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What taxes should the UK implement, reform or abolish?

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Sorcerer

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Discussion offset from the thread about Proposed VAT on Private Health Insurance.

There is such an overwhelming case for land taxation that I'm shocked prominent left-wing voices haven't tried to make the case for it. Unlike property tax it actually encourages development and also ensures efficient land usage as well as being a way to help solve the housing shortages, and there is almost no way to get around it; Amazon for example can probably find ways to reduce corporate taxation, but they cannot dispute how much land their warehouses might occupy. I'd rather see that along with a few more Pigouvian taxes before any new VAT on private health insurance, especially when the NHS is already struggling as it is.
I am confident that such an idea will not raise significant revenue because "wealth tax" as a general term is ultimately meaningless and is mostly a left-wing slogan that most people don't understand beyond a surface level. Wealth is not just money sitting in a bank vault, much of it is tied up in assets which will already be subject to other taxes such as capital gains or dividend/income taxes in the case of stocks, or property taxes in the case of real estate. There are far better progressive tax options such as the aforementioned land value and more Pigouvian taxes that can provide much greater societal benefits beyond simply increasing government revenue.

I am of the opinion that the UK tax system requires some degree of reform (not to be confused with Reform) and that we should implement land-based taxes to encourage development and raise government revenue as well maybe more Pigouvian taxes (ie. tobacco or sugar taxes) to raise revenue from negative externalities. I believe the idea of a "wealth tax" is meaning because the term is merely a left-wing slogan most people don't understand beyond a surface level and that there are better progressive tax options.
 
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DarloRich

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I believe the idea of a "wealth tax" is meaning because the term is merely a left-wing slogan most people don't understand beyond a surface level and that there are better progressive tax options.
Such as? Feel free to offer them.

personally I am happy with merely left wing slogans like: tax the rich!
 

Sorcerer

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Such as? Feel free to offer them.
I already did. Land value taxes and Pigouvian taxes on negative externalities. I am curious as to why you chose to ignore that part.

personally I am happy with merely left wing slogans like: tax the rich!
Whatever floats your boat, but meaningless slogans don't raise government revenue or provide better quality of life to UK citizens.
 

35B

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personally I am happy with merely left wing slogans like: tax the rich!
Is the level of tax a moral matter, or about how government can be funded? Because whether "tax the rich" is a good or bad idea depends a great deal on what you're trying to achieve.
 

styles

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It's all tinkering really.

The problem with the UK is our misguided belief that the public finances should be operated like a child's wallet, where you can only spend money if you have already found the cash somewhere. China didn't go from one of the poorest countries in the world to one of the largest economies by fiddling with tax rates. They fundamentally shifted their economic policy to focus on investment in people, investment in production, and growing exports.

Meanwhile the centrist parties in the UK (Labour, Tories, Lib Dems) fawn over mundane jibes of, "Which tax is going to rise to pay for this junior doctor pay rise?"

The current government is as unambitious as the last, economically at least.
 

DarloRich

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I already did. Land value taxes and Pigouvian taxes on negative externalities. I am curious as to why you chose to ignore that part.
mainly because there are lots of words that sound lifted direct from a Dominic Cummings missive and make little sense even to a man of at least limited intelligence!

Perhaps try again using words in common usage!

I am being ever so slightly factious about wealth taxes but we DO have to do something to move the burden of taxation from, especially, the middle classes and move it to those with the most. We also need more money to fund our public services and bodies that we all rely on to get us through life. That is going to have to come from some form of wealth/unearnt income based taxation if only to assuage public annoyance at what are seen as almost swingeing personal taxation levels. I cant see another way.

Is the level of tax a moral matter, or about how government can be funded? Because whether "tax the rich" is a good or bad idea depends a great deal on what you're trying to achieve.
Honestly - I don't like rich people who haven't earnt a penny of thier wealth and I want some of it to make the fabric of society better for all of us. I am also sick of the bootlicking towards the rich. They are not on our side. Why protect them? They wouldn't give you the steam of thier water.

I get quite Marxist about this kind of thing! ;)

China didn't go from one of the poorest countries in the world to one of the largest economies by fiddling with tax rates.
being a communist nation might have helped reduce protest to thier decisions..............
 
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styles

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being a communist nation might have helped reduce protest to thier decisions..............
They reduced the proportion of their population living in severe poverty from around 90% to 0.2% over the course of around 40 years of economic reform.

As many criticisms I have of China, I expect their economic policy is pretty popular domestically.
 

DarloRich

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They reduced the proportion of their population living in severe poverty from around 90% to 0.2% over the course of around 40 years of economic reform.
FORCED economic reform. You cant make an omelette without breaking eggs eh?
 

