IEA Submission to the Budget

Abolish the budget in its current form Summary The annual budget should be abolished in its current form. It should be replaced by a simple statement outlining the tax rates, allowances and borrowing levels required to finance the government’s spending obligations as outlined in the previous Autumn Statement. New tax legislation should be introduced to parliament separately and debated by both houses of parliament. The government should commit to maintaining the current system of income tax relief for pension contributions, rather than creating a so-called ‘equalised’ rate of tax relief. The tax-free lump sum available from pension funds should be abolished. The government should not introduce a so-called ‘mansion tax’. Furthermore, marginal rates of stamp duty land tax should be significantly reduced over a five year period. Eventual abolition is desirable. The government should either replace council tax with a tax on imputed rent for homes worth more than £1 million, or introduce a tax on imputed rent on all but primary residences and for all foreign-owned residences. Child benefit should be abolished. It should be replaced with a system of fully-transferable household tax allowances. This system could be integrated with means-tested payments for lower-income households. Inheritance tax should be abolished in its current form. A lower rate of tax of 20 per cent should be introduced on lifetime gifts received over £500,000, with generous allowance for small gifts received by low earners in individual years. The 40p income tax threshold should be increased significantly. The government should correct for significant fiscal drag seen in recent times by imposing a ‘double-lock’ on the uprating of thresholds over the next parliament (raising thresholds by the rate of increase in prices or wages, whichever is higher). Thereafter, thresholds for all taxes (not just income taxes) should be automatically updated in line with wage growth.