The following proposals which have recently been advocated by the Centre for Policy Studies were incorporated in today’s budget:
- to make growth the focus of the Budget
- to consult on merging the operation of NICs with income tax,
- to increase the income tax personal allowance
- and to reduce the rate of corporation tax more quickly than expected:
These proposals were first made by the CPS in the following papers:
MERGE NICs and Income Tax
As David Martin outlined in Abolish NICs: NICs are complicated, create perverse incentives and are by and large used in the same way as other government receipts. They should, as David recommended and the Chancellor intimated, be merged. This would be an important first step in simplifying the UK’s complicated person tax system.
Increase personal allowances
Poor people are currently entwined in a system whereby they pay tax on their incomes, have their incomes mean-tested, are given benefits to top up their post-tax incomes and then are taxed on their benefits. As Maurice Saatchi and Peter Warburton highlighted in Poor People! Stop Paying Tax, it is vital that we move away from this convoluted system towards taking poor people out of paying tax altogether. With this in mind, increasing the personal allowance to £8,105 is a good step.
As Michael Forsyth and Corin Talor emphasised in Go for Growth, reducing corporation tax is extremely important in attracting inward investment and job creation. The decision to reduce the main rate of corporation tax by 2% this year (rather than the planned 1%) will be more growth inducing over the course of the Parliament.
Enterprise Investment Scheme
Prior to the Budget, the Enterprise Investment Scheme was limited to companies with 50 employees or less. From April 2012, this will be extended to firms with up to 250 employees. This change was part of a range of measures suggested by Charlie Elphicke in 10 Points for Growth.
But could do more?
However, the Budget could have gone further in attempting to create the conditions that will stimulate significant growth:
- the 50p top rate of income tax should be scrapped now (not when politically convenient) as stressed by Jill Kirby and Iain Griffiths.
- stamp duty on share transactions (also recommended by Michael Forsyth and Corin Taylor) should be abolished.
- plans for new Enterprise Zones should have incorporated proposals for locating them in important regional clusters, such as Sandwich in Kent as suggested by Charlie Elphicke in 10 Points for Growth.
Date Added: Tuesday 22nd March 2011