Cdd89

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I'm going to go for capital gains tax (reform).

It's incredibly distortionary - short-term investors pay "only" 20% on gains that came more easily than income, whereas long-term investors pay 20% on gains that may be largely inflationary. Aside from this being unfair we're also rewarding the wrong behaviour (society doesn't benefit from a bitcoin speculator making money, whereas it does from someone who is a company founder, say).

It should be set to income tax rates, offset for inflation.


Honestly - I don't like rich people who haven't earnt a penny of thier wealth
And connected to this, the interplay between inheritance tax and Capital Gains Tax is incredibly distortionary. Currently someone can hold an asset until they die, and the asset becomes rebased to the value at their death (charged at 40% inheritance tax). If that same person sells their asset before they die, they pay 20% capital gains tax in addition to 40% inheritance tax. Therefore, people continue to hold bad investments if they are close to death, which is bad for the economy.

I think it would make more sense for capital gains tax to be assessed at death, and for inheritance tax to be reduced a bit to account this (although @DarloRich would undoubtedly disagree with the second half ;))
 

DarloRich

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although @DarloRich would undoubtedly disagree with the second half
My view on IHT is that it should never be paid by ordinary people. The bands need to be such that a "normal" family home and a "normal" level of saving should be exempt. As I said elsewhere no one in my family has ever paid IHT. No one in my family owns shares or investments or a second home. Most of them don't own a first home!

it should be paid by the rich - as was the plan on introduction

( I know "normal" is open to discussion but we need to come up with a workable definition. £350k seems fine for now but wont be in a few years.)
 

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It should be set to income tax rates, offset for inflation.

Apparently it once was, but the complexity of this made work for accountants. The current rates are there to coarsely take inflation into account while keeping things fairly simple.

I can see the benefits of your suggestion, but do we really want a tax system so complex that even normal PAYE employees need to employ an accountant, as per the USA? I suppose if you run an accountancy business... :D
 

Cdd89

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Apparently it once was, but the complexity of this made work for accountants. The current rates are there to coarsely take inflation into account while keeping things fairly simple.
I was about to make that point, but my post was already overly long :smile:

My counter argument would be that these changes were made when many of the computations were manual. Nowadays (indeed, at any point in the last 20 years) you could simply use an online government tool to calculate the tax owed.
 

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I didn't say most pensioners were dying from the cold?

I think the point you made implied that; the number of pensioners who would have to switch the heating off if they didn't receive the £200 AND who wouldn't have received it under the proposals AND were ineligible for Pension Credit is very, very small.

I don't think they got the means-test on that right, to be fair, but the impact of it was very small, it was largely rich Boomers shouting about it using the altruistic argument as a straw man.
 

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I think the point you made implied that; the number of pensioners who would have to switch the heating off if they didn't receive the £200 AND who wouldn't have received it under the proposals AND were ineligible for Pension Credit is very, very small.

I don't think they got the means-test on that right, to be fair, but the impact of it was very small, it was largely rich Boomers shouting about it using the altruistic argument as a straw man.
I didn't mention the fuel allowance, so not quite sure why it's being brought up to be honest.
 

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The problem with the UK is our misguided belief that the public finances should be operated like a child's wallet, where you can only spend money if you have already found the cash somewhere.
I agree, and I would go further to suggest that we also have a misguided belief that debt in any shape or form is bad which is why "government borrowing increases" can be a bit of a scary headline. In reality there is good and bad debt, and I certainly wouldn't mind more borrowing to complete crucial infrastructure projects like HS2 because of it's long-term ability to help grow the economy. But people are also increasingly put off by tax increases, so it's only inevitable we'll start thinking of public finances like a wallet or bank account.

Meanwhile the centrist parties in the UK (Labour, Tories, Lib Dems) fawn over mundane jibes of, "Which tax is going to rise to pay for this junior doctor pay rise?"

The current government is as unambitious as the last, economically at least.
To be fair it's hard to imagine anything else when it's all we've known for decades, and with no disrespect to Starmer and Reeves they simply lack the visionary attitude that we could do better beyond slightly improved management of the status quo. Not to say Liz Truss was the answer of course, but there's certainly more than one way to change things.

mainly because there are lots of words that sound lifted direct from a Dominic Cummings missive and make little sense even to a man of at least limited intelligence!

Perhaps try again using words in common usage!
Okay, I'll try again, and this time I'll add a bit of an explanation so that they aren't as meaningless as any proposed "wealth tax".

