It’s creeping up on us like a bad dream. The Autumn Statement, that is, ready to be unleashed on the public on Wednesday 23 November – less than a week’s time. Perish the thought.
A time for the Chancellor of the Exchequer to tinker with the tax system and make our personal finance lives even more perplexing than they are now.
Bad news for the public then, but probably good for financial planners who are adept at explaining the financially incomprehensible to their clients – and helping them to avoid any rough edges.
This time around, we have a new Tinker Man at No 11, Philip Hammond (don’t call him Phil – he doesn’t like it).Although Mr Hammond has already gone on record as saying he is not a great lover of Autumn Statements – preferring the big financial stuff to be addressed in the Budget – I can’t imagine for one moment that November 23 will be without its mix of policy announcements and surprises.
Especially in light of the fact that this is the first opportunity for the Chancellor to introduce new policies post the Brexit vote on June 23.
He’s already indicated he is keen to spend money on the country’s creaking infrastructure and introduce measures designed to boost housebuilding. He has also abandoned a pledge made by his predecessor to balance the Government’s books by the end of the current Parliament.
What I would love Mr Hammond to do is make a pledge to simplify the country’s tax system. In many areas, especially in the personal finance space, it’s become unnecessarily complicated. Pensions is a classic case in point.
The introduction of the tapered annual allowance in April this year for high earners is a classic case of taxation policy ill thought out. It’s over-complicated, reducing the annual allowance of those earning in excess of £150,000 (I wish) in stages from £40,000 to £10,000. It’s also fiendishly difficult to comprehend, as well as spiteful.
I’m in the Jon Greer camp on this one (pensions expert at wealth manager Old Mutual). He says the taper should be scrapped forthwith with Mr Hammond stating that its introduction was ‘an error of judgement on the part of former Chancellor George Osborne’.
There is also the issue of the ever-shrinking lifetime allowance, which currently sits at £1m, causing mayhem with the retirement plans of an ever-increasing band of people (many middle class, many long-sserving public servants).
The allowance is another example of ill-thought-out pension policy hitting those who have saved tirelessly throughout their lives so as not to be a burden on the state in their twilight years.
Then there is the Isa regime. Fine in principle, but increasingly confusing as Isa is piled upon Isa – the help-to-buy Isa, the innovative finance Isa (none of which have yet to get off the ground because of a dilatory regulator) and maybe come April the lifetime Isa (a product Mr Greer describes as ‘muddled’ (dog’s dinner more like). Surely, we need a sweeping of the Isa broom cupboard.
When it comes to tax, I sit firmly in the camp established by the Institute of Economic Affairs, a think tank not renowned for pulling its punches. It is headed by Mark Littlewood, a dynamic individual who believes passionately in the market and a scaling back of the state. I heard him once speak at a dinner hosted by Mark Rogers of financial adviser Clay Rogers (now part of Succession Group) in Birmingham and I was hooked by his free-market thinking and sheer enthusiasm.
Earlier this month, the Institute issued a weighty tome entitled ‘Taxation, government spending and economic growth.’
Edited by Professor Philip Booth, at its heart lay a passionate plea: for the current rash of taxes to be trimmed.
It called for 20 taxes to be given the axe. On the axed list were inheritance tax, stamp duty on both shares and home purchase and air passenger duty. It also recommended an overhaul of income tax, with a 15 per cent flat rate applied above a personal allowance of £10,000.
The report’s authors argue that such a bonfire of the taxes would stimulate economic growth, benefit the poorest the most – and ‘create a lasting legacy of an economy with lower and simpler taxes that will boost prosperity for all’.
It all makes perfect sense. Chancellors – Gordon Brown and George Osborne in particular – love to meddle with the tax system. Yet rarely is such meddling beneficial to either the economy or our pockets.
Let’s hope Mr Hammond breaks with such No 11 tradition and announces a clearout of taxes – and a simplification of others.
I say: out with inheritance tax, savings tax, stamp duty, the tapered annual pension allowance and the lifetime allowance. Just for starters.
Over to you Philip (not Phil).
Jeff Prestridge is personal finance editor of the Mail on Sunday
