The Chancellor will deliver the Autumn Statement this week. Mr Hammond should use the opportunity to root out waste and introduce tax reform which the nation badly needs to put our public finances in order. He should also help secure the recovery by reducing Corporation Tax and restore honesty to the tax system by renaming National Insurance contributions to Wages Tax and Earnings Tax.
TaxPayers' Alliance has produced the most comprehensive plan for tax reform in recent history through the 2020 Tax Commission, and the most detailed guide of how to reduce expenditure in the Spending Plan. We recommend that the following measures feature in next week's Autumn Statement to put the nation back on track to economic recovery.
Waste
- Root out wasteful spending. Give a full-time role to a minister with a successful business background to root out waste in every department and implement more stringent budgetary processes.
- Re-start the process of assessing the role of every single public body and abolish those that are no longer required.
- Make all public bodies accountable to Parliament by requiring their annual budgets to be approved by the relevant select committee.
- Scrap the HS2 white elephant and use some of the money saved for better value rail and road projects.
Taxes
- Require employers to print the employers’ NI contributions on pay slips.
- Change the name of employer and employee contributions to “wages tax” and “earnings tax”.
- Require dynamic analysis using the HMRC CGE model for all fiscal policy changes announced by the Government.
- Each member of the Treasury Select Committee should be allowed to submit one fiscal policy for full assessment using the CGE model each year.
- Cut Corporation Tax to 15 per cent in 2017 going down to 10 per cent in 2018 to boost economic growth.
- Consider increases to Capital Allowances including an increase in the Annual Investment Allowance back to £500,000.
- Recommit to the freeze in the Carbon Support Rate up until 2019, and seek to phase out the Carbon Floor Price thereafter.
Welfare and Pensions
- Abolish the triple lock and link the State Pension to CPI.
- Flatten housing benefit rates across expensive areas by reducing the number of broad market rental areas (BRMAs) to cut 10 per cent of spending.
- Means test winter fuel payments. At a minimum, means testing should be introduced for new claimants from April 2017.
- Immediately adopt a market discount rate to give a realistic value of the unfunded public service pension liabilities.
- Commission an independent review into the benefits of moving public service pensions to a defined contribution or notional defined contribution basis.
Speaking ahead of the Autumn Statement, John O'Connell, Chief Executive of the TaxPayers' Alliance, said:
"With the nation's public finances still in disarray, the Chancellor should use this week's Autumn Statement to introduce transparency to our tax system and cut pernicious taxes to ease the pressure on taxpayers struggling with rising bills.
"Successive governments have added unnecessary complications to our labyrinthine tax code, rendering it unfit for purpose. It is time to drastically simplify our tax system and root out every bit of wasteful spending in the public sector."