Here are seven things we’d like to see at this year’s budget:
1. Personal allowance and employee National Insurance thresholds should be merged and set at the NMW level (approx. £13,000/year after the NMW is raised to £6.50/hour). The government should legislate to keep the tax & NI thresholds at at least at the NMW level. It is crucial that the National Insurance contributions threshold be raised as well as the income tax threshold.
2. The corporation tax cut planned for 2015 should be brought forward by a year (to 20% this year), with a commitment reduce it further by 2.5% per annum for the next three years to 12.5%. In the long-run it should be abolished altogether as it is a stealth tax on income (workers’ wages bear approximately 60% of the tax) and a distortionary tax on capital.
3. The Chancellor should go forward with plans to merge Income Tax and National Insurance. Employers’ National Insurance Contributions should be included on workers’ wage slips to highlight that this is a stealth tax on wages.
4. Help to Buy should be wound down ahead of schedule to reduce house prices in London and the South East. To create jobs and encourage construction the Chancellor should endorse radical planning reform that would allow more houses to be built.
5. Subsidies (“financial relief”) to energy intensive industries should be ended with the money saved paying for a broad reduction in green energy taxes to reduce consumers’ energy bills.
6. The ring-fence of NHS spending should be abolished. If savings can be made in the education, policing and welfare budgets, they can be made in the healthcare budget as well.
7. The Bank of England’s mandate should be revised, with the Bank instructed to target the level of nominal spending (nominal GDP) in the economy along a predetermined trend. This would reduce inflation in boom periods and prevent deep recessions by stabilising aggregate demand.