The Tories have betrayed the ‘just about managing’ in our country – but there is a way they could win them back

Janet Street-Porter
Our tax system most definitely does not work for everyone: Reuters/Hannah McKay

No matter who is in charge of the Tory party, the future of our economy looks bleak. We’re chugging along towards the buffers, borrowing more as we go.

Next month, the Office for Budget Responsibility will predict the Chancellor will have £17bn less to ease the financial pain of Brexit. Two-thirds of Hammond’s much-vaunted war chest to finance big projects to kick-start the economy has been wiped away, as Britain’s output remains sluggish.

In a few weeks, Hammond will deliver his Budget but he will not have the guts to attack the canker at the heart of the public finance. Our tax system is rotten to the core – it’s fiendishly overcomplicated, and continues to favour the rich over the poor, while trying (and not succeeding) to appease those in the middle. Why have successive governments failed to tackle this problem? All they do is tinker around the edges, adding a little bonus here while taking away an allowance there, giving us a fiver and taxing us another £6.50 – and, I promise you, Philip Hammond will stand up in the Commons in November and continue this tradition.

Diddling about with fuel duty, personal allowances, cigarettes and booze. Talk about rearranging the deck chairs on the Titanic! He won’t have the cash to pay increase health and social care budgets and come up with any grand morale-boosting projects. Meanwhile, Jeremy Corbyn has promised to abolish tuition fees and build a million new homes in the first four years he’s in power – and attracted thousands of new members to Labour.

OK, he hasn’t outlined the cost, but faced with that grandstanding, how did the Tories respond? By the end of their conference, it had been business as usual, the same old platitudes about helping ordinary working people – but no bold or brave thinking. The Tories might be in power, and at this rate they don’t deserve to stay much longer. The only way to appeal to voters is to acknowledge that our complicated tax system provides a framework for the rich to exploit and for the poor to pay a disproportionate amount of their income, receiving less and less in return.

Big business treats our tax system with contempt – this week we discover that Facebook paid just £2.6m in tax in 2016, on sales of £840m. To “minimise” tax, they gave staff huge share bonuses, moving money overseas to other branches of the company to avoid UK corporation tax, currently charged at 20 per cent. This exploitation of overcomplicated tax legislation happens all over Europe, and the EU has been clamping down on companies who minimise their bills.

Amazon base themselves in Luxembourg (even though they have a huge operation in the UK), where they paid four times less tax than local businesses, following a “sweetener” deal with the government, agreed when EU President Jean-Claude Junker was Prime Minister. Now, the EU has ordered Amazon to cough up £220m, claiming that the company failed to pay any tax on three quarters of their European profits for eight years.

In Ireland, a similar “sweetheart deal” the government struck with Apple saw the company minimise their liabilities – until the EU ruled they owed £11.5bn in unpaid taxes. That money remains unpaid, and Ireland has been referred to the European Court of Justice to explain their position.

In the UK, the Tories said they were cracking down on non-doms back in 2016. It won’t surprise you to know that the rules are being implemented very slowly, and these wealthy individuals are being allowed until April 2019 to “reorganise” and “cleanse” their overseas accounts. I merely quote the language used by taxation experts.

The Institute of Economic Affairs (IEA) wants income tax set at a flat rate of 15 per cent, VAT to drop to 12.5 per cent, and a whole host of piddling taxes abolished. They propose just five taxes, including fuel duty, a land-value tax and a tax on rental income. As for the “ordinary working families” the Tories are so keen to help, five million people have run up credit card debts that they can’t repay, according to the head of the Financial Conduct Authority, who is tipped to become the next Governor of the Bank of England. Andrew Bailey attacked credit card companies whose charges are so high that for every £100 a family has borrowed they will have to stump up £350 to clear the debt. For millions of the people the Tories claim they want to help, credit cards are the only way they can make ends meet.

If tax was at a flat rate, the IEA reckons that the poorest group in society would receive tax cuts amounting to 26 per cent of their gross income, with the next group seeing a 17 per cent increasing in income. The downsides to simpler tax are – fewer civil servants needed to run an inefficient bureaucracy and fewer accountants and lawyers needed to fiddle and “minimise” tax liabilities. The upsides are obvious – people would have more money to spend and the economy would grow, as it would be cheaper to employ staff. At the moment, wages are stagnant, and the cost of living is rising.

The level of credit card debt shows that many people in Britain are faring worse than “just managing”. They’ve been failed by our feeble Chancellor, who continues to maintain the status quo – and we all know who that favours.