Monday 17 October 2022

Five things Jeremy Hunt should do to save the UK's finances

 So today Jeremy Hunt manfully tried to undo the wanton damage that Kwasi Kwarteng had unleashed on the economy and British fiscal credibility. I snuck a quick look at the £ to $ exchange rate before starting this blog and was not surprised to see that having a grown up in charge of the economy, who talks to the economists employed by the government has lead to an improvement in the situation. Jeremy Hunt has done the most sensible thing possible, reversed more or less the whole lot and tried to sound like a sensible politician. If you'd have asked me three years ago, I'd have not been a fan of Mr Hunt at all, but TBH what has followed since has made him seem almost acceptible. His big problem is that he has a massive great hole in his finances. It is one thing to undo the reckless damage of Kwarteng, but fixing the hole is another matter completely. He needs to raise far more money than can be done by tweaking this, that and the other allowance.

If I was in his shoes, there are a few things, none of which will be popular with his core base, but which will raise cash and will not damage the economy.

1. Increase the number of council tax bands. In Barnet, someone living in a £100 million mansion only pays twice aas much Council tax as somoene living in a property assessed as £88,000. I don't think anyone can argue that someone in a mansion can't afford a lot more. 

These are the bands in Barnet

I'd add another band at £500,000 - £4,500 PA,  £1 million - £9,000 p/a , £5 million - £18,000 P/A, £10 Million - £36,000 and £20 - £72,000 million. If this was ring fenced for local aithority services, it would make a huge difference to local authority finances. I think it is impossible to argue that somneome in a £20 million flat can't afford a bit more.

2. Introduce an excessive energy usage tax. One of the things that has put pressure on the UK's finances is the energy crisis. It makes sense to try and encourage both private households and businesses to use less. A tax on excessive usage would be a very effective way, with all income raised being channelled into energy efficiency schemes. I would set a benchmark average for a household. and any business using 50% more than the average for their demographic would pay a 100% surcharge on their energy costs. This would lower demand and lower pressure on the government budgets. It would encourage firms to put lights off at night and use low energy bulbs. 

3. Crack down on avoidance and evasion. A Guardian report in 2021 estimated that £35 billion was lost through non payment, fraud and avoidance. That would plug the hole in the budget. I see no reason why the little guys pay and the big boys always get away with it. 

4. Abolish the vehicle license and raise the money through fuel duty. Vehicle licensing is a hugely expensive tax to run. Large savings could be made if it was recovered through fuel duty. Vehicle duty means little old ladies who use the car a couple of times a week to go around the corner to the shops subsidise people who drive for hours every day. It would also serve as a disincentive to drive as the cost of taxation would be linked to usage. 

5. Decriminalise all drugs and sell them through licensed outlets, with HM Customs and Excise responsible for collection and policing. This would end the need for expensive police operations to police county line smuggling, would remove the incentive for criminal gangs to market drugs and would bring in huge revenues. Anyone who is interested in taking drugs can do it with impunity already in the UK, with criminal gangs making the profits. I'd personally rather see HM customs and excise benefittting. I'd like to see users issued with a smartcard, which would have a weekly allocation to allow enough for personal use without stigma. I'd also include safety information issued with purchases. In Colorado, legalisation of marijuana raise around $250 million a year in taxes. It is my view that such a move would end much of the anti social aspects of drug usage. I know this is controversial, but it seems to me to be an adult way to address the problem. I would not go for full legalisation, you would have to sign up for a license to buy drugs and clearly people in key professions  would be subject to testing to ensure they were not stoned at work or whilst driving. It is my personal view that breaking the dependence of habitual users on criminal gangs would be a highly desireable outcome. As a legal route would have better safety and be cheaper for end users, there would be no incentive to buy from criminals.

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