2020 Tax Commission: Austerity and growth are inseparable
It’s time for the Government to start showing that austerity and growth are inseparable if we want to achieve real economic prosperity
Austerity vs growth. Growth vs austerity. From the current debate going on in Westminster you could be fooled into believing that austerity and growth are mutually opposed enemies. The Prime Minister is described as prioritising austerity, while Ed Miliband presents what he argues is an alternative “pro-growth” strategy. Regrettably, for the Government and an opportunistic Opposition, few in Westminster are communicating to the British public that neither is achievable without the other. Austerity and growth are inseparable.
At this make-or-break moment for the British economy, the Tax Payers’ Alliance has launched the final report of the 2020 Tax Commission it has been running with the Institute of Directors. They hope the new report will fill a gaping vacuum in British political debate.
Its report calls for a return to growth (check) in a way that is fiscally responsible (check). Cutting through the mercurial half-truths currently dogging debate surrounding the economy in Westminster, the 2020 Tax Commission is a serious, gimmick-free solution to Britain’s moribund economic prospects. Eighteen months in the making and drawing on the experience of senior economists, it is bold but achievable.
The report calls for broad tax cuts on income and a simplification of Britain’s convoluted tax system. Under the proposals, total marginal tax rates would not exceed 30 percent (including National Insurance even the Basic Rate is currently over 40 percent), and the personal allowance would rise to £10,000. Crucially, the report recommends that taxes and spending should not exceed more than 33 percent of national income, as high spending has historically correlated with anaemic GDP growth (if that sounds all-too familiar, the public sector currently spends nearly 50 percent of our national income).
Lower taxes should also go hand-in-hand with localism, and the TPA’s campaign calls for local authorities to raise half of their spending power from local taxes. This should suit all political parties, not to mention their constituents. The local services and taxes deemed necessary in West London are not necessarily the same as in West Bromwich.
The TPA’s proposals would be a shot in the arm for British business, merging income tax and employees’ and employers National Insurance and replacing corporation tax, taxes on dividends and Capital Gains Tax with a single tax on capital income. Who can blame the private sector for being hesitant to hire new staff when Britain’s international competitiveness is at its lowest point in decades? Individuals and businesses across the UK are crying out for tax relief, and every pound given back to the British public is a pound back in the hands of the workers who earned it.
What is most refreshing about the 2020 Tax Commission is its sheer pragmatism. Statistics and data, rather than empty rhetoric and meaningless catch phrases, are used to support the argument for tax reform. If the 2020 Tax Commission proposals were enacted, a two person household with an income of around £28,000 would receive a tax cut of £3,400.
Politicians of all political parties speak eloquently about the so-called Squeezed Middle. The launch of the 2020 Tax Commission is time for them to stop talking and start acting. Could any of the current 650 MP’s in Parliament look a hard-working member of their constituency in the eye and oppose a fiscally responsible economic plan that would return money to the pockets of the same people who earned it?
It’s time for the Government to stop paying lip service to growth. Embracing the proposals in the 2020 Tax Commission would be a step away from obfuscation and one towards real economic growth and prosperity.
Andrew Collinson is a London-based writer
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