The votes have been counted and the results are in. Patrick Stevens, tax policy director at the Chartered Institute of Taxation, and Chris Lee, tax adviser and founder of Fiscability UK, consider possible tax policy changes under the new government.
Returning to government after the general election, David Cameron has reappointed George Osborne as chancellor and made him deputy prime minister (under the title of first secretary of state). The Conservatives have begun planning their approach to tax issues for the new administration.
Will there be an Emergency Budget as there often is at the start of a new government?
Patrick Stevens (PS): In terms of useful things that the chancellor will want to announce, which are new and different, I don’t think there will be any need for an Emergency Budget. That doesn’t mean that there won’t be one - from a political point of view, he could stand up and say: ‘This is what I want to do without coalition partners’. He might want to announce a timetable for increases in the personal allowance, for example, or raising inheritance tax to £1m for married couples and civil partners. But none of that is going to be terribly exciting.
Chris Lee (CL): There are unlikely to be the radical changes to taxation that would have followed had the Conservatives lost power, so there will be no Emergency Budget.
Where do you expect to see greater efforts focused to reduce tax evasion?
PS: HMRC published Tackling tax avoidance and evasion, a 24-page document at the time of the Budget in March 2015. There is a whole stream of measures there - mainly on evasion but there is also a bit on avoidance - that brings together all of their current ideas on what they will do. I find it rather improbable that they would dream up new things now.
CL: There will be a continuing emphasis on counteracting tax avoidance. However, if there is tax to be collected, why haven’t they done it already?
What kind of approach would you expect George Osborne to take as chancellor?
PS: I would expect him to continue in the same way. The only thing he will have a bit more of is inheritance tax relief. If he is going to continue showing the world that we are going through austerity, I’d be surprised if he dreams up something new.
CL: It will be more of the same from George Osborne. The government is hamstrung to an extent by its campaign pledges, that there will be no increase in the rates of income tax, national insurance and VAT, and a new £1m inheritance tax exemption on private homes.
Despite these pledges, there is an almost certain need to increase tax revenues, so expect more technical changes on thresholds and so on, and increases in duties where there is no pledge. Taking credit for other’s ideas has been a Conservative success—for example the Liberal Democrats’ increases in personal allowances. So there may well be restrictions on non-doms which proved popular for Labour during the campaign. Expect further restrictions on tax relief for pensions. There will be no mansion tax, but a review of council tax bandings may do something similar.
Now that shadow chancellor Ed Balls has lost his seat, how difficult will it be for Labour to develop tax policy without him?
PS: Ed Balls was politician, rather than a tax expert or economist, but it will be a blow. They will have to work out who has that economics expertise. They really did have a problem finding someone in the past. Alan Johnson was the first choice (before Ed Balls in Ed Miliband’s shadow cabinet). Ed Balls had enough technical expertise and he did very much provide a central place for tax policy to develop. He will be difficult to replace as shadow chancellor.
CL: Labour and Liberal Democrats are unlikely, in the short to medium term, to provide effective opposition on tax issues. They’ve lost key people and will be preoccupied with leadership changes.
To what extent could there be compromises with the Scottish Nationalist Party?
PS: It’s already, effectively, been agreed that the Scotland will get the right to change rates and thresholds on income tax. The SNP would like full fiscal devolution. I could imagine that further taxes might well be devolved.
Would you expect that the Scots will take a while to work out their tax policy?
PS: The SNP will go after more and more devolution of powers. We haven’t looked at what they will do with these powers. Are they going to raise or lower rates? We might think that they will increase rates for the wealthy and reduce them for the poor. But will they actually do it if they drive out wealthy people? It’s a very interesting question.
CL: Cameron has promised Scotland ‘important powers over taxation’. What does this mean? Is he tempted to give them full autonomy (as the SNP wishes)? As the Scots attract higher per capita public spending than the rest of the UK, he might just be passing on a poisoned chalice.
Interviewed by Neasa MacErlean. The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.
