The Chancellor’s pig-headedness will ruin her party – and her country
Source - Daily Telegraph
As the Budget continues to cast its horrific spell over the UK economy, it is becoming increasingly clear Chancellor Rachel Reeves did not put enough thought and effort into it. If she insists she did her due diligence, then she stands accused of putting ideology before economic reality.
The real danger is that thanks to Ms Reeves’s decisions, the wealth-creating private sector will not generate the economic growth that is required to generate the tax revenues the Government is relying upon – forcing the Chancellor to come back with more plans for higher taxes and greater borrowing to cover the shortfall.
Either she did her homework but came up with the wrong answers – or she listened to all the wrong people and is stubbornly refusing to make it right.
Neither is a good look and must surely drive support away from the Government – which polling already suggests is happening.
The most obvious and high-profile damage has been the announcement of the cutting of agricultural property relief (APR) and business property relief applicable to the inheritance tax liability of family farms.
Originally, Ms Reeves announced the changes to the death tax would apply on estates over £1m, but then did a media circuit to say it could actually be £2.65m by transferring the allowance of the spouse. Already farmers are cutting back investment.
The Treasury then had to correct her correction by saying the allowance could not be transferred to spouses, but only to children.
But even the Treasury figures were misleading, having been based on application rates for APR in the past, which did not reflect the true size of farms.
Had Ms Reeves used the numbers available from the Department for Environment, Food and Rural Affairs, she would have known the average size of a UK farm is 217 acres and that even farms over 150 acres – together with their accompanying buildings, machinery produce and livestock would be liable for 20pc death tax.
The highly damaging impact of increasing employers’ National Insurance contributions is also now being revealed, as a day hardly passes without another business announcing it is cancelling plans for expansion and telling its staff that wage increases will be reduced to meet the added costs.
The increase in the rate by 27pc from 11.8pc to 15pc was a left hook to the head, but cutting the starting threshold from £9,100 to £5,000 was a sucker-punch below the belt. With companies such as Tesco facing an additional bill of nearly £1bn, inflation will be a certainty.
The decision of the Chancellor to include all pensions in calculations for the 40pc death tax from 2027 will, according to tax consultants RSM, make some grieving families liable for an effective tax rate of up to 90pc on the inherited pensions.
While an estate including property but no pension totalling £2m and left to direct descendants by a couple who die after age 75 would be liable for £400,000 tax due. If the same estate also included a £700,000 pension, the relatives would receive just £60,667 more – at an effective tax rate of 91pc. The result of this attack on pensions will be less pension saving.
Ms Reeves confirmed the VAT raid on independent schools – another ideological sop to the left of her party – without scoping its full impact. This will deliver nothing but harm to cherished cultural schooling that promotes the arts and music.
No exemptions have been given, so schools providing for special needs pupils are caught in by the 20pc penalty charge on securing private provision that would otherwise have to be provided by the state. In many cases, distressed parents testify the alternative provision simply does not exist.
The lives of many children will be harmed by this callous act that is being forcibly introduced in January – the middle of the academic year – rather than at the start of a new one in September.
Some pupils will be forced to leave their school shortly before their exams and become new arrivals – with all the upheaval, stress and the risk of bullying such a change entails.
Changes to capital gains tax included slashing investors’ relief by increasing the tax rate by 80pc – from 10pc to 18pc – and cutting the lifetime limit on gains from £10m to a measly £1m.
It was sheer economic vandalism, as the purpose of investors’ relief was to increase investment into small companies through a lower capital gains tax rate.
From small acorns do great oak trees grow, but this ideological decision of Ms Reeves has already resulted in investments being cancelled and consequently will curtail employment growth, increase unemployment, put more pressure on welfare spending and reduce tax revenues from flourishing new businesses.
Warnings were made before the Budget, not least from these pages, about how various tax rises would, thanks to well-known and predictable behavioural responses, inflict significant damage to various sectors, producing unwanted outcomes, unintended consequences and provide far lower revenues than estimated.
Already, we can see Ms Reeves’s Budget is creating her own economic whirlpool where the converging flows of slower growth, higher taxes, higher prices, lower tax revenues and rising debt will pull the country down and suck us all into the vortex.
You don’t have to be revolutionary to deliver Marxist-inspired economics – but you do have to be heartless – as parents, pensioners, farmers and small business owners can all testify, thanks to Ms Reeves.
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