A tax system that fines the behaviour that growth requires
If the planning system is an inherited failure of land, the tax code contains an equally striking inherited failure of transactions, taxes that were reasonable revenue-raising devices in their moment and have become, in their present form, penalties on the specific behaviours a mobile, productive economy most needs.
Stamp Duty Land Tax is the clearest case. It is a tax levied at the point of moving house, which means it is a tax on exactly the behaviour that lets people move to where the jobs are, that lets an ageing couple downsize and free up family-sized housing for the families who need it, that lets a growing firm's employees relocate without a punitive toll standing between them and the move.
Every other major tax at least has a superficially plausible incidence story about ability to pay. Stamp duty's incidence story is that you did the economically useful thing, so you have to pay HMRC for it. A tax on transactions in a market that is already supply-constrained by the planning system is a tax that compounds one failure with another. It doesn't just make housing scarce, it makes the scarce stock that does exist move around less efficiently than it otherwise would.
National Insurance persists as a nominally separate tax from income tax, a fiction dating to 1911 when it was genuinely a contributory insurance scheme with a plausible link between what you paid in and what you might draw out.
That link disappeared decades ago. National Insurance is general taxation in a threadbare disguise, yet the separate administration, separate thresholds, and separate split between employer and employee survive, adding real compliance complexity and well-documented distortions. These include the employment allowance cliff-edges and the different treatment of the self-employed for no remaining conceptual benefit. It is a tax whose only defenders are the people who benefit from the confusion it generates.
Business rates are a tax on the physical footprint of retail, assessed on rental value, in an economy where an increasing share of retail competition comes from businesses holding almost no taxable property at all. The high street pays a tax designed for a world where commerce meant a shop with a rateable value. The warehouse-and-van model that increasingly displaces it pays comparatively little in equivalent terms.
Whatever one thinks about whether high streets deserve protecting, taxing one form of competition far more heavily than its main rival, purely because of an assessment methodology inherited from a different retail era, is not a policy anyone would design from scratch today.
IR35 and the broader employment-status tax architecture deserve a mention in the same category, though the mechanism is different. Rather than an old tax poorly suited to new conditions, this is new anti-avoidance machinery bolted onto the old, unreformed underlying distinction between employed and self-employed, that no longer fits cleanly into how modern work is actually organized. The result is uncertainty costs borne disproportionately by exactly the flexible, project-based contracting that a dynamic services economy depends on.
Planning and tax should be treated together, rather than as separate reform agendas, because they reinforce each other. A planning system that restricts supply drives up the price of moving. And a transaction tax on top of that price makes moving even more prohibitive.
The combined effect is a workforce that is less mobile than the economy needs, sitting in housing that is more expensive than it should be, in a system where the state has quietly become the largest single obstacle to the thing it claims to want, more housing, more mobility and more growth.
None of this required malice. It required only the ordinary failure of institutions to be reviewed against the purpose they were built for, at intervals shorter than a human lifetime. The 1947 planners and the 1911 National Insurance architects were not fools. They were reasonable people solving the problems in front of them. The fault lies with everyone since who inherited their solutions and mistook inheritance for validation.
The test for any of these institutions should be simple, and it is one Britain has stopped applying. It should not be ‘did this make sense when it was introduced,’ but ‘would we introduce it today, unprompted, in the conditions we now actually face.’
Almost none of the above would pass. That they persist regardless is not a case for revolution. Popper's caution about the unintended costs of wholesale reconstruction applies as much to tax and planning law as to grander utopian schemes. But it is a case for the kind of piecemeal, evidence-led dismantling that has always been the more defensible form of policy-making.
Madsen Pirie