some extra cash has to be a priority and since I do not have enough information to try and slash costs, I would have to focus on revenue. Looking at the tax take realistically, the only taxes that deliver substantial amounts are income tax (especially if you include National Insurance) and VAT.

On income tax I would love to go for simplicity, accept that National Insurance is a tax and merge employees' contributions with income tax. Let's be honest and say that the lowest rate of tax you can pay is 31 percent and the highest 51 percent. Painful though it may be, the easiest way to collect a lot of tax is to increase the basic rate -- everybody pays it and everyone would complain, probably an election loser!

One other thing -- why are dividends taxed differently to everything else? Why can we not just collect tax at normal rates on the amount received instead of harking back to a tax credit system that was abolished over 10 years ago. Just think of the saving in time and paper that would achieve (oh and some extra tax too).

In terms of tax avoidance, the gap between income and capital gains tax means there is a lot of scope for planning. The CGT rate has to go up (even though the overall impact should be small) -- probably to 30 percent. I'd also abolish entrepreneurs' relief -- the effort involved to save a maximum of £80,000 is quite frankly out of all proportion.

Picking up the theme of MP's expenses, think MP's should also pay tax on the same basis as everyone else. If any other employee were to work away from home for a five-year period, the tax-free reimbursement of travel, accommodation and subsistence would be taxable.

I hate employers' National Insurance -- taxing jobs, particularly in a downturn, feels all wrong. But if you abolish it where do you make up the difference? The take from National Insurance this year is estimated at £94,873m and over half of that must come employers' contributions. I might just have to live with this one for now.

My shopping list is long -- complexity of law, uncertainty, the recent spate of back-dating... it all needs attention. Can't we commit to living with rates and law for a fixed term so everyone can plan sensibly without having to revise things after every change?

Let's put a limit on Budgets -- two in the lifetime of the current administration or you have to call an election. At least then the proposals and law may be considered properly rather than introduced in a hurry and changed six months later.