Rachel Reeves seems to show an extraordinary lack of imagination with her tax on jobs, raising employers’ national insurance (NI) contributions (‘We had no alternative’: Reeves defends her budget to the CBI, 25 November). Several sources have proposed far more worker-friendly and small-business-friendly ways of plugging the Treasury’s alleged £22bn hole.
For example, the Institute for Fiscal Studies (IFS) has estimated that a wealth tax of merely 0.17% on assets of more than £500,000 would raise £10bn a year. Prem Sikka estimated last year that a larger yield of £22bn could be obtained from a wealth tax of 2% on assets over £10m, which would apply to merely 22,000 people. Researchers at the University of Warwick suggest that £8.6bn could be raised by charging NI on unearned income. Higher contributions will push many people to work “off the books”, paying no tax at all and losing pension entitlements.
Anne Gray
London
• The chancellor says she has “heard no alternatives” to budget measures. She may not want to accept evidenced advice that structural reforms, including fiscal options on wealth, sustainability and wider wellbeing, very much offer better prospects. She is applying her social democratic mindset. But there are always alternatives.
Across the world, electorates are sadly indicating that superficial, dangerous autocrats attract them more than outdated tinkering, however well intentioned. Time is short before the same happens here. If a lesson of Labour governments from 1997 to 2010 was of missed opportunities for lasting changes to tackle inequities, this one would be wise to listen, learn and act.
Clive Needle
Rowhedge, Essex
• Defending her budget to the CBI, Rachel Reeves says that no one has offered a better solution to the mess she has inherited. If she believes that, she is ignoring one group with close links to her own party. The Labour Land Campaign advocates a shift to land value taxation (LVT), while reducing taxes on work, trade and enterprise. It argues that land values are created by society as a whole and should therefore form the basis of public revenue, to be invested in public services.
The CBI director-general, Rain Newton-Smith, wants the government to press ahead with business rates reform. The 2009 report Tax by Design” for the IFS recognised the strong case for LVT, advocating it in the foreseeable future as a replacement for business rates. That would be a good start.
In a Financial Times article in August, the eminent economist Charles Goodhart looked further ahead and urged Reeves to deal with the UK’s £22bn deficit by raising “the bulk, if not all, of the required revenue from a tax on land ownership” over a period of years, and noted the “overwhelming case for a land tax” made by the most prominent economists. There is indeed a better solution if the chancellor is prepared to listen.
John Digney
Buchlyvie, Stirling
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