Cover story: Where politicians fear to tread

Prospect asked which taboos should be broken
January 25, 2012
End pension tax relief

Higher rate pension tax relief costs the exchequer at least £7bn a year. There should be tax relief on pensions—the question is whether the rich should get more generous relief than the rest. The defence is that this helps avoid “double taxation,” where a higher rate of tax is paid on pension income than the relief received in the first place. Yet this affects a very few, very affluent people. Given the severity of the cuts, it is staggering that this slice of spending is protected. In this area, as with universal benefits for affluent pensioners, those who claim to be in favour of a small state mutate into big-spenders.

Gavin Kelly, chief executive, the Resolution Foundation

Tax low earners

If zero ratings on VAT didn’t exist, no one would invent them. They are a taboo subject, as is selling homes to pay for long-term care. There is also a weird obsession about people on low incomes not paying tax—another taboo that may yet be broken.

Andrew Haldenby, co-founder, Reform

Pensioners’ benefits

Cut winter fuel allowance and free bus travel for pensioners. Charge road users for roads, not just tolls. Scrap higher rate tax relief on pensions; tax property more fairly (but not by capital gains tax on first properties); tax child benefit, rather than means test it. Don’t means test the NHS; get people out of hospitals and close them.

Nick Pearce, director, IPPR

Squeeze the rich

Britain has to take on the taboo of taxing the wealthy. We have not run out of money—it’s in the bank accounts of the people at the top. While average living standards are squeezed, boardroom income of FTSE 100 companies went up by 49 per cent in 2011; in 2010 by 55 per cent. According to the 2011 Sunday Times rich list, the average wealth of the top 1,000 wealthiest Britons shot up by a fifth. Rather than hammering people with cuts, make the wealthy pay their share.

Owen Jones, author of Chavs: The Demonization of the Working Class

Cut aid—then taxes

The chancellor should cut the aid budget, which is expected to rise to £11bn in 2014. It should be reduced to a more manageable sum (say £5bn) and the savings used for cutting employees’ national insurance contributions.

Ruth Lea, economic adviser, Arbuthnot Banking Group

Privatise more

Tax is not the answer—value for money is. We need a productivity revolution in the public sector, to end the taboo which judges a public service by how much is spent on it. We should spend less on: EU contributions, overseas aid, management consultants, public sector advertising, administrative overheads, bailing out banks. Sell more public sector assets.

John Redwood, Conservative MP for Wokingham

NHS: use sparingly

The NHS should focus on emergencies. Nasal congestion, skin tags, dermatitis, cataracts that cause no impediment, infertility, erectile dysfunction, indi-gestion, gender dysphoria can all be upsetting; but they should be paid for privately. NHS Trusts should publish their annual financial losses.

Julia Manning, chief executive, 2020 health

Close DCMS and BIS

Swathes of government activity should be ended. At least two departments should be closed. The Department of Culture, Media and Sport should be abolished, its duties transferred to the Home Office or Education department. Public subsidies for arts and culture should be abolished. The department for Business, Innovation and Skills should also be scrapped—if there are three things governments are awful at, it is being business-like, innovative and skilful.

Mark Littlewood, director general, IEA

Tax housing wealth

Britain needs to escape the shibboleth that its public finances are in crisis and all else is of secondary importance. The stock of our national debt is perfectly manageable—indeed has been higher for most of the past 200 years. We should take more time to lower the annual deficit—and introduce taxation on housing wealth, another no-go area, to help achieve this.

Will Hutton, principal of Hertford College, Oxford

Scrap the green belt

Build on the green belt, build on farm land, build more homes. We should construct new towns in rural areas and let only young families buy them—at a discounted rate. Young people need housing so they can save and start businesses. If we have to lose the green belt to get there, then so be it.

Shiv Malik, news reporter, the Guardian