Open Wallet Surgery | IFA 70 Ed’s Welcome

by | Jul 10, 2018

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No wonder Theresa May’s looking a bit grim and careworn these days

As if the current trade rumpus with the United States weren’t enough, and as if the multilevel parliamentary revolts against Brexit policy and enactment weren’t the very stuff of leadership nightmares, the Prime Minister has chosen this of all moments to pour lighter fuel over the troubled fiscal waters instead of the recommended balm. Did she really need to do that?

At any other time, the Premier’s announcement of a £20 billion boost to annual NHS spending (staged over five years) would have been welcomed as a sign of commitment to what they’re calling Britain’s favourite religion. And Health Secretary Jeremy Hunt’s tacit acceptance that the bulk of the £20 billion would need to be funded either by taxation or by borrowing should not have surprised anybody. Oh dear, if only his boss hadn’t been trying to insist that the glorious Brexit dividend would pay for it instead…

Coming in a week when the Bank of England’s own people had rubbished the likelihood of any Brexit dividend, and when national productivity statistics had left the economy looking like a family expecting bad news from the hospital, Mrs May’s principled insistence on the rightness of Gove and Johnson’s side-of-a-bus argument looked like an act of Jungian denial. Small wonder, then, that the leopard-print kitten heels and the lightly wavering fringe have given way these days to the steely grey helmet-hair and the next best thing to a pair of kicking boots. The PM is going to need them.

Take a deep breath…

But back to my point. (At last…) Last month we discussed the thorny issue of millennials’ resentment of the way that the boomers have (allegedly) grabbed all of the property market before dragging the whole nation out of our pan-European paradise. And then having the cheek to get old, and expensively ill, just as they were retiring from tax-paying as well!

Yes, there is good reason for the younger generations to feel beached and marooned by their elders, and there was also something inevitable about this spring’s Resolution Foundation’s recommendation that ways should be found to make the oldies pay their share. Yet, as we also noted last month, doing it with hefty property taxes based on house valuations would be fraught with problems.

Would home owners, for instance, be allowed to deduct the values of their enormous mortgages from any value assessments? How would a flat property tax distinguish between personal ownership and company ownership – surely the PM wouldn’t want to hammer the rental market too? And if the property taxes hit house values as steeply as intended, wouldn’t that leave five million in negative equity, and wouldn’t that bust the banks and stop the economy?

Could we, perhaps, pay for the NHS by taxing pensioners who are currently paying no National Insurance contributions? Yes, we certainly could, but it won’t produce £20 billion a year. We couldn’t easily charge the oldies punitive rates of income tax, because ageism is illegal in the UK. We could means-test the State Pension altogether, of course, but that would be breaking a 110 year contract with every employee in the land, and it would be political suicide for any government that tried it.

But even so, it’s a problem. An extra £20 billion a year for the NHS would necessitate a 3% increase in the total national tax take (or 4% if we excluded VAT from the calculations). How are we going to achieve that? And how are you going to prepare and position your clients in readiness? It’s not a flippant question.

Michael Wilson

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