Weekend reading: No green shoots in this Spring Statement

If Starmer had political nous, he’d fire Reeves PDQ and her replacement would immediately:
a) Reverse the employer’s NI hike
b) Reverse Hunt’s 2% employee’s NI cut (would be better to raise income tax but that would make bigger headlines and upset comfortably off pensioners)
c) Revamp the changes to Winter Fuel Allowance to minimise “cliff edges”. For simplicity, I’d favour restoring the full rate across the board but making it taxable.

I don’t expect any of this to happen. A slim possibility after disasterous local elections in May perhaps?

#Grumpy #3
Pensioners aren’t the Labour Party’s demographic, hence why they’ve already been targeted.
Twice.
Raising (basic rate) income tax *would* impact Labour voters. Therefore it’s unlikely to happen in my opinion. Higher rate taxes are a different story.
I always view government action as attempting to achieve two ends:
1. Raising revenue.
2. Getting reelected.
Everything makes sense once you know that.

Shocking to see the scale of damage that Brexit has done to the UK economy and painful to think how much better off we would all have been without it.

If I were Reeves I would solve the Government’s finances by adding a Brexit surcharge to the income tax of all those who voted for this impoverishment in order that they can reimburse the rest of us and wider society for their folly.

Re: “In reality there is no headroom outside of a Number 11 tweak-and-refresh in Excel”:
And therein is IMO a major part of the problem. You have no idea just how often I saw seemingly [highly] intelligent people badly misuse spreadsheets to convince themselves that they had things under control! Oddly though, the last chancellor to consistently run a seemingly more sensible headroom was nicknamed “spreadsheet Phil”.
A fool with a tool and all that comes to mind.

No doubt fiscal drag will drag on!
But they really need to come up with some new wheezes as this one is definitely wearing thin.
How about some more non taxation forms of picking your pockets. Think: TV licences, more passport cost increases (part of the Spring statement apparently), more border levy’s, Air Transport Duty (last flight I took nearly 50% of the price was taxes, surcharges, etc), insurance premium tax, water bill hikes, reduced rates of bin collections, infrastructure investment (think grid, water/sewage, etc), funding for “social” utility tariffs, inflation plus increases on so called deflators (like tech / telecoms, etc) etc. IMO, we are being fleeced left, right, and centre by a whole host of rogues and hoods to help keep the apparent level of income taxes down!

Thanks for the shout-out.

Bon weekend!

There was a really great More or Less on Radio 4 yesterday (Friday) discussing wealth taxes and where they have been tried and abandoned.

You know what I fink, right, it’s the bankers right, it’s all those bankers and if we just tax these rich faceless corporations right, we’ll all be able to ave a ouse, we’ll be twenny grand richer right and that’s woz the problem. Rich elite right with £10m liquid wealth won’t leave right if we tax them 2% a year, nuffin could be further right, from the troof.

Tbe guy is a total moron and the only reason he has any credibility is because a) he pertains to speak like a man of the people and b) the masses we’ll believe anything than face the obvious unpalatable truth that roughly half the population is not working and the vast majority take out more than they put in. No criticism to many of those people, they are young, elderly, ft sahp , genuinely sick in many cases but whatever, the whole thing is unsustainable, any person with a rough grasp of numbers knows it and the only question is how long before the whole thing comes crumbling down.

My betting is not for another decade or two and not before governments have had a real go at liberating wealth from a minority. Albeit a exogenous event of size would accelerate timing.
We’ve moved things along the timeline a few years with the equally moronic exit from the single market.

I cannot see myself retiring in the UK.
I’ve got about 4-5 years to earn as much dosh as possible and I doubt anyone will bring a wealth tax before then or pose an exit tax on leaving (albeit that risk is definitely rising).

I can extract my DC pension, or GIA largely tax free or at low low tax rates in a multitude of other countries.

Englands green and pleasant land is going to look less pleasant every year. The most terrifying concern for the elderly is the shocking state of palliative care in the UK. I cannot believe in some cases it’s worse in almost any other country. It is a total disgrace here every winter.

no man’s an island but it feels increasingly it’s going to be Jacob Rees Mogg style of every man for themselves. I’ve got a couple of dogs in the race, so I’ll help them out and in todays globalized playing field for resources, everyone else can jog on.

