ALEX BRUMMER: 13 things Reeves could do in the Budget to fire growth - but won't because Socialists don't understand economics
Rachel Reeves is widely predicted to introduce a less-than-appetising smorgasbord of painful levies when she stands up in the House of Commons tomorrow.If the kites the Chancellor has been flying in the run-up to this year’s Budget are any guide, we can expect her to penalise capital gains, inheritance, home-owning, pensions and banks.It’s as if she’s learned nothing from the baleful impact of the measures she introduced in her first Budget last October, which stalled growth, spiked unemployment from 4.1 per cent to 5 per cent and hiked inflation to 4.1 per cent.Socialists such as her never seem to understand that Britain will forever be stuck in the doom-loop of high taxation and low growth unless we prioritise the wealth-creating private sector above all else.Entrepreneurship, innovation and endeavour are the keys that will unlock the nation’s potential, and we urgently require a ruthless scaling back of the size of the state and a series of judicious tax cuts.So, here is my list of the measures that Reeves should – but won’t – announce in her Budget.1. Introduce a hiring freeze in the public sector Britain will forever be stuck in a doom-loop unless we prioritise the wealth-creating private sector, writes Alex BrummerStopping recruitment in the absurdly overmanned civil service – 516,000 full-time roles at the last count – would save, over time, an estimated £2 billion a year, as well as dramatically lowering the future cost of funding gold-plated public sector defined benefit pension schemes (see below).If extended to the NHS – which employs 1.5 million people – the saving would be a further £8 billion a year.2. Scrap stamp duty on property purchases Nothing is doing more to strangle the property market than this iniquitous tax, which (apart from first-time buyers) every purchaser of a property priced at more than £125,000 must pay.While it starts at 2 per cent, it spirals to 12 per cent for buyers of properties valued at more than £1.5 million.Getting rid of it would warm the frozen housing sector by encouraging people to move and spur property developers to build more badly needed homes.At present, stamp duty raises £9.2 billion a year. But the actual cost of abandoning it – already Tory policy – would be half that thanks to the dynamic effects of the consequent construction and employment boom.3. Slash the bloated welfare benefits bill Welfare benefits have been rising at a totally unsustainable rate since the pandemic, much of it down to an explosion in the cost of disability handouts for mental health illnesses.The Government got a bloody nose from its economically illiterate backbenchers when it attempted to introduce a modest set of reforms in the Spring Statement that would have cut costs by a paltry £5 billion a year.Reducing the number of unemployed people of working age claiming health benefits by 20 per cent and cutting in-work health benefits by the same amount would eventually save £19 billion a year, according to the Office for Budget Responsibility.4. Abolish the ‘tourist tax’ on shopping The decision to end VAT-free shopping for overseas visitors has been a blight on tourist shopping.Luxury retailers in central London, department stores across the country and designer outlet centres such as Bicester Village in Oxfordshire have all suffered grievously as international consumers have diverted their spending to European centres such as Paris and Milan.This has had a knock-on effect on the hotel market and the hospitality industry.The cost of abolition to the Exchequer is put at £2 billion. But much, if not all, of this would be recouped via increased tax revenue from companies’ higher profits and more jobs.5. Charge customs duties on small parcels This might seem like a minor issue, but it has an outsized impact on Government finances.As things stand, parcels worth £135 or less enter the country tax-free. This has helped fuel a boom in imports, with the value of small parcels sent from China – which accounted for 51 per cent of all the small parcels shipped to the UK from around the world last year – rising from £1.3 billion in 2023-24 to £3 billion in the latest financial year.This has benefited Chinese fashion upstarts such as Shein and Temu at the expense of UK no-frills shopping groups such as Primark and Asos.6. Slash spending on infrastructure The Government has pledged to spend £120 billion on capital spending in this Parliament.Improving our train network and road system, as well as spending more on affordable housing, is all very well. But in the face of economic emergency, we should halve the proposed annual increase in capital investment by £12 billion a year and use the cash to fund tax-cutting initiatives that will promote growth.7. Scrap the company-killing packaging tax An environmental levy to raise up to £2 billion a year is proving to be a major drag on business.The Plastic Packaging Tax sees a levy of more than £200 per ton slapped on all plastic packaging in the UK containing less than 30 per cent recycled plastic. It involves an intrusive bureaucratic inspection process, raises the costs of goods and threatens to drive smaller firms into bankruptcy.8. Abolish the stamp duty charge on shares This penal charge may raise around £3 billion a year but is also driving British savings to other jurisdictions – how absurdly counter-productive.By hitting investment in the UK’s top FTSE 350 shares and deterring new companies from floating on the London Stock Exchange, it has been a gift to the New York and Amsterdam stock markets. What’s more, it operates in direct opposition to the Chancellor’s goal of encouraging share investment in British firms.9. Raise Isa limit for tax-free investing in UK If the stocks and shares Isa limit was raised from £20,000 to £25,000, it would incentivise savers to invest in British enterprise.This would be a far more positive approach than the much-trailed proposal to cut the amount which can be saved tax-free in a cash Isa to just £12,000.10. Extend ‘full expensing’ on firms’ investments After the pandemic, in a bid to encourage investment in new plant and equipment, the Tories introduced legislation which allowed firms to set the cost of new plant and equipment against corporation tax.This benefit, known as full expensing, will lapse next year unless renewed.Yes, it will cost an estimated £10.7 billion a year in terms of lost tax revenue by the end of the decade. But, since it was brought in, full expensing has led to a sharp increase in new investment.Renewing it and extending it to embrace digital innovation, cyber security and AI will boost productivity and turbocharge growth.11. Increase spending on our world-leading R&D Britain is a scientific, biotech and AI creative powerhouse because of our world-leading research universities.But UK backing for research and development via tax breaks and other forms of assistance stands at just at 2.6 per cent of GDP, a figure dwarfed by more go-ahead nations.America supports Silicon Valley by spending 3.6 per cent of GDP on R&D. Israel spends 6 per cent plus. If we went some way to matching their bullish spending, the payback in terms of technological development, start-ups and jobs would be enormous.12. End public sector ‘gold plated’ pensions New employees taken on by the NHS, civil service, local councils and other bodies should be required – like workers in the private sector – to be enrolled in defined contribution pensions, not, as is traditional, lucrative gold-plated defined benefit schemes.Over the decades this would gradually lower the completely unsustainable burden on taxpayers – a liability that is estimated to have risen to a scarcely believable £1.2 trillion.13. Reverse inheritance tax on family farms This legislation, which is a clear and present danger to the family farm, must be dropped before it undermines our efforts to become more self-sufficient in food.Another, less high-profile, inheritance tax raid should also be axed. The Government has withdrawn ‘property relief’ from family-controlled businesses. Inheritance tax on these enterprises will go up from zero (a band introduced by Labour chancellor Denis Healey back in the 1970s) to 20 per cent.If it’s not abolished, it could see family businesses up and down the country tipped into insolvency.
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