Some good, and some bad, from UKIP’s Party Conference
Sep 2014 26

UKIP today announced a number of new policies, the details of which can be found here. Jonathan Isaby, Chief Executive of the TaxPayers’ Alliance, responded by saying:

“For every good policy announced today, UKIP conjured up a bad one. Despite all the talk of simpler, fairer taxes, many of the proposals announced today will only increase taxes and add further complexity to our already baffling tax system. The frankly bizarre “luxury tax” on handbags and Jimmy Choos would be a nightmare to administer, add hundreds of pages to the tax law books, and would send a very strong anti-aspiration message.

“All parties should promise to abolish the unfair and unjust Inheritance Tax, and the Barnett Formula needs significant reform. But where were the radical proposals to reduce spending? It’s wrong to claim savings from HS2 – which should be scrapped – could pay for anything else, as the money needs to be borrowed anyway. Tax cuts deliver economic growth and raise money in the long-term, but they must be accompanied by clear proposals showing how to bring the deficit down.”

Ed Miliband’s new taxes are “lazy and dangerous”
Sep 2014 23

Responding to Labour’s plans to introduce a number of taxes and increase spending on the National Health Service, Jonathan Isaby, Chief Executive of the TaxPayers’ Alliance, said:

“This was sixth form socialism of the most uninspiring kind. It is lazy and dangerous to implement populist measures that won’t raise the money politicians promise. Windfall taxes will hurt pensioners who rely on stable returns for a comfortable retirement, sin taxes hit the poorest hardest, and a Mansion Tax would be a vindictive gesture that will eventually find its way down the property ladder to hit much less expensive homes, too.

“If we want more money for essential services and cancer drugs in the NHS then there must be a serious and sustained war on wasteful spending, alongside a rigorous reassessment of priorities.”

A Mansion Tax is a very bad idea
Sep 2014 23

And here’s why.

It’s unfair

  • Why should people who purchased properties that have appreciated in value be subject to an arbitrary annual penalty? More here.

Politicians can’t be trusted

  • Eventually this tax will be extended to more home owners. As with Stamp Duty, thresholds will be lowered and/or frozen and rates increased while house prices go up.  This is the case with all new taxes.

Property is already heavily over-taxed

  • Britain already has the highest property taxes in the developed world. At 4.2 per cent of GDP they are more than double the OECD average.

It would be an administrative nightmare

  • How would further appreciation be treated? Given than house prices increased by 8.4 per cent in 2013, more and more 2 bedroom flats will become “mansions” in the near future.
  • How this would be assessed is unclear. Would there be a revaluation every few years or would average price increases be applied for each local authority? The first approach would be very expensive whilst the latter would be inaccurate and open to legal disputes.
  • Perhaps there would also need to be a “Home Improvements Inspectorate” to make sure owners of homes close to the threshold weren’t surreptitiously building conservatories to turn their terraced houses into “mansions.”

It would distort the market

  • In the five months after the 7 per cent Stamp Duty rate on properties over £2m was introduced, the number of properties sold by Savills between £1.8m and £2m increased by 37 per cent compared to the same months in the previous year. Yet the number of sales between £2m and £2.2m, just over the new threshold, fell by 29 per cent. Some of this distortion was exacerbated by the clumsy slab basis on which Stamp Duty is calculated. But a new tax on high value properties would have much the same effect. More research is here.

It’s illogical

  • Someone living in a £1.9 million mansion in Surrey with a 1,000 home buy-to-let empire worth hundreds of millions of pounds would theoretically pay no Mansion Tax.
  • But a widow living off meagre savings in a central London home bought in the 1970s which has risen in value to over £2 million would face an annual penalty.
  • The BBC’s Robert Peston believes that “Labour will allow cash-poor mansion owners to roll up the tax they owe, and pay it only when they sell up or die.”
  • So instead the penalties will be passed on (along with 40 per cent Inheritance Tax) to grieving families when the widow dies.
  • Or what if they sell the house? If the tax becomes payable then, that would constitute a large and increasing disincentive for such people to move homes, further gumming up the property market. This would result in a misallocation of residential property assets.
  • If it’s deferred till death, however, that just means short term receipts will be even smaller. And it will be odd that someone with a big tax liability connected to a house doesn’t have to pay it, even though they’ve sold it and pocketed a large sum. Even worse – what happens if the value goes down? Are they still expected to pay this bill even though it wasn’t worth so much when they sold it?

