Today is ‘Budget Day’, when the UK government lays before Parliament the amount of money it needs to raise to pay for its spending. Since the days of William Pitt, Robert Peel and William Gladstone in the late 18th and 19th centuries, the length of the tax code has grown at a terrifying pace. I came across this from a firm of accountants commenting on today’s performance by Gordon Brown:
Since 1997, the UK tax code runs to more than 8,300 pages, twice as long as it was 10 years ago, and the second-highest in the world’s top 20 countries apart from India , according to the World Bank and PriceWaterhouseCoopers
(Wall Street Journal, print edition)
No wonder accountants love Gordon. There is a sort of unhealthy symbiotic relationship between the whole financial services sector and Brown’s tax morass: the finance minister increases the complexity of the tax code; the accountants make money explaining this to their clients and helping some people to avoid it where possible. This in turn creates a whole industry of people with a vested interest in complexity. A flat-tax, for example, would put a lot of these financial whizzkids out of business and force them to do something more useful instead.
At a recent discussion with City types about this, this point was made very clear to me. Assuming we have taxes at all, they should be summarised on two sides of A4 paper, tops. The cost savings to business and individuals would be enormous.
Today, Brown grabbed superficial headlines by cutting the standard tax rate to 20p from 22p and cut the rate of corporation tax to 28p from 30p. It sounds like a good step and there will be some net winners from this. Good. However, as is always the case with this sly and driven character, the details are less flattering. The removal of the 10p rate for low earners, adjustments to National Insurance and corporate capital allowances means the overall balance is neutral rather than towards a smaller state. The state will take about 45-46% of UK GDP, compared with 37% in 1997 when Ken Clarke was in Brown’s job (it is worth remembering that Clarke is regarded as a leftwing Tory, but in certain respects his record is pretty good, or at least not as bad as it might be).
Watching the House of Commons debate on Brown’s speech, several things struck me. Tory leader David Cameron was plainly rattled by Brown playing the tax-cut card – however bogus a ploy Brown’s is. It might – just might – be enough of a shock to the Tories to realise that competing over which party can push up taxes the most and not get caught might not be a smart strategy with the voters. Brown is trying to pose as a tax-cutter. How odd it is that the Labour Party is now trying to make the running in this direction. Even though it is all hooey, it is interesting to see how Brown’s gambit may pay off.
The whole point of this budget, as far as I can see, is in Brown trying to squash Cameron: stealing some of his ‘Green clothes’ while also trying to persuade middle-income voters that Labour is actually more of a tax-cutting party than the Tories.
Even if this is utter rubbish – it is – the very fact that Brown wants to create such an impression is interesting. I am increasingly coming round to the view that libertarians and free-marketeer Tories should let Cameron realise that they prefer to keep in Labour than let the Tories win on a Big Government agenda.