Daily Bulletin

The Times Real Estate

.

  • Written by The Conversation
imageDave the vague.Stefan Rousseau/PA

Over the past five years of coalition government, most major economic policies have been driven by the Conservatives. Only a few changes – such as increasing the point at which income tax is paid – have come from the Liberal Democrats. So, when it comes to setting out plans for the next five years, the Conservatives are best placed to know the true state of the nation’s finances.

With this manifesto, the party could have set out a clear, honest, economic roadmap. It is disappointing that they haven’t done so. This is probably because many voters would not like the answers, but it leaves the party’s key economic polices looking random, and lacking a coherent strategy.

Ultimately, any government has budget constraints. Therefore, what is spent in one area of government, results in budgetary cuts in another, or in higher taxes. The Conservatives say that they will be able to raise money via a clampdown on tax avoidance and efficiency gains across departments. Sadly, both of these holy grails of government are almost impossible to achieve, and never generate the the revenues governments think they will.

Some of the party’s key policies, such as the Northern Powerhouse, or investing £100 billion in UK infrastructure, are sensible. There is a real need to balance the economy away from London and the South East, and to upgrade much of the Victorian infrastructure that the UK still runs on.

But how this is paid for, given that pensioners have been protected with the triple-lock, the 40p rate of income tax will not kick in until someone is earning over £50,000, and income tax, VAT, and National Insurance are to be fixed at their current levels, remains to be seen.

Fractured fundamentals

One major issue that has occurred over this parliament, and looks set to continue over the next, is the fracturing of some of the fundamentals of tax policy. In tax, the idea is to capture flows of revenue. But an increasing number of flows are being removed from tax, and this is particularly true of wealth.

For instance, one of The Conservatives' key proposals is to increase the inheritance tax threshold to £1 million. But this is a policy which benefits only a handful of people. The average UK house price is £286,000; as a result, with the current combined threshold sitting at £650,000, the vast majority of people will clearly not pay inheritance tax on their estates. However, the government has also set pension pots outside of inheritance as well. As a result, there are going to be some very large inter-generational wealth flows for a very select few that are simply missed, which lowers tax revenues.

EU uncertainty

One final issue that has dogged the Conservative party for decades is that of Europe. The fact that an “in/out” referendum is going to be on the table is a major economic issue. The relative costs and benefits of EU membership are hugely complex. But the promise of a referendum adds a level of uncertainty to the UK economy, which it can ill afford. The UK economy has some “green shoots” but many do not feel better off, even if the data suggests they are.

Given the need for deficit reduction, the huge debt overhang that exists in the private sector, the need for increasing wages, and to ensure people feel better off; increasing uncertainty is not good for business and growth.

All manifestos are written to get political parties elected. But the extent to which this motivation pervades the Conservative’s manifesto is concerning. So, while many of the “benefits” of a Conservative government have been clearly set out, the costs and the implications for taxation, the exchequer, and the size of the state have not.

The Conversation’s Manifesto Check deploys academic expertise to scrutinise the parties' plans.

Iain Clacher does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.

Authors: The Conversation

Read more http://theconversation.com/manifesto-check-tory-tax-policies-are-out-of-focus-40672

Business News

Insulation Solutions for Meeting Modern Industrial Standards

As global energy costs soar and environmental regulations tighten, industries face unprecedented pressure to optimise their operations while minimising their ecological footprint. Modern industrial ...

Daily Bulletin - avatar Daily Bulletin

How Australian Startups Should Responsibly Collect, Use and Store Customer Data?

Owing to the digital landscape, data is the most important currency in the market. From giant e-commerce sharks to small businesses, every company is investing heavily to responsibly collect data an...

Daily Bulletin - avatar Daily Bulletin

Revolutionising Connections - The Power of Customer Engagement Software

As time goes by, customer expectations keep on rising ever so rapidly. Businesses that must keep pace will need future-ready tools to deliver connectedness at every touchpoint. Customer engagement a...

Daily Bulletin - avatar Daily Bulletin

LayBy Deals