Budget Day always invites a certain theatricality. Ministers thump dispatch boxes, analysts sharpen their pencils, and the great British public hopes, once again, for Scandinavian public services on American tax rates. As YouGov keeps reminding us (https://lnkd.in/eDMzBguK), we want better outcomes without paying for them. It is a peculiarly national form of magical thinking.
Our fiscal challenges have clear origins: the global financial crisis legacy, the COVID shock, the Brexit drag, and austerity for much of the rest (https://lnkd.in/gXErMDQj).
The wealth warriors call for the decapitation of entrepreneurs, which would shrink the very tax base that funds the services so many rely on. The austerity warriors demand cuts that would brutalise the poorest. Both routes have been tested. Both fail.
A year ago, I offered a tongue-in-cheek provocation (https://lnkd.in/eDMzBguK). A modest proposal, Swiftian in intent. Rather than children and casseroles, I suggested something gentler: scrap the tangled lattice of UK taxes and replace it with three levies that are harder to dodge, based on land, wealth and transactions.
Economists duly dissected it. Some numbers held firm. UK land is indeed worth £6.3 trillion. CHAPS really does process around £90 trillion a year, though taxing it would trigger a stampede. Other points fared less well. Wealth valuation is a swamp. Behavioural responses matter. Transaction taxes buckle under their own weight. There was a kernel of economic sense beneath the simplicity, which was rather the point.
The underlying question remains. How do we fund high quality public services when voters resist almost every lever required to pay for them?
Pretending we can trim waste or tax an abstract “wealthy” cohort is comforting but unserious. Defending the status quo ignores the fact that our system is creaking. Council Tax relies on 1991 bands. Stamp Duty distorts mobility. Income tax thresholds sit frozen in stealth tax territory. We have contrived to make fiscal pain both invisible and unavoidable.
Thought experiments force us back to first principles. What is fair? What is efficient? What supports growth rather than throttles it?
More sensible answers exist. Reforming property taxation through land value models, aligning capital gains with reality, simplifying the tax code, and ensuring work genuinely pays would narrow the gap between what we want and what we are prepared to fund.
We cannot magic our way to world-class services. We can, however, design a tax system that is clearer, more honest and better aligned with economic growth. That would be a grown-up start.