If I were Chancellor...

I was asked on Radio 5 this morning to play Fantasy Chancellor and come up with what I’d do at the dispatch box. It’s a fun idea so I thought I’d note down my top picks here….

Quite deliberately I avoided big tax and spending revenue issues, which are more a question of political policy than finance, to try and long term solve some ‘stupid taxes’ – trying to pick out anomalies where the system is just wrong.  Here goes.

• Stamp Duty on homes. This is the most ridiculous tax, not the fact we need pay it, but the way the tax is structured. Eg, you pay 1% tax on a £249,999 property but 3% tax on a £250,000 property. Unlike most taxes which are marginal (ie you only pay the higher rate on the amount above the threshold), stamp duty is absolute. So on £249,999 the tax is £2,499, while for a house that is £1 more expensive, the tax trebles to £7,500. Ridiculous! Read more in stamp duty calculator.

• Stop student loans early repayment penalties. This is a ludicrous proposal, we should be encouraging people to repay their debts, not penalising them for doing so. I’d stop this before it started (read more at stop student loan early repayment penalties blog) and thankfully so many agree with me, this blog even trended via my twitter page last night!

• Child benefit anomaly. The decision to stop child benefit if one parent is a higher rate taxpayer doesn’t make sense. It means one 4 person family earning £43,000 (just above the new higher rate threshold) won’t get it, whereas their neighbours with two parents both earning £40,000 (so £80k in total) would. Related: Save £1,000s on childcare

• Simplify tax and benefits for those workings. Let’s stop taxing people in work then handing back the cash in benefits, just tax people on lower incomes less so work pays more. Related: Benefits check up

• Merging income tax & national insurance. This is one of George Osborne’s likely proposals I do agree with, the idea that National Insurance is a contribution to your future is no longer really true, except to a loose extent in state pensions. So merging them makes life a lot easier and stops politicians pretending ‘we haven’t increased income tax’ by increasing NI. The only worry though is for savers….

  Currently above the threshold per £100, a basic rate taxpayer pays £20 income tax and £11 national insurance, so £31 in total. Yet per £100 interest on saving, the same taxpayer only pays £20 tax. If we merge the two we need to think about some protection for savers, as encouraging savings is good for the economy.

• Fuel tax. If a litre costs £1.30 that’s 50p to the manufacturer and retailer, and 80p to the taxman (duty and VAT), ’nuff said.  Related:  Slash £1,000s off petrol bills

Those are mine, what’d you do?

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