Abolish the budget, cut spending and taxes
Furthermore, the budget should not be used to bring in tax legislation because Finance Act measures are not properly scrutinised or debated in parliament, leading to poor tax design.
The government should set out its spending plans each autumn for the following three years. The March budget should then simply set the level of borrowing and the rates and thresholds of existing taxes necessary to meet spending levels. That way, we could properly scrutinise a much smaller number of budget decisions.
But, given where we are, what should be done? The chancellor should cut spending and remove the ring-fences; especially implicit ring-fences around those welfare benefits increased by Gordon Brown. The priority with regard to tax should be to cut damaging taxes that raise little revenue. The 45p income tax rate should be abolished. Also, the higher rate tax threshold needs to be raised: the coalition will preside over a near doubling of the number of people paying higher-rate tax, which is no longer just paid by the rich.
Corporation tax should be reduced to the basic rate of income tax. Inheritance tax thresholds should be increased hugely, and the tax should be turned into a tax on gifts received rather than on estates (as a transitional measure before abolition). Inflation indexation relief should be reintroduced for capital-gains tax to ensure that investors are not taxed on illusory gains. We should have radical supply-side reform too. But, there are 364 other days for this. Budget day should focus on taxes.
This article originally appeared in The Observer.