Matthew Lesh, Head of Public Policy at free market think tank the Institute of Economic Affairs comments ahead of this Friday's fiscal event
The fiscal event is a key opportunity for the government to reset the agenda and demonstrate their interest in boosting Britain's prosperity.
The cost of living crisis can only be meaningfully addressed with reforms that boost the ability of the economy to produce goods and services; this means addressing how the tax system discourages investment and work.
An agenda to boost productivity and make work pay could include:
- Reverse the NI increase for employees and employers, which constitutes yet another burden on working age people at a time when jobs are insecure, inflation is rising and wages are squeezed.
- Cancel the planned increase in corporation tax (from 19 per cent to 25 per cent). Raising the rate of corporation tax will discourage investment in the UK, lower productivity and put donward pressure on wages.
- Introduce full expensing', that is, an immediate 100 per cent capital allowance for all plant, machinery and building investments in the corporation tax (replacing the super deduction). This could supercharge business investment by as much as 10 per cent, helping reverse Britain's stagnating productivity and economic growth.
- Exempt new buildings and plants from business rates, ensuring the tax system does not discourage improvements.
- Reform income taxes by unfreezing thresholds, abolishing the 45p income tax rate and removing the 60 per cent effective marginal tax rate at 100k-125k, thus encouraging people to work.
- Increase the stamp duty threshold to over 1 million, and reform council and business rates, to unstick the property market and encourage people to downsize into more suitable housing.
- Launch a radical tax reform white paper with the goal to simplify the system and increase productivity.