The NHS can improve how it spends taxpayers’ money

  • A quick Google search for “NHS cash crisis” between the dates of 2001 and 2008 will bring up countless tales of the imminent financial collapse of the health service12345 at a time when its budget was being increased at a historically unprecedented rate. Despite the latest funding issues the NHS still has the money to employ Third Sector Environmental Sustainability Leads, Car Park Sustainability Officers and Administrators of Green Travel Facilities.
  • Throwing more money we don’t have into an inherently wasteful and inefficient system is counterproductive.
  • In 2010 the National Audit Office said that:

Over the last ten years, there has been significant real growth in the resources going into the NHS, most of it funding higher staff pay and increases in headcount. The evidence shows that productivity in the same period has gone down, particularly in hospitals.

  • There’s no reason to think this time things would be any different without politicians accepting this reality and dealing with it.
Tim Newark speaks to Exeter students during Freshers’ Week
Sep 2014 22

Students dressed as pirates, cartoon characters and much more besides wandering along the streets of Exeter — it had to be Freshers’ Week! More soberly dressed University of Exeter students gathered for a Freshers’ Week TPA event at the Imperial pub, a favourite with local students for many years and situated next door to the campus. Continue Reading

As Scotland votes no, we demand change to the Barnett Formula
Sep 2014 19
  • Scots receive over £1,600 per person more in public spending
  • Lord Barnett, the former minister who devised the formula, called it a “terrible mistake” and “national embarrassment”
  • TPA also calls for a change to Scottish MPs’ voting rights in Westminster

After the No vote on Scottish independence, the TaxPayers’ Alliance (TPA) is calling on Westminster politicians to urgently address the substantial constitutional and financial issues thrown up by the referendum result.
As the polls tightened towards the day of the vote, the leaders of the three main parliamentary parties in London promised to protect the Barnett Formula, which since the 1970s has been used to allocate British taxpayers’ cash between England, Scotland, Wales, and Northern Ireland.

However, there is a substantial public spending gap that exists between England and the three home nations with devolved powers – with even Lord Barnett himself, who designed the formula, calling it a “terrible mistake” and “national embarrassment”.

In 2012-13, public spending per head in each of the home nations was:

  • £10,876 in Northern Ireland
  • £10,152 in Scotland
  • £9,709 in Wales
  • £8,529 in England

In an era of devolved government, such spending gaps have become increasingly difficult to justify. Should higher public spending in some home nations be subsidised from taxpayers elsewhere? Why shouldn’t those areas pay for their own promises through higher local taxes?

The Barnett Formula cannot possibly survive. Little more than a crude back-of-the-envelope rule for splitting annual increases in public spending, back in 1978 it was a short-term expedient. It was never designed to last for thirty years and to bear the public scrutiny and resentment it now engenders.

Reform is essential – but politicians have promised to maintain unequal shares.

Jonathan Isaby, Chief Executive of the TaxPayers’ Alliance, said:

“The people of Scotland have spoken, but in their last-ditch attempt to save the Union politicians have also saved the unfair Barnett Formula. It is outdated and has spectacularly failed to address the extremely inequitable situation of taxpayers from one home nation heavily subsidising others. English taxpayers want an end to subsidising Scotland and the Scottish Government wants financial control devolved to Holyrood, so now is the ideal time to abolish the Barnett Formula entirely.

“Furthermore, as even more power is set to be handed to the Scottish Parliament, the time has come to end the anomaly of Scottish MPs voting on policy for other parts of the UK where Westminster MPs have no such say North of the border. English votes for English laws is the only fair way to proceed.”

In 2008, TaxPayers’ Alliance Research Fellow, Mike Denham, authored Unequal Shares, a paper examining the Barnett Formula and public spending across the UK. You can read it in full here.

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