Even if Gary Stephenson is genuine in his beliefs, at £10m the fact is that, especially in London, that is not influencial wealth levels of the super rich, and once a WT is accepted future governments will let fiscal drag pull more middle classes into the net. Eventually the biggest tax take will come from the middle class households. The super rich as always will mitigate.

@18Wephway not taking issue with the overall point you make, and hollowing out of the middle classes, but Duke of Westminster and Dyson are in a different category to the suggested £10m assets. At £10m with generational fiscal drag it will become just another tax for the middle class, not just the super rich. Why not 3% over £100m rather than 2% over £10m – if the super rich will stay and not take avoidance measures then it would raise a similar or greater amount given the concentration of wealth.

@Boltt, I tend to agree that those with real wealth e.g. £100m would do everything to avoid 3% £3m p.a., but I suggest would probably also avoid at 2% £2m p a. It all points to the motive for setting a threshold of around £10m so that longterm fiscal drag will ensure that at least the middle classes will pay as they are not as asset or tax residency agile as the super rich who have a choice.

Let’s face it, ZX’s real hang up about Gary, to paraphrase Harry Enfield, is that he’s someone who claims to be “considerably richer than yow”.

“The same man who inherited £9.4bn without paying any inheritance tax let’s not forget” I doubt that’s true. Can you explain? Was it all agricultural property relief?

Thank goodness for you in these comments @Wephway. Sickening to hear so much contempt for the most vulnerable, unemployed and immigrants elsewhere. I cannot understand how so many people think themselves better than them or somehow immune to being in a similar position just because they’ve managed to save more disposable income and speculate on the markets. Rounding errors Reeves’ statement might be, but these savings are being made at the expense of real hardship and deaths of people who are already suffering. It’s a Dickensian nightmare. Anyone complaining others take more out than they put in and then talk of leaving the country, avoiding tax or screw anyone but me and my own, are being plain hypocrites. I long for the day everyone, but especially the millionaires and billionaires, recognise their wealth does not come from them like magic but from the exploitation of people’s labour and the world’s natural resources. Hoarding it and using it like some badge of superiority fundamentally undermines the very processes that keep them wealthy. And whether it’s via a popular uprising or natural disaster, drastic change will come for us all – rich or poor – unless we try to address inequality together.

@ Paraquat, Wephway, thank you for your input. Have to say I found it hard to read some of the comments above! I don’t know the answer, but wealth inequality seems an increasing problem that can’t be ignored.

@Boltt (#29)

Flat rate taxes impoverish the poor and kill governments (see Thatcher and the poll tax).

Taking someone on minimum wage (about £25.4k per year for a 40 hour week), they currently pay £1k in NI and £2.5k in tax, leaving them with 21.8k (I’ve assumed zero pension contributions).

With a flat rate tax of 35% and UBI of £4k per year, their tax would be £8.9k, NI £1k (assuming that is retained), while the additional £4k of UBI (presumably for those who left school at 18 only once they reached 23 to 28 or if going to university at 26 to 31 – another implied £20k to £40k on the cost of higher education) would leave them with £19.6k – a drop of £2k in what is almost certainly a stretched budget.

Correction to my post (#35)… going to university would add an implied cost of £12k in lost UBI (not £20k to 40k).

@VicMackay “Let’s face it, ZX’s real hang up about Gary, to paraphrase Harry Enfield, is that he’s someone who claims to be “considerably richer than yow”.

No it isn’t. His wealth isn’t even a fraction of mine. Which isn’t surprising since he only worked in finance for a few years and I’ve worked over 25 years.

He came from a working class background, did well at uni, and then got a job in finance. Which he seems to have done realtively well. All good and no different from me, or many others who sit on a interest rate trading desks. None of us, however, claim to be the best trader in the world, or claim to be the most profitable. That is simply a lie.

