THE two certainties in life are often said to be death and taxation.

The former is a given, but taxation has recently become centre stage in political debate. We recently had the highest tax burden since the 1950s.

This in many respects was a direct consequence of the Covid pandemic and the subsequent Ukraine war which had a significant impact on energy prices. Combined, they have cost this country a staggering £500billion. This is money which now has to be added to our national debt and will have to be repaid over time.

Fortunately, the overall finances of the nation have started to improve and in the recent budget, we started to see the tax burden come down from high levels.

Hopefully as the economy continues to recover and grow, there will be further reductions in the tax burden.

However, it has opened up a very important discussion and debate about tax policy itself, what should and should not be taxed, and how we go about doing so.

The Chancellor chose to reduce national insurance. Contrary to some commentary, the national insurance does not specifically pay for pensions, benefits or anything else. It is quite simply a general tax on income and the funds go into the central pot along with all other taxes which then pay for public services.

It is however only applied to income from work. This is the key reason why I have supported the reduction because it will benefit those who are actually in employment (as well as those who are self-employed) which disproportionately should help younger workers.

I believe though that there now needs to be a proper discussion and debate about our tax policies. Sadly, since Nigel Lawson was the Chancellor, subsequent chancellors have all helped to over complicate tax and, in many respects, distort its underlying principles.

A successful tax regime should have four key ingredients. These are:

  • Certainty - so people can plan accordingly knowing what the tax regime will be.
  • Simplicity - this is so everyone understands how the systems works and tax should be easy to understand and easy to collect.
  • Efficiency - which ensures that the tax regime does not distort economic activity. Chancellors have a terrible habit of trying to persuade people to act in a particular way and use the tax system to encourage them to do so. Invariably, this tends to have unintended consequences and over complicate the system. 
  • Finally, the fourth ingredient is the most important and that is fairness. Fairness should be for all taxpayers and all ages.

At the end of the day, a sensible tax framework is there to raise money to pay for public services and other activities which we believe are in the public good.

Ensuring that we have a fair and efficient tax regime is therefore vital.

I for one look forward to a future Nigel Lawson becoming Chancellor and carrying out a long overdue reform of our tax system.