Even for the August silly season, the number of kites being flown above 1 Horse Guards Parade over the past few weeks has been manic.
Each one has carried ever madder proposals for tax hikes that the Chancellor is said to be considering for the Autumn Budget to help fill the ‘black hole’.
They range from the sublime to the ridiculous, from capital gains on your first home to charging National Insurance on a landlord’s rental income – and even a new wealth tax.
Kite-flying is a common enough sport within Whitehall. All the parties do it. Get the really extreme ideas out in the open and see which ones are shot down the most violently, leaving Treasury policymakers and politicians with the more palatable ones to chew on.
Which is why most of the ridiculous proposals – such as the unholy idea of taxing an Englishman’s castle – have prompted concern but have not been taken too seriously. Until now.
Now the man who is pulling the kites has been uncovered. None other than Torsten Bell, the junior pensions minister who has been promoted to support Rachel Reeves with her Budget.
New role: Torsten Bell has been promoted to support Rachel Reeves with her Budget
Bell’s new role has set alarm bells ringing. As one top business leader put it, his appointment has shifted the mood to consternation and even sheer panic.
Torsten Bell, the junior pensions minister who has been promoted to support Rachel Reeves with her Budget
While head of the Resolution Foundation think-tank, Bell came up with a list of controversial tax proposals which included scrapping the lifetime Isa, big hikes to council tax, CGT on primary homes at a flat rate of 28 per cent, abolishing business and agricultural property relief, slashing VAT threshold to £30,000, raising basic rate of dividend tax from 8.75 per cent to 20 per cent, and so on.
Some, such as abolishing business and agricultural relief, were introduced by Reeves last October.
If any more of Bell’s proposals are adopted, they would only serve to depress further any desire left by private individuals to invest either in private businesses or the public markets – which are already suffering from a lack of investor confidence.
Clearly rattled, the FTSE 100 is down on the week by more than 100 points.
Shares in the UK banks were the latest to crumble, falling nearly £7billion in value on the latest proposal for a new windfall tax levy.
This comes from the Institute for Public Policy Research (IPPR), which claims a levy on the big banks could raise £22billion to help plug the black hole.
The IPPR argues the banks benefited unfairly from the Bank of England’s 2008 emergency economic policy – quantitative easing – and that the taxpayer has lost out to the tune of about £22billion a year.
The think-tank’s logic is not unreasonable. As part of its rescue policy to pump liquidity into the banking system, the Bank bought up bonds from the banks, crediting them with reserves at Threadneedle Street.
While the Bank is winding down its QE programme, the banks are earning 4 per cent on their reserves.
But should they be made to pay for what was obviously a cack-handed emergency rescue, the fault of the Bank and, indeed, the Labour-run Treasury at the time?
Banks are an easy target. They already pay a corporation tax surcharge and a bank levy.
While it’s true that most are in a much stronger position, the danger is that further taxes will constrain what they lend to customers, private and business.
What is so enervating about the political debate is that we only hear about putting up taxes, which will penalise savings and indeed investment in the future growth of the country.
Where are the incentives or reliefs to inspire the next generation of entrepreneurs? Where are the new ideas?
If Labour plucks every single feather from the golden goose, the skin will fall off and only innards will be left.
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