As Chancellor of the Exchequer Nigel Lawson made it a feature that in every one of his budgets he would simplify taxes and abolish at least one tax altogether. George Osborne has been dealt a difficult hand, but has played it reasonably well, achieving the highest growth rate in Western Europe, and helping the UK economy create more jobs than the rest of the EU combined, more than 1,000 each day.
One senses that he is at heart a believer in simplifying taxes and lowering them wherever possible. He wants to emulate Nigel Lawson, perhaps, but is constrained by the need to bring down the deficit and the debt. Nevertheless, he could take his first steps down Lawson Street in his July budget.
First the abolition. He should end stamp duty on shares. This tax diminishes the capital available to companies for investment and expansion. It takes money from pension funds and decreases both the size of people's pensions and the incentives to save for them. Its abolition would immediately increase the value of listed companies, augmenting their capital, and, as Tim Worstall points out, extra capital allied to labour increases productivity and the potential for wage increases. Abolition would thus be a gain for both pensioners and workers, and the growth generated would soon repay its Treasury shortfall.
For simplification, National Insurance must be a prime candidate. It is a tax in all but name, and a complex one at that with its various classes and sub-classes. It is calculated differently from income tax and with different thresholds. It is a huge burden on employees, especially on the low-paid. Even the so-called "employer" contribution in fact comes from the wage pool that would otherwise have gone direct to the employee. Many business leaders and economists have called for NI to be merged with income tax. The Chancellor could make a start in his July budget by having NI calculated in the same way as income tax, and subject to the same thresholds. This would avoid many of the costs that the present duplication entails, as well as making life simpler for employers calculating deductions for their workers. It would also make it more transparent.
The call, therefore, is for lower taxes and simpler taxes. Over to you, Chancellor.