Allister Heath writes in today's Spectator that there's a looming clash between George Osborne and Michael Forsyth over his interim Tax Commission report. Osborne is reportedly asking Forsyth to tone it down, as it apparently proposes £19 billion of tax cuts over a five year period. Read the full article HERE. Here's an extract...
Its 40 proposals include cutting the basic rate of income tax from 22 per cent to 20 per cent, slashing corporation tax from 30 per cent to 25 per cent (and eventually to 20 per cent) and scrapping the 10 per cent starting rate of income tax. The draft even calls for a cut in the top rate of tax as a longer-term aspiration. In a blow to Cameron, and contrary to media reports, the Commission won’t propose any countervailing new green taxes, nor does it address council tax reform.
The poor would pay significantly less tax, with the starting 10 per cent rate of income tax scrapped and hence no income tax payable on the first £7,185 of earnings. There would also be a revolutionary reform of inheritance and capital gains tax; the two levies would be merged. Primary homes would become totally exempt from inheritance tax while the rest of a deceased’s estate would be eligible only for a reformed capital gains tax. This would impose either a 20 per cent or a 40 per cent tax on gains on assets handed down; the rate would be reduced by a tenth every year so that no tax at all would be payable on assets held for a decade.
There would also be help for families with transferable personal allowances, for couples with a child under the age of five, making it less costly for one of the parents to stay at home. Currently parents earning £50,000–£60,000 are still eligible for family tax credits; the Commission wants to ensure that these taper off at a significantly lower rate. It also wants to scrap tax credits for film production and for research and development. Stamp duty on share transactions would be abolished; however, the Commission will not propose to undo Chancellor Gordon Brown’s destructive raid on pension funds.
Contrary to speculation, the plan doesn’t endorse a flat tax. In conversations with Forsyth, Osborne has made it clear that he is especially opposed to the Commission’s proposed reduction in the basic rate of tax. Osborne is concerned that it would be portrayed as helping the rich and the middle classes. Even more controversially, Osborne wants the Commission to consider a £1 billion employee national insurance contributions hike by extending the income range on which they are payable by £5,000.
Osborne and Cameron will have to tread carefully as the radicalism of the Forsyth Commission chimes perfectly with increased unease over tax among Tory backbenchers. Many who had reluctantly begun to accept the Cameroonian view that tax cuts are political suicide are now changing their minds again. Backbenchers have told me that a TaxPayers’ Alliance/ICM poll, splashed on the front page of the Sunday Times last month, created a stir by demonstrating a growing public appetite for tax cuts when sold the right way; they also report that their constituents are increasingly angry about the gross waste of taxpayers’ money that has become the hallmark of Brown’s public sector.
The sentence which leaps out at me from this is this: In conversations with Forsyth, Osborne has made it clear that he is especially opposed to the Commission’s proposed reduction in the basic rate of tax. Osborne is concerned that it would be portrayed as helping the rich and the middle classes.
Excuse me? How can a reduction in basic rate income tax be seen as helping the rich?! I respect Allister Heath but I simply cannot believe that George Osborne would have said that. And since when was it a crime to help the middle classes?
There is a lot of good stuff in what Michael Forsyth is proposing - some of it already adopted by the Liberal Democrats. We have to be brave in this area. No one is going to vote for a mushy status quo. We've got three years to sell a comprehensive package of tax and spending reform. We don't need all the detail now, but we do need to know that the Party leadership and its Tax Commission are united in its aims.