‘Cut high earners’ tax to boost UK’

Published: Tuesday 4th November 2014 by The News Editor

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Taxes for higher earners should be slashed and the Department for International Development abolished to turn Britain’s fortunes around, Owen Paterson has said.

The former environment secretary insisted income tax, stamp duty and inheritance tax were out of control and having a “dampening effect” on wealth creators.

He also suggested public spending could be cut by up to £170 billion – saying the Tories should not shy away from “getting rid of” government departments.

The comments came in a speech to launch his new think-tank, UK 2020.

Mr Paterson – who lost his Cabinet job in the summer reshuffle – said history showed that “if you reduce taxes, you grow the economy”.

“As it is, we are seeing a narrowing of the tax base and, with it, an increased tax burden upon those who we really want to encourage to create wealth,” he told the audience in London.

“The accumulation of Income Tax, Stamp Duty and Inheritance tax, before even adding VAT, Council Tax and energy subsidies on a utilities bill have a compounding, dampening effect on people.”

Mr Paterson said headline tax rates did not give the whole picture, as they did not include national insurance payments.

And he pointed out that while only one in 20 people paid the 40% higher rate in 1980, the proportion earning over the threshold of £41,450 now was more like one in six.

Four fifths of homes are also being caught by stamp duty, and the charge is much higher than previously.

“It is high time we rediscovered the virtues of low taxation,” Mr Paterson said. “Low taxes encourage effort, initiative and enterprise.

“They reward society’s wealth creators and risk takers, the people who create jobs and build the prosperity that benefits us all.

“We should start with a significant uplift in the threshold for paying 40% income tax to send a signal that those who work hard and achieve success will be rewarded, not penalised.”

Mr Paterson said the “brutal fact” was that no British government over the last 40 years had managed to raise more than 39% of national income in tax.

All spending beyond that had to be borrowed, and even though the coalition had cut the deficit the Government was still borrowing £200,000 a minute.

“The Taxpayers’ Alliance has identified £120 billion in potential savings. In order to get public expenditure down to 40%, we would have to reduce spending by a further £50 billion,” he added.

Questioning the functions of departments run by some of his former colleagues, Mr Paterson went on: “One of the most striking features I noticed while attending Cabinet is that there are too many chairs at the table.

“We shouldn’t shy away from getting rid of departments.

“It is easy for Government departments to lose focus of their central mission and to become obese.

“We must sharpen up departments and ensure they are effective. Can we afford BIS (Business, Innovation and Skills), DECC (Energy and Climate Change), DCMS (Culture Media and Sport) or DfID (International Development) as independent departments with all the associated costs?”

Mr Paterson suggested Britain should be looking to align itself more with English-speaking countries such as America, Australia and Canada rather than focusing on traditional European partners such as France.

“When we look ahead to a brighter future, we can see the UK alongside self-reliant, low cost, entrepreneurial economies, starting with the Anglosphere where the economies of Australia, Canada and New Zealand are flourishing thanks to Conservative governments,” he said.

“And we have close links with the emerging economies of the Commonwealth, the Far East, and parts of Eastern Europe which are all growing faster than our local but important partners in Europe.”

In an apparent message to David Cameron, Mr Paterson insisted politicians should “forget the focus groups” and pursue traditional Conservative goals.

“If we are straight with the public – about the importance of balancing the books, about the duty on ministers to spend public money wisely and frugally, and about the dynamic effects of low taxation, this puts the country’s best interests at the forefront,” he said.

“If we do all that, forget the focus groups, we will take the public with us.”

Responding to Mr Paterson’s call for further increases in the 40p income tax threshold during a campaign visit to Rochester and Strood, Mr Cameron said: “I think we have got the right balance – we want to cut taxes for hard-working people.

“Our priority is obviously the lowest paid, which is why we want to lift the threshold before you starting paying any income tax to £12,500. That is the more expensive of the two pledges, but I think it is the right one to make.

“But we do recognise that people on middling incomes have worked very hard, they are drawn into the top rate of tax, the higher rate of tax too early, and that is why we say that you should not pay the 40p rate until you get to £50,000.

“I think our approach is the right one – Owen is making a contribution to the debate and obviously I will look at what he says, but our plans are very clear.”

Published: Tuesday 4th November 2014 by The News Editor

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