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OPINION

George's marvellous medicine?

George's marvellous medicine?
March 23, 2011
George's marvellous medicine?

Fleet Street's headline writers will focus on the usual bribes to various special interest groups, most obviously motorists; a cut in fuel duty and the cancellation of the fuel duty escalatory will be financed by a Brown-style raid on the profits of North Sea oil operators. One or two may also notice that for all its vaunted independence, the Office of Budgetary Responsibility is no better at economic forecasting than the Treasury was.

But this Budget may yet be remembered for other reasons. Mr Osborne spoke repeatedly of the need for fairness, simplicity and consistency in the tax system. Yes, he is fiddling with reliefs here and allowances there, just as his predecessors did. But he is also taking, or at least contemplating taking, some more significant and worthwhile measures.

The most immediately tangible of these is the indexing of tax allowances to consumer prices rather than retail prices. Cynics may carp – rightly – that this is fiscal drag, since consumer prices (and therefore future allowances) will rise more slowly than retail prices. The £600 rise in the basic allowance could be eroded in as little as six years. But it does bring taxes in line with benefits, which means more consistency and fairness.

Then there is the proposal to combine income tax and national insurance, which is welcome and very long overdue. National "insurance" is nothing of the sort; it is an open-ended tax in all but name, levied on both employees and employers, and conferring only the vaguest of benefits upon the individual in return. Combining it with income tax would cut administration costs at both government and business, and introduce far greater transparency and accountability into the tax system.

Mr Osborne could go further still and reform the completely iniquitous levy that is stamp duty, be it on shares or homes. His latest wheeze to improve prospects for first-time buyers – a £250m shared-equity scheme – is insignificant compared to the amount that stamp duty raises from that same group of people, even allowing for a first-time buyer 'holiday' that ends in 2012. Anyone wishing to buy an average house in the southeast of England must hand over £8,230 to the taxman for the privilege of becoming a lifelong mortgagee. Yet those that have done the best out of rising house prices pay not a penny in capital gains tax on their fortunate profits.