Citi is a very large custodian bank. It has a huge STIRT franchise. A vast percentage of that revenue stems from client market-making. The Citi STIRT desk in a period such a 2011 would have had global revenues (P&L) of say $10bn+. Most market makers are making a P&L of $25-50mm per annum. The big books (EUR/GBP/JPY etc) make $100mm+, the smaller EM ones perhaps just $10mm. At the bank I worked for until around that period, the most profitable STIRT book would generate $250mm/annum. So his claim that $35mm made him the most “profitable trader at Citi” is nonsense. It doesn’t move the dial.

So I don’t like is his ego and lies. Truth matters in a Trump world of “alternative facts”. I also don’t understand, if his objective is genuine, how lying about these numbers furthers his aims. His arguments may have merit but lying about his career undermines his credibility since it’s so obviously not true. He now seems to be telling people he’s the best paid economist in the world …

I’m not sure why people are so against passing down wealth to future generations.
Surely if someone has worked hard to achieve something they should be able to disburse it as they see fit. I believe the IHT threshold in the US is something like 12m USD?
This sort of hatred of passing down of wealth is another reason why rich people are and will probably continue to leave the UK.

The way to really build an economy is to provide opportunities and incentive and yes, positive attitudes to people. They need to believe that they can succeed in the UK economy. I remember when that used to be the case here in the UK.

To my mind, you have 60 m people in the UK – you don’t need immigrants – you just need to incentivise people and give them belief that if they try and work hard they can succeed.

@ Wephway 18 “inequality is growing in the UK”

No it isn’t. It may not be palatable or fit the “we woz robbed” narrative peddled to the gullible masses but actually inequality is falling in the UK and has been for the last decade or so. The principle driver of this is the significant increases on taxes on PAYE high earners and rises in the personally allowance both ironically by the conservatives (& lib dems’s). In 2023, inequality fell slightly in the UK.

The Gini index, which has its limitations, shows this quite clearly.

https://www.statista.com/statistics/872472/gini-index-of-the-united-kingdom/

https://data.worldbank.org/indicator/SI.POV.GINI?locations=GB

None of this is mutually exclusive with (a) inequality in the UK is high and (b) the middle class is being ‘hollowed out’ as you put it. Agree on both points. I’m no wing nut. I’d tax IHT near 100%. No one earned a good start in life. And as I said, I’ve got a couple of dogs setting off on their first laps.

RE landowners, duke of westminster etc. of course you can tax them if you want, who cares if it’s in a trust or not. Go Mugabe style if you want. It won’t raise anything like the money needed. Anyone with liquid assets – note I say liquid will happily check out and visit us in the summer months when the weather is nice.

The sage of intellectual discourse, Dianne Abbott, along with other useful idiots, thinks a one off wealth tax might raise £24bn. Big deal. Peanuts. NHS spends £180bn a year. Pensioner benefit spending around £140 bn per year. British Navy needs another 10 – 20 ships to operate properly and defend the UK properly. Type 45 destroyer costs £1bn. Christ, even fixing the pot hols in the UK is being touted as a £17bn figure in total.

The answer is not more taxation. The only answer to sustain this very high level of public expenditure is economic growth. labour know it but there is no appetite under the electorate to take the pain.

I suspect a lot of the inheritance tax debate will often come down to whether you have kids or not!

Interestingly, Canada has zero inheritance tax.

Maybe the inheritors did not work for it but perhaps their very presence enabled and motivated the donor to work hard and achieve the wealth in the first place?

As far as deserving it or being lucky/ or not working for it – would you take away someone’s lottery winnings because they did not work for it? Or their benefits?

Plus 40% is a very high rate.

@53

“The problem with the lefty view point on taxes”

…is a total lack of understanding of incentive structures on shaping behaviour.

About trusts set up before 2006 not being subject to the ten year IHT charge. HMRC says:

“Inheritance Tax is charged at each 10 year anniversary of the trust. It is charged on the net value of any relevant property in the trust on the day before that anniversary. Net value is the value after deducting any debts and reliefs such as Business or Agricultural Relief. There are different rules for trusts set up before 27 March 1974.”

Does “different rules” refer to an exemption from the charge? Does that mean that the crucial date is 1974 rather than 2006?

https://www.gov.uk/guidance/trusts-and-inheritance-tax#the-10-year-anniversary-charge

More on discretionary trusts and the IHT periodic charge.

