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Monday, April 11, 2005
Media summary - Monday 11 April

Every working day, Reform, the independent public policy think-tank, publishes an excellent media summary which can be viewed on their website or subscribed to by email. Here are the tax stories from today's summary:

  • Business believes Labour will raise taxes. A MORI poll of 200 finance directors in today's FT finds that nine out of ten believe that Labour will raise taxes after the election. 49 per cent believe that the Conservatives have "the best policies for business" compared to 23 per cent for Labour and 4 per cent for the Liberal Democrats. 58 per cent of the finance directors said they would vote Conservative, 26 per cent Labour and 14 per cent Liberal Democrat (FT, p.1).
  • Hamish McRae on tax competition. In the Independent on Sunday, Hamish McRae argued that international tax competition can be regarded "as a crucial discipline on governments that waste taxpayers' money. Given the pressure on politicians to spend more, the only real discipline is to deny them the funds to do so. You force efficiency on the public sector, the argument runs, by denying it the money to spend" (Independent on Sunday, Business, p.13).
  • Roger Bootle on flat taxes. In the Sunday Telegraph, Roger Bootle noted that a combined income tax and NI flat tax would be 33 per cent. He argued that to reduce that rate would require the abolition of allowances and exemptions: "But delivering such a radical reform would require an unusual combination of political vision and self-discipline. It is easy for politicians to 'be generous' by introducing some allowance that supposedly helps some deserving group or other. With each 'good deed', though, the tax system becomes more complicated... . Still, we should not underestimate the scale of what could be achieved. After all, the Labour Party will go into this election with a pledge not to increase the basic or higher rates of tax from 22 per cent and 40 per cent. Before Mrs Thatcher, a Conservative government imposed a top rate of tax of 75 per cent" (Sunday Telegraph, Business, p.4).
  • Labour to say that Conservative spending plans leave a GBP15 billion black hole. The Government will today release a Treasury-costed estimate that the Conservative manifesto contains commitments to an extra GBP15.7 billion of spending by 2007-08. The estimate is drawn from 23 different spending commitments made by Shadow Cabinet Ministers (Guardian, p.1).
  • Conservatives expected to announce tax plans this week. The Telegraph reported on Saturday that the Conservatives are expected to announce their final pledges on cutting tax during the week. These are expected to include reducing income tax for lower and middle income workers and a lifting of the inheritance tax threshold from GBP263,000 to well over GBP300,000 (Telegraph, Saturday, p.8)
  • Allegations that Labour plans to increase National Insurance. On Saturday, the Mail reported that the Government has changed the rules that "ring fence" National Insurance contributions. It recalls the rise in National Insurance after the 2001 election and suggests that Labour will do the same again if re-elected (Mail, Saturday, p.6).
  • Volunteers to receive council tax discount under Labour plans. The Guardian reports that the discount will be for people who take time out to care for older people or to work in their local community (Guardian, p.4).
  • Fred Harrison argues in favour of taxing land rather than income. In the Guardian, Fred Harrison argues: "We should untax people's wages and savings: conventional taxes inflict deadweight losses on incomes. Instead, public services could be funded out of rents that people were willing to pay for the benefits they enjoy at a particular location. That is efficient. Productivity would rise and speculation in gains from land would fall. It is also fair. It is the voluntary, self-assessment approach in which payments are direct and proportionate to the public services people want to use ... . Politicians of all parties should champion a simple ad valorem charge on the location value of all land - excluding improvements such as buildings. A high enough rate would end boom and bust cycles and establish a new relationship between citizen and the state. The interface between the public and private sectors would be redefined, and many of the disputes that divide our communities would be resolved" (Guardian, p.25).
  • Business prepares to face new swathe of red tape. An article in the Telegraph looks at the extra burden placed on businesses by laws enacted last week before Parliament was dissolved. These include 10 significant pieces of legislation establishing over 100 new rules in the fields of labour relations, pay and gender. The biggest single costs from recent legislation are associated with the introduction of a maximum 48 hour working week for the haulage industry which will cost operators, according to the Government's own estimates, about GBP1 billion a year and create a need for 21,000 new drivers. The law firm Sweet & Maxwell has also calculated that over the past two weeks alone, more than 200 statutes and statutory instruments in the field of commercial law have been implemented. The British Chambers of Commerce highlights a 46 per cent rise in the number of new regulations over a 12-month period, bringing to a total of GBP40 billion the cost of regulations on business since Labour came to power. This figure is hotly disputed by the Treasury (Telegraph, p.31).
  • Sunday Mirror poll. The paper noted that the Observer poll showed that 56 per cent agreed with the statement: "Government services such as health, education and welfare should be extended, even if it means some increase in taxes." Only 15 per cent thought that "taxes should be cut, even if it means some reduction in government services, such as health, education and welfare".
  • David Cameron says that the Conservatives will do most to help the poor. The Observer reported that David Cameron said that tax levels were now "absolutely holding back" the least well-off. He said that good state education, clean hospitals and more police" matter most to the people in the country who have the least. If you are very rich you can buy your way out of bad education and put a security guard at the end of your street" (Observer, p.5).