Land value tax
  • Land is a finite resource that is just as natural as the air we breathe. Therefore if someone wants to own private sectors of land not for public use, then the value of the land should be taxed accordingly.
  • Because people who own vast swathes of land will pay more than those who own little to none, it is a progressive tax, and the biggest landowners will making the biggest contributions.
  • Because the land is costing you money, you will either have to make use of it through things such as housing developments, or sell it to someone who will make us of it.
  • Alternatively if you want to keep the land as it is, you simply have to accept it as something you will need to maintain through other means of revenue elsewhere.
  • Either way, the end result is the same. You own the land, you pay tax on it, and unlike many other taxes there's little ways of getting around it because land is a physical asset.
Pigouvian taxes
  • This is more of an umbrella term to cover things such as carbon tax, sugar tax or tobacco tax, so sometimes each tax has to be argued for or against individually.
  • But in general, it's a tax on negative externalities that discourages harmful activities. Example, you buy lots of sugary drinks, you pay more because the sugar tax will be included in the price.
  • Some might be inherently regressive, but ones such as carbon taxes will generally impact oil and gas companies more than individuals, and road users will pay more than public transport users.
  • Implementation matters, and it's considerably more delicate and inferior compared to land taxes. But it can be done in ways that it affects the ultra-wealthy more so than the working class.
  • On a wider societal level it can have indirect benefits. More taxes on tobacco and sugar might encourage more healthy habits which will reduce long-term spending and stress on healthcare.
If only one of these taxes could be implemented though, it without a doubt needs to be land value tax. I don't expect we'll disagree with the idea that it's wrong for a wealthy landowner to buy private land without making any form of improvements and still be able to gain value by either just sitting on it for a few years. Indeed much of the land's value will be because of external factors.
 

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I didn't mention the fuel allowance, so not quite sure why it's being brought up to be honest.

The fuel allowance is the only thing that has come up with regard to "letting pensioners freeze" in the news in the last year or two at least.

Personally I think a more pressing problem is that in order to let the Boomers keep their riches (and their privileged middle class kids* inherit them) we are failing our young people, big style. There needs to be a big transfer of wealth from older/richer people to younger/poorer people. Sure, I won't object to getting a couple of hundred thousand quid for discretionary spending in my mid fifties or thereabouts**, but I don't NEED it. Today's teens NEED it, they are being utterly screwed over.

* I am one of those "privileged middle class kids" by the way, so I'm NOT saying "tax other people" here!
** I'm guessing I will probably lose my parents around there based on their age. Hopefully not sooner; I'd rather they were alive (and living happily) than I got any money at all.
 

styles

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I agree, and I would go further to suggest that we also have a misguided belief that debt in any shape or form is bad which is why "government borrowing increases" can be a bit of a scary headline. In reality there is good and bad debt, and I certainly wouldn't mind more borrowing to complete crucial infrastructure projects like HS2 because of it's long-term ability to help grow the economy. But people are also increasingly put off by tax increases, so it's only inevitable we'll start thinking of public finances like a wallet or bank account.


To be fair it's hard to imagine anything else when it's all we've known for decades, and with no disrespect to Starmer and Reeves they simply lack the visionary attitude that we could do better beyond slightly improved management of the status quo. Not to say Liz Truss was the answer of course, but there's certainly more than one way to change things.
This is key for me. Borrowing money for day to day spending is poor. Borrowing money for another failed IT system without learning how to run IT projects is also poor. Borrowing money to invest in increasing rail capacity and speed, good thing, and shouldn't be framed in political debates as, "Who's going to pay for that?"
 

Richardr

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Discussion offset from the thread about Proposed VAT on Private Health Insurance.




I am of the opinion that the UK tax system requires some degree of reform (not to be confused with Reform) and that we should implement land-based taxes to encourage development and raise government revenue as well maybe more Pigouvian taxes (ie. tobacco or sugar taxes) to raise revenue from negative externalities. I believe the idea of a "wealth tax" is meaning because the term is merely a left-wing slogan most people don't understand beyond a surface level and that there are better progressive tax options.
I've no doubt about the first part - ideally there would be severe reform of the UK tax system, but the chances of it happening are next to zero when we have a situation where the losers, however few, shout the loudest, and they are the ones listened to.

Take land tax as you suggest it, and in theory not the worst thing to tax. There are issues though. Farmland for example is valued a lot, lot higher than its economic value because the Dyson's and the Clarkson's of this world buy it up to avoid a lot of inheritance tax [and it still does that role for them, just not quite as much as before the last budget]. As soon as it is suggested that that cuddly Clarkson should pay his share of tax, and you can guess the media reaction. As well as farmland being at an absurd price level, of course the value of a plot of land can change radically overnight if it becomes part of a zone where housing is allowed, or gets planning permission.

