In an interview with Blairite magazine, Progress, Ed Balls has refused to rule out imposing the 50p top rate of tax on all salaries above £100,000. “Those are discussions that we still have to have,” he said. “It depends very much on where we are in the future.” This is very welcome news and opens the door to more progressive tax policies which could bridge the budget gap without cuts in public services, as proposed in the Compass pamphlet In Place of Cuts: Tax reform to build a fairer society.
The key proposals in this pamphlet, published prior to the last election when Labour was planning its own cuts programme, were:
- Introduce a 50% Income Tax band for gross incomes above £100,000. This raises £4.7 billion compared with the current (2009/10) tax system, or an extra £2.3 billion compared with introducing this band at £150,000 as proposed by the Chancellor.
- Uncap National Insurance Contributions (NICs) such that they are paid at 11% all the way up the income scale (although pensioners would continue to be exempt); make NICs payable on investment income. This results in further revenue of £9.1 billion.
- In addition to (1) above, introduce minimum tax rates of 40% and 50% on incomes of above £100,000 and £150,000 respectively; these raise an additional £14.9 billion.
- Introduce a special lower tax band of 10% below the poverty line (below £13,500 per annum), while restoring the ‘basic rate’ to 22%. This costs £11.5 billion.
- Increase the tax payable (higher multipliers) for houses in Council Tax bands E through H (while awaiting a thorough overhaul of property valuation and local authority taxation) raising a further £1.7 billion.
- Minimise personal and corporate tax avoidance by requiring tax havens to disclose information fully and changing the definition of ‘tax residence’; these two reforms are estimated minimally to yield £10 billion.
- Introduce a Financial Transactions Tax (FTT) at a rate of 0.1%, applicable to all transactions. This would raise a further £4.2 billion.
- Immediately scrap a number of government spending programmes (including ID cards, Trident, new aircraft carriers, PFI schemes), reforms totalling £15.1 billion.
- Urge that all current small limited companies be re-registered as limited liability partner- ships to simplify their administration and reduce opportunities for tax avoidance.
We could do a lot worse!
