The Budget is coming – here’s what I’d like to see

The Budget is now less than four weeks away. The extraordinary speculation is effectively pointless now – it’s time to wait and see, editor Edmund Greaves writes.

It is almost unbelievable how many rumours about the Budget there have now been. Months and months of the stuff. Hundreds of billions of pounds – from households to business and beyond – are now at stake. 

Indeed, in The Times today reportedly there are around 100 separate measures now in play at the Treasury. ONE HUNDRED. 

The reality here is that it is pointless, with so little time left, to speculate or even act on that speculation. 

It is now for us to wait and see, fingers crossed, depending on your personal finances for good or brace for bad news. 

The Mouthy Money Podcast

What I’d like to see in the Budget

I’ve done these sorts wish lists for the Budget in the past – and warning to the reader – they unfortunately rarely pan out.

I can’t abide by speculation of what I think that Rachel Reeves will do, that’s for the birds at this juncture. Nor am I that interested at this point in saying whether rates should be higher or lower. It is very complicated and political (and subject to personal prejudices).

Instead, I’m going to offer my personal wish list for what I’d like to see, based on things that I just think are bad and inefficient for the economy, households and businesses. So here goes:

1. Council tax

Based on decades old valuations, appallingly distortive, totally misunderstood as to what it pays for and completely untethered from economic reality. Council tax is an appalling levy and needs to be gotten rid of. Imagine a tax where poor northern homeowners pay higher levies than the ultra-wealthy in Knightsbridge. It’s mad. 

Better idea: bring in a land value tax on the unearned value of land underneath a property. You can set it at 0.5% or 1% but essentially this forces the owner of land to use that land to its most efficient purpose. 

At a stroke it makes land banking expensive and encourages owners to think about how to maximise the efficiency of the land (or sell it to someone who will). Good for economic growth and much more progressive because people in Chelsea will pay a lot more than those in the North. 

2. £100k Income tax cliff edge

Another appallingly distortive tax, but one that has crept in thanks to constant tweaking and benefit fiddles over years. It is irrelevant that people who breach the £100,000 income cliff edge are ‘rich’ – many of them will be doctors with young families or other highly productive and useful members of society. Punishing them and discouraging their work is stupid. 

Better idea: You don’t need to get rid of the limitations but it is time to increase some of the allowances and add tapers in. particularly with regards to childcare where losing the benefits when you go one pound over the limit (potentially costing 10s of thousands) is just stupid. 

It’s also critical to find ways to not punish couples where there are big discrepancies between the individual earnings. We cannot persist with a system where two parents on £99k a year get all the child benefits they could want and a family where one parent earns minimum wage and the other £101k get a kicking to the tune of thousands. Its grotesque. 

3. Stamp duty

Stamp duty is a terrible tax. It’s hard to pay, stops people from moving and getting on with their lives and encourages people to sit in their houses in order not to pay the charge – gumming up the market (particularly at the top end).

Better idea: Yes, I’m about to recommend the same tax twice. The land value tax will do away with these problems and reintroduce fairness based on the value of the asset. The biggest argument against LVT is that older homeowners who are ‘asset rich but cash poor’ would become forced sellers.

Unfortunately, that is the point of the tax, not an unintended consequence. We have too many empty nesters sitting in expensive homes. It is time for them to downsize and get the market moving. It’s time to crystallise your investments, folks.