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  • Tax policy: What did the recent party conferences tell us about tax?

    12 October 2018

    Andy Wood

    Tax policy: What did the recent party conferences tell us about tax?

    Despite the frequency of the polls appearing in British media, the only test of opinion which really matters is the General Election.

    Nevertheless, all the major political parties recognise the merit in keeping the country on their side in the interim just in case the usual five-year electoral cycle is disrupted by a snap decision to dissolve parliament.

    Continuing uncertainty about a Noel Edmonds’ Brexit (‘Deal or No Deal’) and various figures fomenting rebellion in the ranks of the Conservative Party have, of course, made the possibility of a sudden election all the greater.

    That’s one reason why the various party conferences over the last few weeks have been of such interest.

    However, even allowing for the added scrutiny of their respective positions on key issues – and, in particular, the degree to which HMRC has been much in the news in recent months – persuasive detail was fairly thin on the ground in the set-piece speeches for tax-watchers like myself.

    Labour, as expected, took aim at the Government’s record on policing tax avoidance, with Shadow Chancellor John McDonnell labelling the Treasury’s efforts to clamp down on firms avoiding tax “on an industrial scale” as “a disgrace”.

    Nevertheless, both he and Labour leader Jeremy Corbyn – who objected to Prime Minister Theresa May’s promise to make Britain a low-tax, post-Brexit economy – appeared to pull their punches, making few specific points or policies.

    Labour fringe meetings, which usually generate interesting debate, were also relatively tame this time around, only producing a continuing pledge to honour proposals in the party’s last election manifesto, notably a hike in the rate of Corporation Tax.

    Far more worthy of note was Labour’s support for a report published last month by the Institute for Public Policy Research (IPPR), which set out striking plans for personal and workplace taxation, including everything from scrapping Inheritance Tax (IHT) to the phasing out of R&D tax reliefs for all but the SME community.

    Even there, Labour was beaten to the drop by the LibDem leader, Vince Cable, who – perhaps unsurprisingly, given his party’s role as coalition partner for the Conservatives in 2010 – tried to borrow the IPPR ideas most likely to appeal to current supporters of the other two main groups.

    In an echo of the Tories’ Birmingham assembly, he outlined an intention to cap relief on pension contributions and – mirroring some of the talk escaping Labour’s gathering in Liverpool – tax capital gains and dividends. It was, he said, a programme of “progressive tax reforms and an honest approach to tax”.

    Hopes for something of the same from Chancellor Philip Hammond were dashed. He failed to give the ruling administration the kind of clarity able to distinguish it from the middle and right of the British political spectrum and extinguish the internal dispute over its attempts to negotiate the terms of withdrawal from Europe.

    Those seeking a little definition on tax will have drawn little comfort from a speech which was constructed to avoid inflaming Conservative tensions which have taxed his patience and that of the PM since the Brexit vote.

    In all, in fact, he mentioned tax just five times.

    He claimed that despite Britain leading the debate about how best to ensure the world’s digital giants were properly taxed, a solution to the problems posed and headlines prompted by the likes of Google and Amazon was best arrived at with “international agreements” but added that, in the absence of accord, the UK would “go it alone”.

    It escaped no-one’s attention that the UK may have to try and do so out of necessity, given the result of the June 2016 referendum.

    Due to his previous pronouncements, it may come as no surprise that it was left to the Treasury Minister, Mel Stride, to try and offer some crumbs of comfort but, again, little detail.

    Speaking to a seminar organised by the Chartered Institute of Taxation, he described taxation in turmoil.

    On the one hand, the likes of the gig economy and the use of Personal Service Companies has undermined a tax system which was now “crumbling before your eyes”, with stability only provided by things such as Stamp Duty Land Tax (SDLT).

    Amidst this uncertainty, the current Government was succeeding in clamping down on avoidance and evasion, heralding the Tax Gap as proof of its achievements

    A cynic might suggest that Mr Stride’s ability to infuriate his critics by citing two controversial areas in which changes introduced or overseen by the Tories as good practice is as close to the kind of bold comment with which conference season has traditionally been associated.

    Mind you, a sceptic would point out that a £33 billion shortfall between idealised and actual tax income is not necessarily anything to be overly proud about.

    It might well be that the shape of the country’s future tax landscape only becomes apparent after the fine print of the Brexit negotiations are agreed or, at least, until Mr Hammond declares his final pre-withdrawal Budget at the end of this month.

    Until then, we remain in something short of a phoney tax war (a tax fudge, if you like) and that, I would suggest, is of no use to businesses or households alike.


    If you have any comments or queries on tax policy, or on any tax matters at all, please get in touch.