The votes have been counted and the results are in. Patrick Stevens, tax policy director at the Chartered Institute of Taxation, and Chris Lee, tax adviser and founder of Fiscability UK, consider possible tax policy changes under the new government.
Returning to government after the general election, David Cameron has reappointed George Osborne as chancellor and made him deputy prime minister (under the title of first secretary of state). The Conservatives have begun planning their approach to tax issues for the new administration.
Will there be an Emergency Budget as there often is at the start of a new government?
Patrick Stevens (PS): In terms of useful things that the chancellor will want to announce, which are new and different, I don’t think there will be any need for an Emergency Budget. That doesn’t mean that there won’t be one - from a political point of view, he could stand up and say: ‘This is what I want to do without coalition partners’. He might want to announce a timetable for increases in the personal allowance, for example, or raising inheritance tax to £1m for married couples and civil partners. But none of that is going to be terribly exciting.
Chris Lee (CL): There are unlikely to be the radical changes to taxation that would have followed had the Conservatives lost power, so there will be no Emergency Budget.
Where do you expect to see greater efforts focused to reduce tax evasion?
PS: HMRC published Tackling tax avoidance and evasion, a 24-page document at the time of the Budget in March 2015. There is a whole stream of measures there - mainly on evasion but there is also a bit on avoidance - that brings together all of their current ideas on what they will do. I find it rather improbable that they would dream up new things now.
CL: There will be a continuing emphasis on counteracting tax avoidance. However, if there is tax to be collected, why haven’t they done it already?
What kind of approach would you expect George Osborne to take as chancellor?
PS: I would expect him to continue in the same way. The only thing he will have a bit more of is inheritance tax relief. If he is going to continue showing the world that we are going through austerity, I’d be surprised if he dreams up something new.
CL: It will be more of the same from George Osborne. The government is hamstrung to an extent by its campaign pledges, that there will be no increase in the rates of income tax, national insurance and VAT, and a new £1m inheritance tax exemption on private homes.
Despite these pledges, there is an almost certain need to increase tax revenues, so expect more technical changes on thresholds and so on, and increases in duties where there is no pledge. Taking credit for other’s ideas has been a Conservative success—for example the Liberal Democrats’ increases in personal allowances. So there may well be restrictions on non-doms which proved popular for Labour during the campaign. Expect further restrictions on tax relief for pensions. There will be no mansion tax, but a review of council tax bandings may do something similar.
Now that shadow chancellor Ed Balls has lost his seat, how difficult will it be for Labour to develop tax policy without him?
PS: Ed Balls was politician, rather than a tax expert or economist, but it will be a blow. They will have to work out who has that economics expertise. They really did have a problem finding someone in the past. Alan Johnson was the first choice (before Ed Balls in Ed Miliband’s shadow cabinet). Ed Balls had enough technical expertise and he did very much provide a central place for tax policy to develop. He will be difficult to replace as shadow chancellor.
CL: Labour and Liberal Democrats are unlikely, in the short to medium term, to provide effective opposition on tax issues. They’ve lost key people and will be preoccupied with leadership changes.
To what extent could there be compromises with the Scottish Nationalist Party?
PS: It’s already, effectively, been agreed that the Scotland will get the right to change rates and thresholds on income tax. The SNP would like full fiscal devolution. I could imagine that further taxes might well be devolved.
Would you expect that the Scots will take a while to work out their tax policy?
PS: The SNP will go after more and more devolution of powers. We haven’t looked at what they will do with these powers. Are they going to raise or lower rates? We might think that they will increase rates for the wealthy and reduce them for the poor. But will they actually do it if they drive out wealthy people? It’s a very interesting question.
CL: Cameron has promised Scotland ‘important powers over taxation’. What does this mean? Is he tempted to give them full autonomy (as the SNP wishes)? As the Scots attract higher per capita public spending than the rest of the UK, he might just be passing on a poisoned chalice.
Interviewed by Neasa MacErlean. The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.
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