“I have a client who set up a discretionary trust in 1987 (broad discretionary trust, definitely not an A&M). As I understand it, the trust has potentially been liable to anniversary charges in 1997, 2007, and 2017. The client’s previous advisers were of the firm view that an anniversary charge could only arise after 2006. I thought the FA2006 simply brought certain trusts within the already operational relevant property taxation system, and that a broad discretionary trust was already subject to that system?”

If this lawyer is right then the claim that pre-2006 discretionary trusts are exempt from the periodic charge is plain wrong. (I say “if”: IANAL as people used to say.) I realise this is technical stuff but I must say this seems much more plausible than a claim that all such trusts set up before 2006 were exempted from the periodic IHT charge. You’ll see that other lawyers comment on the case and seem to me to imply that my guess about plausibility is right.

https://trustsdiscussionforum.co.uk/t/pre-2006-periodic-charges/5594

@Ermine: “when I was a child the (I presume then state owned) water companies didn’t pump shit into the water in quite that same way as the privatized version do.”

Before “privatisation” our local water company wasn’t state owned: it had been private since (as far as I know) its inception. I don’t know how common that was but I do remember with great joy a socialist colleague banging on about the water company going all to hell since privatisation. How he had failed to understand who had sent him his bills for decades God alone knows. They were headed Cambridge Water Company; you’d think the word Company might be a clue. Maybe his wife dealt with money stuff.

And as for shit, at least to begin with water privatisation was a successful anti-shit measure. Previously local authorities, who were the main dumpers of shit into water courses, were the very bodies charged with keeping the water courses clean. They were, as people like to say, “marking their own homework”.

They did it about as well as you’d expect i.e. badly. Privatisation split the job in two: one “privatised” outfit to run the sewerage, a different (government) one to check the levels of filth. Unsurprisingly it was done better that way.

Why it works worse now I don’t know. Population growth? Anyway, the privatised English companies still do better than the government-owned Scottish ones. That is a clear advantage of our sorta-kinda-federal system: it teaches lessons of that sort.

You might say ah yes, but if Scottish government hadn’t been devolved and Scotland had been governed under the old system but had still kept its government-owned water companies then those water companies might well have done a better job than they have done under the Scotnaz terror. That might well be true but is necessarily rather speculative.

@Precambrian, Delta Hedge, yes I think my main takeaway from reading Piketty was basically capital will always win out over labour over the long run (unless there’s some major war or revolution or something which I’m definitely not advocating), and I concluded therefore it’s best to invest in capital, to protect your status and your family’s status as middle class (or whatever). I invest in property for that reason, which makes me a pariah among some on the left, but I’d argue it’s just realism. I argue for wealth taxes and trying to slow down rising inequality while understanding it’s a losing battle, especially given the influence the rich already have over politics. Which is a depressing thought but I guess I still think we have a moral duty to try to argue against growing inequality despite the futility of making that argument.

“Supporters of no/low inheritance tax must want to more heavily tax the people who earn money, set-up businesses, and work harder doing more hours in order to make up for the tax breaks they give to those who did no work and created no wealth or whatnot to earn it, they just happened to be born to the right parents.”

Well, Canada and the US seem to be doing alright.

Plus the wealth created by the donors is already taxed during their lifetimes. It is doubly taxed due to inheritance tax. You also have to remember that wealthy people are already paying way above their weight in taxes ( is it something like the top 1% pays 28% of the income tax take?)during their wealth creating lifetimes. Also, their tax goes to funding public services and benefits.

As I say, I think if you did a survey of people who have children, they would almost overwhelmingly favour abolishing it (or at least increasing the threshold or decreasing the rate), I think that is obvious. Having children changes your viewpoints on these kinds of things!

Plus it does not even raise that much – something like 0.7% of all tax receipts?

@Wephway (#64):
A word of caution if I may.
I learned years ago that oftentimes income inequality is used as a proxy for wealth inequality as there are known difficulties in collecting “accurate” wealth estimates.
As if to underline this point, the latest version of the ONS Wealth and Assets (W&A) survey (2020 – 2022) released in Jan ’25 comes with a couple of official health warnings as follows:
a) collection method was by telephone rather than usual f-2-f and, amongst other things, the response rate seems more biased than usual;
b) revised method introduced to measure DB pension wealth – the ONS estimate that had the revised method been applied in 2018 -2020 (which it has not been) it would have reduced total wealth by some 14%.
Upshot of which is:
i) 2020-2022 total wealth and pension wealth figures are not comparable with previous years, and
ii) there is increased uncertainty in the data accompanying this W&A release.

