- A fair and transparent tax system should be a goal of any democracy
- Britain is in the grip of a massive stealth tax heist
- Many taxpayers are unaware that a multi-billion pound sneak attack is even taking place
Divine intervention: Rishi Sunak opted for a freeze on allowances and thresholds in 2021
A fair and transparent tax system should be a goal of any democracy. Voters have the right to clear information about how much they have to pay and where their money goes.
Stealth taxes, where governments use underhanded tactics to pick the pockets of citizens, are the opposite of this principle.
Britain is in the grip of a massive stealth tax heist. Many taxpayers will be unaware that this multi-billion pound sneak attack is even happening, let alone the sheer scale of it.
No one, apart from a few crazy socialist millionaires, wants to pay more taxes. If there are legitimate reasons, governments should at least be honest. And yet we are only just waking up to the enormous impact of a measure first announced by Rishi Sunak when he became Chancellor in 2021. Instead of increasing nominal rates, Sunak opted for a freeze on allowances and thresholds.
These are normally increased every year to keep pace with the cost of living. Keeping them static makes people poorer. Jeremy Hunt extended the freeze until 2027-2028, meaning it will last a total of six years if he does not ease or reverse the freeze.
What makes matters worse is that the moratorium has generated much more money than expected, due to runaway inflation. It was initially expected to generate £8 billion a year by 2026. If it only were.
The Mail on Sunday highlighted a new estimate from the Growth Commission think tank, based on figures from the Center for Economics and Business Research. This suggests that the stealth attack will leave voters worse off by £75bn a year in 2027/2028, equivalent to 9p in the pound in income tax, unless Hunt intervenes.
That is higher than other estimates, including a recent estimate from the Institute for Fiscal Studies (IFS), which put it at £52 billion.
These analyzes differ due to assumptions about inflation and wages. The consensus, however, is that whatever the actual figure will be, it will be colossal.
Millions of low-income Britons will be forced to pay tax, including many pensioners who were below the threshold.
And the number of reasonably well-off people in the higher 40 percent group is on track to at least double to nine million by 2027/2028.
Economists call this ‘budgetary drag’. Whatever name you use, it is a very bad way to incriminate people. It is underhanded, poorly understood and undemocratic.
The full consequences have not been properly presented to parliamentarians or disclosed to the public. A measure that was originally expected to raise £8 billion a year and is now raking in many multiples of that deserves a fully informed debate.
The stealth raid is relevant to the discussion about whether Hunt can afford tax cuts in his fall statement. Despite pressure from the Tory party, he has shown little appetite, arguing that he is in a budgetary straitjacket.
Still, the sheer size of Hunt’s unexpected stealth windfall will be ammunition for those calling on him to give some of it back.
A cunning six-year freeze at a time of high inflation risks damaging the economy by leaving people with less money to spend. It reduces the incentives to work or get promoted. That is no way to tackle the scourge of economic inactivity, when about nine million working-age people are unemployed.
Above all, it is shameful to try to lose sight of our eyes.
This is gaslighting on an epic scale.