For a new tax on a new base it would probably take several years to value all of the land in this country. Given that we haven't had a council tax revaluation since 1992 because governments are worried about the losers [=those who have profited most from rising house prices] the chances of keeping land values up to date and thus the tax fair would I suggest be zero.

Land value tax should, assuming up to date valuations, be as simple a tax as can be. However, once politicians get their hands on it, it will become complex with deliberate loopholes, inconsistencies, stupidities, use for other objectives, etc., etc., as every other tax in this country. We have business rates which is taxing the property value which is in part dependent on the land value. We would presumably get rid of that and just tax the land value instead.
 

swt_passenger

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…There are issues though. Farmland for example is valued a lot, lot higher than its economic value because the Dyson's and the Clarkson's of this world buy it up to avoid a lot of inheritance tax [and it still does that role for them, just not quite as much as before the last budget].
How about an apostrophe tax? :lol:
 

35B

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My view on IHT is that it should never be paid by ordinary people. The bands need to be such that a "normal" family home and a "normal" level of saving should be exempt. As I said elsewhere no one in my family has ever paid IHT. No one in my family owns shares or investments or a second home. Most of them don't own a first home!

it should be paid by the rich - as was the plan on introduction

( I know "normal" is open to discussion but we need to come up with a workable definition. £350k seems fine for now but wont be in a few years.)
Given what we know about governments' reliance on fiscal drag, no definition of "normal" is ever likely to be sensibly applied, and it will never be "affordable" to move the thresholds. It is also a tax that is quite feasible to avoid, and is expensive to administer, expensive for those who have to deal with it*, and raises little money. The effect is that it doesn't touch "the rich" but instead extracts wealth from a middle band who are not "rich" but lack the time and/or resources to sort themselves out.

* - my father died earlier this year. He'd spent his working life in the police, and his estate is a mixture of a modest house worth a disproportionate amount because of where it is (a "good" area in London Zone 3 that went up in the world while he lived there), and some reasonable savings made possible by a couple of inheritances and a frugal lifestyle. The burden of IHT is both financial (when due, the amounts are by definition large) and emotional - it has imposed aggressive timescales on dealing with his affairs, many of which have been delayed because of other death related government rules. That has meant that we've had to employ professional help simply to get to the point of submitting the forms - a couple of thousand simply to get the information necessary to submit the IHT paperwork, plus other professional fees. If I compare that to my experience of paying Income Tax, it's like night and day - including my awareness of how much tax I'm paying.
 

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I've no doubt about the first part - ideally there would be severe reform of the UK tax system, but the chances of it happening are next to zero when we have a situation where the losers, however few, shout the loudest, and they are the ones listened to.
Unfortunately I can't disagree with you too much there because landowners are a significant portion of voters in this country, and because we're not starting from scratch like Singapore it's going to be a lot harder to implement. Indeed the power and influence of landowners might play a part in why it's not a very well known idea at all, and they'll fight tooth-and-claw to keep it away from Parliament.

But I'm not of the belief that it can't be done, especially with the majority that Labour currently have, it'll just take a lot of courage to make such a potentially unpopular decision. Or it could be very popular. We don't quite know yet since it's not very known to the public. But the right politician with a bit of charisma could probably sell it to a good amount of voters I reckon.

Take land tax as you suggest it, and in theory not the worst thing to tax. There are issues though. Farmland for example is valued a lot, lot higher than its economic value because the Dyson's and the Clarkson's of this world buy it up to avoid a lot of inheritance tax [and it still does that role for them, just not quite as much as before the last budget]. As soon as it is suggested that that cuddly Clarkson should pay his share of tax, and you can guess the media reaction. As well as farmland being at an absurd price level, of course the value of a plot of land can change radically overnight if it becomes part of a zone where housing is allowed, or gets planning permission.
I've often wondered whether farmland should have some degree of exceptions because it is crucial for a country's food supply, and food is an essential for quality of life of citizens. I do not have a definite answer for that.

Interestingly though I think the Clarkson and Dyson comparison is interesting because, if the tax were implemented, Dyson would have to either make use of this arable land or accept it as a net loss that he'll be paying for and can't move elsewhere. It lines up with the principle that if you're going to own this land that could otherwise be put to public use, you're going to have to pay for it, and how you do so is your problem.

For whatever reasons he bought it for, I at least have some respect for Clarkson actually making use of his farmland as well as bringing to light some of the issues that farmers have to deal with. Granted most farmers don't also have the financial backing of Amazon, but at least the land isn't just being sat on with Clarkson reaping the benefits of increased value without putting in any external contributions.

