Latest article by John Blundell in The Scotsman
We authorise far too much taxation because we offer the illusion of “free services” whether they be roads or hospitals or schools. Taxation neuters the economy. I want to be remembered as the Chancellor who opened up our national life. I am going to cut all taxes – sharply.
Let us agree to examine the success of my measures next year. My assumption is that lower duties may raise higher revenues. Freed of the burden of taxation, everyone will be more active; the very nature of the economy will take a surge. At low tax rates, the evasion of taxes becomes a waste of time. History confirms this, but in modern China and India we observe this paradox that a light tax regime generates far more revenue.
My first measure is to impose a rule that all retailers must price their wares with pre- and post-tax prices. Every forecourt will make it plain that a litre of fuel may cost 75p but that 70p of that is tax. No longer, I hasten to add, I am lopping 50p off a gallon.
In all the supermarkets we will see what foods would cost but for the levies that they carry. The iniquitous Common Agricultural Policy is beyond my powers to reform but at least everyone will see how it doubles the cost of everyone’s groceries.
Income tax, in league with the tax we call national insurance, is more than an oppressive burden on all enterprise; it also distorts all the price information about the value of everyone’s work. As of 4 April, there will be only one income tax rate – 20p in the pound. I acknowledge that this may create massive unemployment among accountants, but they will have to retrain to perform useful services. NI, Lloyd George’s folly imposed in the 1906 Budget, is hereby abolished.
If anyone purports to be “unemployed” after these measures, we will know that they are not trying. My assumption is that the entire commercial life of the UK will rediscover a vitality not seen for generations.
For the past 100 years we have taxed profits and “unearned” income at rates that have been so punitive they only created professional evasion tactics. With no taxes whatsoever on profits, the publication’s patterns of investment and spending will be changed in a manner that none of us can foresee in detail.
My expectation is that the money now at the discretion of our fellow citizens will be far better husbanded than by agencies of the State. Today sees the end of “capital punishment”.
Inheritance tax is henceforth abolished. It purports to catch the opulent, but the wealthy take evading action. In fact IHT is merely a levy on the elderly whose asset is their home. IHT is absurdly expensive to collect. Every £1 taken costs 50p to collect. The relatives of those expiring will make far better use of the sums than my most diligent public servants.
The effect of these overdue reforms will be to make the tax returns of 99 per cent of the population so simple that they should be no longer than a postcard and take barely a minute to complete.
It is argues that, as a province of the European Union, we are obliged to raise VAT to 20 per cent by 2008. I would welcome having this tested in the courts.
In the meantime, I am reducing VAT from 17.5 per cent on all transactions to a plain 10 per cent. Those items currently excluded from VAT, such as children’s clothes and newspapers, will be subject to the uniform rate. The government will ratify no further EU demands for tax “harmonisation”. Britain will compete through lower taxes.
I propose to withdraw the cascades of cash we gift to local authorities from the Treasury. In future, municipal bodies will need to raise their own revenues.
The UK’s entire commercial life will rediscover a vitality not seen for generations
My calculation is that this will create local discipline as communities will find themselves responsible for what local authorities do in their name.
I will bring forth further details, after consultation, by which all parents can elect out of local authority schools and create their own or contract in teaching teams.
Those who opt out of this failing municipal service will need a tax rebate identical to the saving they offer their councils. It is worth noting here that private education contributes to the national income statistics while council provision is merely a transfer payment. National income will soar as quickly as educational standards.
We must wean the universities from their status as nationalised entities. I propose a one- off endowment to every university. After this gift they will cease to have any claims on the Treasury. They will earn their income from teaching and from research. This way they will restore their crumbling fabric. Some will become pre-eminent, some may close.
To celebrate this catalogue of enlightened policy, I will be reducing all taxes on alcohol and tobacco products by 20 per cent. I predict an early proof that lower taxes will bring in higher revenues. I am confident the nation’s off-licences will prove this simple dictum before Easter is past.
I turn now to those parts of the Treasury’s expenditures I will alter or abolish.
Taking my cue from the Liberal Democrats, I will dissolve the Department of Trade and Industry. Some ceremonial duties may need to be preserved and we will need a body to police free trade. The small residue will be called the Board of Trade.
Its satellite bodies, such as Scottish Enterprise, will be allowed to continue but without public funding. If SE’s investments are as shrewd as it says, then the organisation can live on its dividends.
The devolved bodies in Edinburgh, Belfast and Cardiff strike me as a waste of money, but I will leave them to raise their own funds from levies on the people of Scotland, Ulster and Wales. My assumption is that they will find no popular clamour for regional bureaucracy.
In my forthcoming Budget measures, I envisage imposing a duty on all State procurement programmes to ensure delivery on price and on time. This will prove a cultural jolt to the Ministry of Defence, but it has to learn that the threat from the Soviet Union has evaporated. Our national enemy, if we have one, is embodied in the autocratic agencies of the European Commission in Brussels.
In 1947, the Germans liberated their economy by removing all the controls, levies, taxes and regulations inherited from their past. We all know how that liberalisation gave life and hope again. Today we can see the Germans quietly strangulated by the drizzle of regulations from Berlin and Brussels.
My Budget is a simple design …to give the nation back to the people. Let them choose their priorities. Let them apply their energies and talents.
John Blundell is the director general of the Institute of Economic Affairs