Andy Burnham should abolish national insurance, stamp duty, inheritance tax and the 45p top rate of income tax if he wants to revive Britain’s stalled growth, a right-leaning think tank has urged, in what would amount to the biggest shake-up of the UK tax system in generations.
Policy Exchange, in a report published on Tuesday, argues that the incoming prime minister should make cutting the UK’s tax burden, on course for a post-Second World War peak, one of his first economic priorities when he enters Downing Street next week.
For the millions of small firms writing a national insurance cheque every month, the most eye-catching recommendation is the last one. The think tank describes NI as “one of the most economically damaging features of the UK’s tax system” and wants it scrapped entirely, for employees and employers alike. That would wipe out at a stroke the levy behind the £28bn jump in employers’ NIC bills that has been blamed for redundancies and hiring freezes across the high street.
Family firms would also feel the difference. Alongside stamp duty, Policy Exchange wants inheritance tax gone altogether, a striking proposal at a time when tighter inheritance tax reliefs are already forcing family businesses to rethink succession plans rather than invest in growth.
The catch, and it is a substantial one, is the price tag. The think tank says the whole package should be funded by shrinking the state to 33 per cent of GDP. Under current plans, public spending is heading for 42.7 per cent of GDP by 2030-31, so the report is proposing a reduction in the size of government with little modern precedent.
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