Britain must avoid “taxpayer austerity” to fight back a potential 2.8 million unemployment wave, says TaxPayers’ Alliance

Embargoed 22:00 Wednesday 3 June


  • The economic fallout of coronavirus could dwarf the great recession. To maximise the chances of bouncing back, there should be no taxpayer austerity.

  • Former secretary of state for trade and industry Lord Lilley has welcomed an ambitious package of supply side reforms from the TaxPayers’ Alliance.

  • The campaign group's proposed jobs and investment measures could cut the average wage bill by 38 per cent, put £1,622 in workers’ pockets and boost economic growth, capital investment and the housing market.


With coronavirus measures seeing the economy put on life support and millions furloughed, unemployment is set to skyrocket and investment fall in coming months. Raising taxes now would mean taxpayer austerity and cripple the recovery.

Instead, major tax reform is needed to provide vital support as Britain emerges from the pandemic, according to a new report endorsed by a former cabinet minister. Analysis from the TaxPayers’ Alliance (TPA) sets out five key tax changes that should be made as quickly as possible to rescue the economy:


  • Abolish employer national insurance, cutting a typical business' payroll tax bill by 38 per cent this year.

  • Abolish employee national insurance, meaning an average worker would pay £1,622 less tax this year.

  • Abolish capital gains tax, which according to the Fraser Institute can grow an economy by up to 3 per cent.

  • Increase the annual corporation tax investment allowance to £5 million, which would catapult the UK to the top of the OECD’s rankings for the best treatment of fixed capital investment.

  • Raise the Stamp duty land tax threshold to £1 million, unlocking 220,000 home moves, the equivalent to the total dwelling stock of Manchester, Leeds or Bristol.


Click here to read the research paper

TPA spokesmen are available for live and pre-recorded broadcast interviews via 07795 084 113 (no texts)



The country is facing the threat of mass unemployment, with over 10 million people currently unemployed or furloughed. The estimate of 1.3 million unemployed in the last Labour Force Survey conducted pre-coronavirus crisis accounts for just 10 per cent of the current total. Furloughed employees in the jobs retention scheme (JRS) account for 66 per cent while the self-employed claimants of the self-employment income support scheme (SEISS) account for another 18 per cent. Even if only a tenth of these furloughed staff and half of new claimants fail to retain their jobs, unemployment could potentially swell by another 1.5 million to 2.8 million.



Tax cuts

Bold, powerful action will be needed to reinvigorate the economy in the aftermath of the virus to avoid a prolonged, painful slump which entrenches the structural weaknesses of the economy. The pressing need to take radical action requires a package of reforms that ordinarily would appear daunting and nowhere more so than in the tax system. Substantial tax cuts are required to sharpen incentives and confidence. That means the time for bold tax reform has arrived. Rather than cutting a rate here or raising a threshold there, the government should augment the power of tax cuts by abolishing whole taxes entirely, and replacing them with simpler alternatives when necessary.

These measures would amount to tax cuts worth £100 billion this year, falling to £51 billion next year, before adjusting for dynamic effects on economic activity. However, the true impact on receipts is likely to be substantially lower than these estimates, because of their powerful effect on economic activity and the impact of the pandemic.


Click here to read the research paper


Key measures 

1. A restart for jobs

Employer national insurance should be abolished immediately and replaced with a temporary payroll tax of 10 per cent on wages and salaries (above £4,500 per employee) from October. This would cut a typical business' payroll tax bill by 38 per cent this year. This payroll tax should be phased out entirely by 2026 via consistent annual reductions. 

Over 10 million people are currently unemployed or furloughed. A tax change which reduces the cost of employing staff is vital for incentivising employers to hire more and fire less. Currently, an employer with 50 employees, pays £9,740 a month in employer national insurance. The restart for jobs would eliminate this bill for four months and then replace it with a £8,843 monthly bill from October. The total saving for this example company would be £44,345 this year.

2. A stimulus for staff

Employee national insurance should be abolished immediately, meaning an average worker would pay £1,622 less tax this year. Next year, a basic rate surcharge of 10 per cent on PAYE income tax should be implemented. meaning an average worker would still pay £300 less than currently. 

More money in consumer pockets will be warmly welcomed by the service industry as it seeks to recover from the lasting damage of the virus emergency. 

3. A catalyst for capital

Capital gains tax should be abolished immediately. This alone could grow the economy by up to 3 per cent, using the upper estimates of the impact of abolition in Switzerland. Neither Belgium, Hong Kong nor Singapore have a capital gains tax.

This would have a powerful effect on investment which in turn would lead to increased productivity and higher incomes. 

4. A fillip for factories

Corporation tax is particularly damaging to investment and the government should increase the annual investment allowance from £1 million to £5 million.

This would deliver a tax cut on investment worth £5 billion, boosting it by up to 8 per cent and increasing labour productivity by £2,214 per worker. This would catapult the UK from 33rd to top of the OECD’s rankings for the best treatment of fixed capital investment. The government has already recognised the problem of taxing investment by temporarily increasing the annual investment allowance from £200,000 to £1 million.

5. A release for movers

The threshold at which stamp duty land tax is charged should be raised from £125,000 to £1 million.

Stamp duty land tax makes it harder to move home, meaning that fewer people move when it suits their requirements, such as for a new job or to reduce their housing costs. Raising the threshold to £1 million would increase transaction numbers by 31 per cent, or 220,000. That is equivalent to the total dwelling stock of Manchester, Leeds or Bristol.


Click here to read the research paper


John O'Connell, chief executive at the TaxPayers' Alliance, said: 

"Now more than ever, Britain needs tax cuts, not taxpayer austerity."

"With the economy on its knees and millions facing unemployment, trying to tax our way out of it would be madness. But bold reforms could slash the cost of hiring, boost pay packets and drive a wave of investment which would power up economic growth and kick start the housing market.

"By reducing the most economically damaging taxes now, the chancellor can avoid a deep depression and wave of unemployment by protecting taxpayers and businesses in the recovery."

Former secretary of state for trade and industry, Lord Lilley, said: 

"It is vital to switch the focus from the costs of shutting down the economy to stimulating recovery as we move out of lockdown. Thank heavens the TaxPayers' Alliance are proposing bold tax cuts to boost the recovery.   

"My priorities would be measures which bring forward economic activity, like the proposed increase in investment allowances so that we don’t tax companies when they invest in machinery and factories, but only when their investments generate a profit. Slashing stamp duty, which is a punitively high levy on the cost of moving home, and cuts on employers national insurance contributions to encourage them to take on employees, will do wonders for jobs and productivity. 

“Some of these changes should be on a time limited basis, to limit the cost and encourage people to bring forward expansion plans. But either way, bold tax cuts are exactly what Britain needs.”


TPA spokesmen are available for live and pre-recorded broadcast interviews via 07795 084 113 (no texts)


Media contact:

Sam Packer
Media Campaign Manager, TaxPayers' Alliance
[email protected]
24-hour media hotline: 07795 084 113 (no texts)


  1. Founded in 2004 by Matthew Elliott and Andrew Allum, the TaxPayers’ Alliance (TPA) fights to reform taxes, reduce spending and protect taxpayers. Find out more about the TaxPayers' Alliance at
  2. TaxPayers' Alliance's advisory council.
  3. In December 2019, the TaxPayers' Alliance released the tax burden rankings of post-war prime ministers.
  4. On 25 March, the TaxPayers' Alliance published a statement on the coronavirus emergency.
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