- A fair and transparent tax system should be the goal of any democracy
- The UK is in the grip of a huge stealth tax theft
- Many taxpayers don’t even know a multi-billion pound stealth raid is taking place
Divine intervention: Rishi Sunak opted to freeze benefits and thresholds in 2021
A fair and transparent tax system should be the goal of any democracy. Voters have the right to clear information about how much they are expected to pay and where their money will go.
Stealth taxes, where governments use devious tactics to pick out citizens’ pockets, are the opposite of this principle.
The UK is in the grip of a huge stealth tax theft. Many taxpayers will not even be aware that this multi-billion pound stealth raid is happening, let alone its enormous scale.
Nobody except a few crazy socialist millionaires wants to pay more taxes. When there are legitimate reasons, governments should at least be honest. Yet here we are, just waking up to the huge impact of a measure first announced by Rishi Sunak when he was chancellor in 2021. Instead of raising headline rates, Sunak opted to freeze allocations and thresholds.
These typically increase each year to keep pace with the cost of living. Keeping them static impoverishes people. Jeremy Hunt extended the freeze until 2027-28, so it will last a total of six years if it is not eased or reversed.
To make matters worse, the moratorium has raised much more money than expected, due to rampant inflation. It was initially anticipated to raise £8 billion a year by 2026. If only.
The Mail on Sunday highlighted a new estimate from the Growth Commission think tank based on figures from the Center for Business and Economic Research. This suggests the poaching raid will leave voters worse off, to the tune of £75 billion annually by 2027/28, equivalent to nine pence in the pound in income tax, unless Hunt acts.
This figure is higher than other estimates, including a recent one from the Institute for Fiscal Studies (IFS) which puts it at £52bn.
These analyzes differ due to the assumptions made about inflation and wages. However, the consensus is that whatever the real figure is, it will be colossal.
Millions of low-income Britons will be forced to pay taxes, including many pensioners who were below the threshold.
And the number of reasonably well-off people who fall into the top 40 per cent group is on track to at least double to nine million by 2027/28.
Economists call it fiscal drag. Whatever name it is used, it is a very bad way to tax people. It is clandestine, little understood and undemocratic.
The full effects have not been adequately presented to parliamentarians or fully explained to the public. A measure that was originally expected to raise £8 billion a year, and which now raises many multiples of that amount, deserves a fully informed debate.
The poach raid is relevant to the debate over whether Hunt can afford tax cuts in his autumn return. Despite pressure from the Conservative Party, he shows little appetite, arguing that he is in a fiscal straitjacket.
However, the magnitude of Hunt’s unexpected windfall will be ammunition for those asking him to give some of it back.
A clever six-year freeze at a time of high inflation risks damaging the economy by leaving people with less to spend. Reduces incentives to go to work or seek a promotion. That is no way to address the scourge of economic inactivity, with around nine million people of working age unemployed.
Above all, it is scandalous to try to deceive us.
This is gaslighting on an epic scale.