Cameron’s was a “positive speech for taxpayers”
Oct 2014 01

Responding to the Prime Minister’s speech at Conservative Party Conference and the announcement of two major taxation policies, Jonathan Isaby, Chief Executive of the TaxPayers’ Alliance, said:

“This was a positive speech for taxpayers, with tax cuts for the lowest paid and long-overdue relief for ordinary people being clobbered by the higher rate of tax. Leaving more of people’s money in their own pockets is not just morally right, but the best way to promote economic growth and long-term prosperity. Taxes in Britain have been too high for too long, and the Prime Minister is absolutely right to want to bring them down for hard-pressed working people.

“The next step must be to bring National Insurance thresholds in line with Income Tax, taking those on the lowest pay out of tax altogether.”

Our reaction to the Chancellor’s speech: Much more must be done
Sep 2014 29

Responding to the Chancellor’s speech at Conservative Party Conference, Jonathan Isaby, Chief Executive of the TaxPayers’ Alliance, said:

“The Chancellor is spot on that you can’t tax your way out of a deficit, and that Britain’s astronomical debt must be dealt with. However, much more needs to be done to face up to the huge challenges Britain faces. That means radical tax reform, a war on waste, and another hard look at public spending.”

On the freeze of working age benefits, he continued:

“Freezing benefits is a necessary step towards restoring discipline to our public finances, and ensuring that taxpayers get a fair deal from the welfare system. The benefit system must support those in need and help people into jobs, but can never become a long-term alternative to work.”

On the headline measure to abolish the 55% “death tax,” he continued:

“A tax cut – any tax cut – is always welcome, but piecemeal measures like this don’t represent the radical reform our tax system needs. Britain needs more vision, more ambition, and more boldness from all of its political leadership.”

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.
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