Burnham told to launch £100bn tax reform package
Andy Burnham has been urged to introduce sweeping tax reforms that could generate over £100bn in extra government revenue by a group of influential economists, which includes his own heavyweight adviser Jim O’Neill.
A letter signed by O’Neill, who was formerly a Treasury minister and Goldman Sachs executive, urged the next Prime Minister to introduce major reforms of the country’s tax system.
Andy Haldane, the former Bank of England chief economist who is also advising Burnham, made a similar call in an interview with City PM.
The letter argues that the government needs to implement radical changes on infrastructure spending, welfare benefits and taxes.
Burnham has promised to take a different approach to managing the UK economy based on a critique of “neoliberalism” and a focus on so-called “good growth”. He will enter Downing Street on 20 July should no other Labour MP challenge him in a potential contest, which is seen as being highly unlikely.
The letter signed by top economists accompanies a report by the UCL’s Institute for Global Prosperity, titled Prosperity 2030. The report features a list of 30 policies to “remake Britain”, including replacing stamp duty with a one per cent levy on property valuations that would “end the absurdity of a modest terrace paying proportionally more than a high-value mansion”.
It would mean that families stump up £5,000 each year to HMRC if their house is worth £500,000.
The report also calls for income taxes, national insurance, dividend taxes, inheritance taxes and capital gains taxes to be wrapped together into a “national contributions” tax. It would scale up from zero per cent to a 22 per cent base rate. A 46 per cent top rate would be applied to a “flat definition of income”.
The authors’ projections suggest it would raise up to £75bn after five years.
Solving the £100,000 tax trap
Economists also insisted that the report’s “core” was a tax cut for workers, with those in the £100,000 to £125,000 tax trap due to the stripping of personal allowance also projected to keep more of their wages.
Other key reforms include replacing job centres with training centres for apprentices, moving costs from energy system investments away from bills and onto national taxation, and providing nine “Universal Services” that focus on “support delivered in kind” rather than cash handouts.
The authors argued that policies in the report, which is set to be published on Thursday, would create £38bn in extra fiscal headroom under the current borrowing rules. The redesign of the HMRC tax code would add £101bn in extra revenue each year and convert £16bn in non-disability benefits to services.
Other signatories to the letter alongside the report include Jonathan Portes of King’s College London, who worked at the Treasury until 2011, and Danny Sriskandarajah of New Economics Foundation, a left wing think tank whose former chief – Labour MP Miatta Fahnbulleh – is currently advising Burnham on policy.
The letter notes that taxes were rising faster than in any comparable company yet public services were deteriorating and around £110bn was being spent on debt interest costs.
It says the UK’s problems are “structural and systemic” while adding that “incrementalism will not fix Britain”.