Later this morning Osborne will deliver a speech on tax simplification. Guido looks at the economy and sees real trouble ahead, it needs decisive action, not hand-wringing words from politicians about tax simplification. The property market is seized up and consumer confidence is draining away. A massive pro-growth tax package is required now, the earlier the better.
George Bush is pushing a bi-partisan growth package targeting $150 billion in tax relief at individuals and businesses to kick-start private sector spending. That is a stimulus equal to 1% of U.S. GDP.
In the U.K. the equivalent amount would be a £13 billion, a quarter of what the government has used to prop up one insolvent bank to protect a mere 6,000 jobs in Labour’s North East heartlands.
A growth package should include two simple elements of action:
Housing market – stamp duty should be abolished for two years to help resuscitate the property market. House builder shares have slumped as demand expectations have plummeted, this is a relatively cheap way to boost sentiment and help young families in particular.
£500 per taxpayer flat relief – no matter what your level of taxation. This would disproportionately favour those taxpayers on lower incomes, boosting high street spending at a difficult time for retailers. It is simple and easy to implement, would be populist and would let individuals, rather than Whitehall, decide their own spending priorities. The receipt of a cheque for £500 by millions of taxpayers would boost economic growth from the bottom up in a healthy, decentralised way.
Greenspan says today the U.S. is teetering on the edge of recession, Mervyn King has said the same of the U.K., the cost of not acting now will be higher later…
UPDATE: Just read Osborne’s speech and am reminded that it is is already Tory policy to lift the stamp duty threshold for first time buyers to £250,000, taking nine out of ten out of the tax altogether.