This is something chancellor Philip Hammond could address in the coming Budget. But middle Britain’s taxpayers are now seen as the cash cow that must be milked.
The government’s failure to raise key thresholds in line with inflation has created a tax creep that has engulfed millions.
Take the £100,000 threshold for the erosion of the personal allowance. This was set at £100,000 when introduced in April 2010 by then-chancellor Alistair Darling. It has stayed there ever since. Had it been increased with the CPI, the starting threshold would now stand closer to £116,000.
The government’s failure to raise key thresholds in line with inflation has created a tax creepHMRC estimates that 893,000 people will be affected this tax year. That is a chunky 3 per cent of all taxpayers. In 2015 for figures was estimated to be 791,000 accountants, Deloitte told me.
The impact on these people has been increased by the raising of the personal allowance to £11,500. Now those in a bracket from £100,001 to £123,000 are affected by a marginal tax rate of 62 per cent if you include National Insurance.
But the greater travesty has come with child benefit withdrawal. The £50,000 level was set in January 2013. Above this, 1 per cent of child benefit is withdrawn for every £100 earned until at £60,000 it is gone altogether.
It can create ludicrously high marginal tax rates for families that can hardly be counted as super wealthy. For example, Deloitte's illustrations show that a family with one child would lose 52.56 per cent tax on this chunk of income while one with four children would lose 73.46 per cent.
The Institute for Fiscal Studies estimated that about 1.1m families would be affected when the measure was introduced in 2013.
So far the £50,000 threshold has not been indexed with inflation. If it had been raised with CPI it might now be closer to £52,000.
The IFS has warned the number losing the benefit could increase by 50 per cent in five years and double in 10 years if the threshold remains unchanged.
Those on the threshold of paying higher rate tax have also suffered through lack of indexation. As a result, the number paying 40 per cent tax has doubled over the past 20 years from 2.1m in 1997.98 to 4.2m today.
Yes, through financial planning and particularly pensions, the effects can be mitigated. But for some this is just not financially feasible.
This all helps to explain why, despite the tax dodgers, receipts rose by 17 per cent to £177bn in the five years to April 2017 even though the personal allowance has more than doubled over the past 10 years from £5,225 in 2007/08 to £11,500 today.
Protect consumers from exploitation
Where does the responsibility of a regulator start and stop when it comes to protecting consumers?
What about the responsibilities of firms and regulator in identifying and protecting vulnerable consumers? And what about the responsibilities of consumers to make reasonable decisions?
Those are some of the things that will no doubt be considered by the Financial Conduct Authority’s Future Approach to Consumers document.
I watched a BBC News report on high interest lending with increasing frustration as a mother was interviewed with her teenage daughter outside a shop renowned for high-interest lending. The pair listed things they had bought from the store. By the time they reached the Playstation 4 I was tearing my hair out.
No doubt they had been lured by low monthly payments and taken scant notice of the interest. This used to known as “borrowing on the never never”, for good reason.
Is this exploitation of naïve consumers or lack of personal responsibility?
It is a fine line, but firmer guidelines from the FCA should help both industry and consumer.
Base rate hoo-ha
So the Bank of England finally increased the base rate, doubling it to 0.5 per cent. From all the hoo-ha on the television you might have thought disaster was imminent.
In fact, interest rates are merely back where we were before the Bank of England panicked after the Brexit vote.
Even now two deputy governors have voted to leave them unchanged. And governor Mark Carney says any future rises will be limited and gradual.
Sadly the rise will not bring any relief to savers. It simply restores the miserable position they were in a year ago.
As for borrowers. If a 0.25 percentage point rise is a catastrophe then surely they should not have been borrowing in the first place.
Tony Hazell writes for the Daily Mail's Money Mail section
