Saturday, March 15, 2008

So I wrote to George Osborne...

I'm writing to you in your capacity as Shadow Chancellor.

I saw your response to the budget and while your points on inheritance tax, fuel, and drink were well made, I cannot help but feel that all parties have somewhat lost the plot on taxation. You're too busy papering over the cracks to see the gaping hole. Taxation only works if people are earning money, and all too many taxes get in the way of that.

The more people earn, the more the government can tax them. This was amply shown by Reagan and Thatcher. The current taxation regime stops people earning.

Consider the fuel duty: a few years ago I was spending what would be today £2000 per year on commuting, and over 75% of that was duty. To add insult to injury, that £2000 is after tax, so I'd have to earn over £3000 just to afford the petrol. Cut fuel duty and you improve the flexibility and profitability of the workforce.

Consider the minimum wage: people earning the minimum wage pay tax. But if it's the minimum wage, isn't that a contradiction? And they still have to pay hugely to get to work. So raise the tax-free allowance enormously to £8000, which is about the minimum wage for a 40-week working year.

Benefits: benefits cost money. It costs more than £1 to dispense £1 in benefits. There's a huge, baroquely complex, infrastructure, not to mention fraud. Why not raise the tax-free allowance to the minimum wage so more people don't have to be paid benefits?

Children and family: it is no secret that Britain faces a demographic time-bomb. Children are currently very expensive for people not on benefits. And caring for older relatives is also expensive. I have a suggestion to cope with this: give everyone, from birth to death, the full tax-free allowance, and let this allowance be transferrable to those family members within the bounds of consanguinuity or civil partnership. This will help the mother stay at home to look after the children, and allow granny to come and stay to help or be helped.

Inheritance tax: this was introduced to break up the great estates. An estate of £1M, great though that may seem, is not a great estate. Please raise that figure to £10M or even more.

I hope you find some of these ideas of interest.

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