 The IEA Alternative Budget would cut taxes on a median paid job by around £1,300 a year, slash employer National Insurance by £21bn, abolish stamp duty and inheritance tax and introduce new Defence Bonds to help fund Britain’s military. The Institute of Economic Affairs (IEA) has today unveiled a £75 billion tax cutting Alternative Budget that would cut income tax and employee National Insurance for a typical worker by £644 a year. Published ahead of the Chancellor’s Budget, the IEA’s proposals combine major tax reform with spending restraint, with the aim of reducing taxes on work and employment while bringing the public finances under control. Rather than increasing the overall tax burden to address the deficit, the IEA proposes a major reshaping of the tax system. Taxes on earnings, hiring, property transactions and trade would be cut or abolished, while the VAT base would be broadened so that more revenue is raised from consumption. The tax reforms would be accompanied by tighter control of welfare spending and wider reforms to planning, regulation and saving. The IEA’s fiscal projections do not assume additional revenues from stronger economic growth or savings from lower borrowing costs. Under the proposed reforms, someone earning the median wage would pay £644 less a year in income tax and employee National Insurance. Once the reduction in employer National Insurance is included, the total tax burden on a median-paid job would fall by around £1,300 a year. The Alternative Budget also proposes a new Defence Bond to help finance Britain's growing defence commitments. Available exclusively through stocks and shares ISAs, the bonds would allow British savers to invest directly in the country's defence, with the money raised ring-fenced for military spending. The proposal would be accompanied by an increase in the annual ISA allowance from £20,000 to £50,000. Key measures in the IEA Alternative Budget include:
Overall, the IEA projects that the Alternative Budget would move the current budget into a £7.8 billion surplus in 2027 - 28. By 2030 - 31, cumulative borrowing would be £127.2 billion lower than the OBR baseline and net debt would fall to 91.6 per cent of GDP - without assuming additional revenues from faster economic growth. Commenting, Lord Hannan, Director General, Institute of Economic Affairs, said: “Britain cannot tax its way to prosperity. For too long, we have loaded ever higher taxes onto work, enterprise and investment, and then wondered why economic growth has disappointed. “The IEA Alternative Budget shows that there is another way. It is possible to reduce damaging taxes, make it easier to hire, invest, build and trade, and still bring the public finances under control, but only if we are prepared to make difficult choices about tax and spending. “At a time when Britain urgently needs to strengthen its defences, we should be looking for innovative ways to finance that investment. Our proposed Defence Bonds would give British savers the opportunity to put their money towards strengthening the country's security. “John Healey’s first Budget as Chancellor is an opportunity to change course. We want to show the government that yet another round of tax rises is not the only option. Britain needs serious reform if we are to get the economy growing and put the public finances back on a sustainable footing.” Dr Valentin Boboc, Chief Economist, Institute of Economic Affairs, said: “Britain’s tax system puts too much of the burden on people earning, businesses hiring and families moving home. Our Alternative Budget would change that by cutting damaging taxes and making sure public finances can rely on a healthier and more optimal tax base. “But tax cuts have to be paid for. That means making difficult choices on spending as well as tax. What we are not proposing is a giveaway funded by more borrowing. “Nor are we relying on wishful thinking about growth to make the numbers add up. These plans are designed to bring borrowing down and get the public finances back under control.” |
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