Abolish the budget, cut spending and taxes


Lifestyle Economics
The chancellor should announce that this will be the last annual budget of its type. Unfortunately, the budget is now used to make announcements that have nothing to do with Treasury responsibilities. Osborne will try to generate good political headlines, and that normally leads to bad economic policy.

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.

Philip Booth is Senior Academic Fellow at the Institute of Economic Affairs. He is also Director of the Vinson Centre and Professor of Economics at the University of Buckingham and Professor of Finance, Public Policy and Ethics at St. Mary’s University, Twickenham. He also holds the position of (interim) Director of Catholic Mission at St. Mary’s having previously been Director of Research and Public Engagement and Dean of the Faculty of Education, Humanities and Social Sciences. From 2002-2016, Philip was Academic and Research Director (previously, Editorial and Programme Director) at the IEA. From 2002-2015 he was Professor of Insurance and Risk Management at Cass Business School. He is a Senior Research Fellow in the Centre for Federal Studies at the University of Kent and Adjunct Professor in the School of Law, University of Notre Dame, Australia. Previously, Philip Booth worked for the Bank of England as an adviser on financial stability issues and he was also Associate Dean of Cass Business School and held various other academic positions at City University. He has written widely, including a number of books, on investment, finance, social insurance and pensions as well as on the relationship between Catholic social teaching and economics. He is Deputy Editor of Economic Affairs. Philip is a Fellow of the Royal Statistical Society, a Fellow of the Institute of Actuaries and an honorary member of the Society of Actuaries of Poland. He has previously worked in the investment department of Axa Equity and Law and was been involved in a number of projects to help develop actuarial professions and actuarial, finance and investment professional teaching programmes in Central and Eastern Europe. Philip has a BA in Economics from the University of Durham and a PhD from City University.

2 thoughts on “Abolish the budget, cut spending and taxes”

  1. Posted 14/04/2013 at 10:58 | Permalink

    For a smaller state, challenge, defeat and destroy feminism as an ideology that is morally and intellectually bankrupt.

  2. Posted 14/04/2013 at 11:00 | Permalink

    To return this country to rationally small government again, destroy feminism as a viable or moral ideology. It really is not that hard to do.

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