Chancellor Philip Hammond delivered the 2019 Spring Statement to the House of Commons, and stated that the UK economy had ‘reached a turning point’.
The Office for Budget Responsibility (OBR), which produced the latest economic forecasts for the Spring Statement, said: ‘Economic growth in the UK and globally has slowed since the Budget in October. But tax receipts have performed better than we expected in the final months of 2018/19, and we judge that much of this buoyancy will endure.’
The Shadow Chancellor, John McDonnell, lambasted the Chancellor’s Statement, saying: ‘He’s boasting about the deficit. He’s not eliminated the deficit as we were promised by 2015. He’s simply shifted it onto the shoulders of headteachers, NHS managers, local councillors and police commissioners and, worst of all, onto the backs of many of the poorest in our society.’
Meanwhile, Caroline Lucas, Co-Leader of the Green Party, stated that the government used the Spring Statement to celebrate a ‘tiny improvement in growth’. She said: ‘GDP isn’t a real measure of our society. True indicators are people being treated in hospital corridors, and foodbank use shooting up. Our economy is designed to fail people – and it needs an overhaul.’
HMRC has started to write to taxpayers ahead of the introduction of the Welsh rates of income tax (WRIT) on 6 April 2019.
From this time, taxpayers will pay the WRIT if their main residence is situated in Wales. The Welsh government will set the rates. It intends to use the money raised by the WRIT to fund public services, such as the NHS and schools.
Workers with a main residence in Wales will pay tax at the Welsh rates via Pay as You Earn (PAYE). HMRC will add a ‘C’ to the start of individuals’ tax codes so that affected taxpayers pay the correct rates.
Those who opt to file their self-assessment tax return online will be required to tick a box in order to tell HMRC that they pay the WRIT.
Commenting on the matter, Angela MacDonald, Director General for HMRC Customer Services, said: ‘We want to help people pay the right tax, so we’re writing to customers to let them know that they’ll now be paying WRIT.
‘Customers don’t need to do anything right now, but should make sure to keep HMRC informed if their details change in the future.’
Additional information on the WRIT can be found here.
In a new report, the Association of Accounting Technicians (AAT) has outlined a range of proposals designed to help raise funds for the NHS without instigating tax rises.
The publication of the report comes following the Prime Minister’s recent pledge to raise £20 billion per year for the NHS by 2023/24. In response to this, the Office for Budget Responsibility (OBR) warned that tax rises will be required in order to fund NHS budget increases.
According to the AAT, its proposals would ‘raise over £27 billion’ while protecting UK taxpayers from increased government borrowing or tax rises.
Within the report, the AAT has urged the government to simplify inheritance tax (IHT); abolish the Marriage Allowance; remove higher rate tax relief for pension contributions; and switch stamp duty liability from the buyer to the seller.
The AAT acknowledged that some of its recommendations would ‘raise significant political challenges’, but stated that the proposals ‘make financial sense’.
Commenting on the matter, Phil Hall, Head of Public Affairs and Public Policy at the AAT, said: ‘AAT’s recommendations will not clear the deficit or enable investment to be showered across the country, but they do identify over £27 billion of annual savings and deserve serious consideration as a worthwhile, credible and thought-provoking contribution to the UK taxation and investment debate.’
The report can be read in full here.
Think tank the Resolution Foundation has dubbed Entrepreneurs’ Relief (ER) the UK’s ‘worst tax break’, and has urged the government to abolish the initiative altogether.
ER is a tax relief available on the disposal of a business, and gives those eligible access to a lower rate of capital gains tax (CGT): under ER, this is charged at 10%, as opposed to 20%.
According to the Resolution Foundation, ER is ‘ineffective’, and should therefore be abolished in order to fund improvements to NHS services.
When it was first introduced in 2008, ER was expected to cost £200 million per year. The Resolution Foundation stated that spending on the relief ‘ballooned’ to over £2 billion by 2011/12, due in part to ‘increased generosity’ and ‘greater-than-expected use’. HMRC recently predicted that ER spending increased to £2.7 billion last year.
The Foundation suggested that this figure is ‘more than the entire budget’ for the UK’s intelligence services, and is enough to ‘provide £100 to each and every household in the country annually’.
Adam Corlett, Senior Economic Analyst at the Resolution Foundation, said: ‘As the Treasury wrestles with how to raise revenues to fund the Prime Minister’s pledge of £20 billion for the NHS, they should start by scrapping this expensive, regressive and ineffective tax relief.’
In its latest Fiscal Sustainability Report (FSR), the Office for Budget Responsibility (OBR) has warned that tax rises or spending cuts will be required in order to fund planned increases in the NHS budget.
The government recently outlined plans to boost its health budget partly by way of a so-called ‘Brexit dividend’ – by 2023/24, it hopes to contribute £20 billion a year to the NHS in England. However, according to the OBR, Brexit is ‘more likely to weaken than strengthen’ public finances.
Responding to the OBR’s warning, the Treasury said: ‘The government will fund this five-year commitment while continuing to meet its fiscal rules and reduce debt. Taxpayers will need to contribute a bit more in a fair and balanced way.’
Within its report, the OBR also stated that public finances are ‘likely to come under significant pressure’ in the long-term, as a result of the UK’s ‘ageing population’ and ‘upward pressure on health spending’.
The fiscal watchdog revealed that the current long-term outlook for UK public finances is now ‘less favourable’ than at the time when its last FSR was published in January 2017.
Think tank the Adam Smith Institute has suggested that UK taxpayers are giving more of their income to the Treasury than at any other time.
According to research published by the Institute, from 29 May 2018, employees will be ‘working for themselves’, having worked 148 days ‘just to pay their tax bill’.
Each year, the Adam Smith Institute calculates the number of days it takes the ‘average’ taxpayer to pay their taxes. For 2018, the Institute has suggested that ‘every penny’ workers earned up until 28 May went to the Treasury.
The Adam Smith Institute has therefore dubbed 29 May ‘Tax Freedom Day’ for 2018. From this date onwards, employees will get to ‘keep every penny they earn’, according to the Institute.
The research also revealed that this year’s Tax Freedom Day falls three days later than in 2017, and is the ‘latest it has been’ since records began in 1995.
Commenting on the findings, Sam Dumitriu, Head of Research at the Adam Smith Institute, said: ‘Tax Freedom Day is a stark illustration of the UK’s tax burden.
‘It is a reminder that public services such as education, welfare and the NHS must be paid for, either through taxes or borrowing – taxes on the next generation.’
The Institute for Fiscal Studies (IFS) has warned that the NHS will require tax rises in order to maintain the level of service it currently supplies.
In a recently published report, the IFS stated that, with an ‘ageing population’ and an increasing pay and drugs bill, individuals’ reliance on the health service will ‘only continue to grow’.
In order to sustain the NHS and fund increases in health spending, taxes would need to rise by between 1.6% and 2.6% – equivalent to between £1,200 and £2,000 per household, said the IFS.
It also revealed that funding increases of 4% per year will be required over the medium term to ‘secure modest improvements in NHS services’.
Commenting on the issue, Paul Johnson, Director of the IFS, said: ‘If we are to have a health and social care system which meets our needs and aspirations, we will have to pay a lot more for it over the next 15 years. This time we won’t be able to rely on cutting spending elsewhere – we will have to pay more in tax.
‘But it is a choice: higher taxes and a health and social care system which meets our expectations and improves over time, or taxes at current levels and a more constrained health service delivering less than we have become accustomed to.’