FWIW, the IFS got quite animated about this W&A release too, and wrote a less than complementary report.

@dearieme, we had ‘Capital Transfer Tax’ in the late 70’s/early 80’s and that included 10 year charges on discretionary trusts (I recall doing the calcs when studying it!). Some time before that (1975 and prior) we had Estate Duty, but I’m not sure what the rules were – it may well be trusts were taxed completely differently under that regime. The Inheritance Tax Act came into force around 1984/5 and that included 10 year charges on discretionary trusts too. Ive no idea if any exceptions applied when the regimes changed, carving out existing trusts set up before the legislation came in, say they had already been heavily taxed under the old regime say. Hope that helps!

Sorry, a bit off topic!

@Alan S (#71):
All I will say is a rather hesitant “aqueduct’s?”

@DH (#73):
OK, so NHS not as “bad” as average US, but surely that cannot be the height of our ambition/expectation?

@Curlew: in short, Cambridge Water Company was indeed a private company. (And therefore my socialist colleague was indeed a chump.)

@JP: thank you. I was discussing discretionary trusts because I’ve so often been told by commenters on blogs like this that they have quasi-magical powers of letting people avoid tax. Yet every time I check such a claim (in a necessarily amateur way) I find that they don’t.

They are a jolly good way to stop your alcoholic, spendthrift, druggie son spending all the family money, to the disadvantage of the grandchildren, but they don’t have magic anti-tax properties. Their business is control of the assets. (The reference to a hypothetical ne’er do well son is not a snide reference to the Grosvenor family who are, I assume, perfectly respectable.)

@Hedge 82

One thing I think we can agree on is that if Trump doesn’t give the UK relative relief from tariffs vis a vis the EU, then Brexiters better get their figurative crash helmets on because the baseball bats will rightly be coming out. Farage should be on the blower to Trump telling him that whilst he doesn’t want to help Labour, he needs something to work with here.
I suspect I might be wearing full chain mail soon however

@Curlew re chump:

1852 Vice Chancellor Dr Richard Okes was instrumental in organising “a good honest company” to supply the town with water.

1853 The Cambridge University and Town Waterworks Act received the Royal Assent on June 14, 1853. This set up a company to supply fresh water to the town and university as a commercial enterprise.

1985-7 The majority of the voting stock was acquired by the University, directors, staff and other local supporters of the company.

Of course you may ask “How would your colleague have known that?”
I answer “Because he’d been a Fellow of one of the colleges for ages.”

@invariant 83
“Now, as you may have guessed, I don’t have children.”
As has been mentioned many times, this is probably one of the most important factors in this debate.

But even then, 0.7% of tax receipts has made people’s lives that much more difficult? Only 6% of people actually are eligible to pay inheritance tax. Has that really been enough of a drag on society to explain away all its ills?

It seems unlikely.

@Seeking Fire (#15), Algernond (#16), out of interest where would you consider going when you leave the UK in 4-5 years?

I currently live and work in a high tax European country and similarly planning my next step for when I leave paid employment. Taxes here include high social security costs at a fixed rate from the first Euro (flat tax), wealth taxes, exit tax and inheritance tax with nowhere near £1m allowance, the full monty! There is an option for flat rate taxes on investment income (interest, dividends and cgt) which reduces tax to (only) 30%! My review of alternative locations with more tax efficient jurisdictions (not my only criterion) shows the UK to be quite well placed for my situation compared with other credible options.

Other comments regarding the worsening of public services in the UK seems to be another concern raised, but in truth the UK is far from unique. The public healthcare here is widely vaunted as the best in the world. I fear that title is fast being eroded with many people not able to access GPs and waiting times for specialists routinely run in many months in the more rural parts of the country.

Sorry I’m a bit late with this comment but would love to hear you views and thoughts on finding your Eldorado .