Damned if she does
And damned if she doesn’t.
I fully realise that I’m in the minority on this one (or perhaps a minority of one – ed) but I genuinely feel some pity for our Chancellor of the Exchequer, Rachel Reeves. In preparing for the imminent Autumn Budget, she finds herself in an impossible conundrum. Firstly, with a fiscal black hole estimated to be between #20bn at best and #50bn at worst, the tax revenue picture is dire. Secondly, with even her own backbenchers hounding her every move she cannot significantly cut expenditure. Thirdly, economic growth is non-existent. And finally, her own self-imposed financial straightjacket means she can’t increase income tax, personal national insurance or VAT. However, the fact is, that to balance the country’s books, she needs to find money, and quick. So what are her options? A wealth tax? A mansion tax? A gambling tax? An increased inheritance tax?
Due to the widespread perception of being forced to pay tax on money that has already been taxed once, inheritance tax remains the most hated in the country, resented even by those who don’t have to pay it! To counter this, apparently, Ms Reeves is considering placing a lifetime cap on the value of a property an individual can hand down or ‘gift’, and cutting the ‘seven year rule’ that allows the passing on of these tax-free gifts. Would these modest amendments compensate, in the minds of those having to pay an increased percentage of inheritance tax on their estate? I doubt it.
Reforming the council tax system, still based on 1991 property valuations, is next on the list and widely viewed as being long overdue. Even limited reform would witness a fairer system within the nationwide price bands. Further property tax changes being mooted include the actual replacing of stamp duty, and perhaps even council tax as well, with a land value tax – an annual levy on the undeveloped value of the land on which the property sits. Complex or what and the question remains if this would actually improve matters or generate any cash! The final option is to introduce capital gains tax on primary residences at more than #1.5m, meaning a possible 24% on any profit made over this value. Popular? No way, Jose, and good luck with that, Rach.
Rachel’s problem, (and no doubt Reform’s first Chancellor’s next time around!) boils down to the fact that the state’s top expenses – the NHS, welfare, pensions and defence – are, largely as a result of our ageing population and geopolitical uncertainty, growing considerably faster than the economy. Labour has been willing-ish to make enemies, including pensioners, employers, farmers and parents with children in private education, and this looks set to continue.
At some point in time we have to accept the obvious need to both tax everyone more (the rich, the royalty, the non-doms and the rest of us) whilst massively slashing spending. Sadly, everything has to be on the table and fair-game, including the removal of the pension triple-lock. The Labour government and Reeves must be honest and radical with the country and we need to be grown-up, mature, realistic and socially-oriented about the reality of the situation. Sorry.