For a new tax on a new base it would probably take several years to value all of the land in this country. Given that we haven't had a council tax revaluation since 1992 because governments are worried about the losers [=those who have profited most from rising house prices] the chances of keeping land values up to date and thus the tax fair would I suggest be zero.

Land value tax should, assuming up to date valuations, be as simple a tax as can be. However, once politicians get their hands on it, it will become complex with deliberate loopholes, inconsistencies, stupidities, use for other objectives, etc., etc., as every other tax in this country. We have business rates which is taxing the property value which is in part dependent on the land value. We would presumably get rid of that and just tax the land value instead.
Land value tax would probably replace council tax and use the current bands to determine the rates. If not a complete replacement it might certainly have some degree of integration. There has to be room for pragmatism as there does with any tax policy, but land tax is arguably the most logical and most progressive form of taxation.
 

35B

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This is key for me. Borrowing money for day to day spending is poor. Borrowing money for another failed IT system without learning how to run IT projects is also poor. Borrowing money to invest in increasing rail capacity and speed, good thing, and shouldn't be framed in political debates as, "Who's going to pay for that?"
I've worked on successful government IT projects, and I've seen unsuccessful investment in rail capacity and speed - shall we look at HS2? If we're talking about investment, let's be really clear what we mean by that - and then expect a return. Not just in terms of a BCR, important though that is, but also actually in direct return to government. Otherwise all those benefits flow outside government, and the costs fall on taxes.
 

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I've often wondered whether farmland should have some degree of exceptions because it is crucial for a country's food supply, and food is an essential for quality of life of citizens. I do not have a definite answer for that.

The line I've developed in my mind on this is that (and I might be tempted to apply it to actual mansions and the likes, i.e. ones that might typically be donated to the National Trust etc) that the IHT should still be payable, but should be applied as a charge on the land which becomes repayable in the event of sale, or in the case of farmland the event of change of use away from farmland.

We do need to protect farms, but we don't need to protect the right of people to hide from IHT using them.
 

35B

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Interestingly though I think the Clarkson and Dyson comparison is interesting because, if the tax were implemented, Dyson would have to either make use of this arable land or accept it as a net loss that he'll be paying for and can't move elsewhere. It lines up with the principle that if you're going to own this land that could otherwise be put to public use, you're going to have to pay for it, and how you do so is your problem.

For whatever reasons he bought it for, I at least have some respect for Clarkson actually making use of his farmland as well as bringing to light some of the issues that farmers have to deal with. Granted most farmers don't also have the financial backing of Amazon, but at least the land isn't just being sat on with Clarkson reaping the benefits of increased value without putting in any external contributions.
The Clarksons and Dysons do use their land - they don't just leave it idle and unfarmed. Here in Lincolnshire, Dyson's invested significantly - he has a large strawberry farm under glass, which is being further developed. The myth of them parking the land is because they also get benefits from passing on assets as farmland, rather than as money or shares.

== Doublepost prevention - post automatically merged: ==

The line I've developed in my mind on this is that (and I might be tempted to apply it to actual mansions and the likes) that the IHT should still be payable, but should be applied as a charge on the land which becomes repayable in the event of sale, or in the case of farmland the event of change of use away from farmland.

We do need to protect farms, but we don't need to protect the right of people to hide from IHT using them.
Agree completely - the principle of the current rules is reasonable, but the failure to recognise the cash constraints of small farms is creating distortions.
 

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It's incredibly distortionary - short-term investors pay "only" 20% on gains that came more easily than income, whereas long-term investors pay 20% on gains that may be largely inflationary. Aside from this being unfair we're also rewarding the wrong behaviour (society doesn't benefit from a bitcoin speculator making money, whereas it does from someone who is a company founder, say).

It should be set to income tax rates, offset for inflation.
What if they use that money to start a business and employ people? A lot of people will be also making smallish gains and using them for deposits on a house and such, which this govt is adamant on making sure nobody can be a success. Also nobody has an incentive to be more productive and be promoted and earn a higher salary because...40-45% income tax.

I like the idea of a land tax, but also a means tested state pension, where for every year you earn above a certain amount, say £120k, you don't receive it for that year. They could also scrap the triple lock but the pensioner vote is too important to give that up. I'd say a double lock would have been better, where it keeps up with earnings growth or 2.5%, but not CPI inflation.
 

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The line I've developed in my mind on this is that (and I might be tempted to apply it to actual mansions and the likes) that the IHT should still be payable, but should be applied as a charge on the land which becomes repayable in the event of sale, or in the case of farmland the event of change of use away from farmland.

We do need to protect farms, but we don't need to protect the right of people to hide from IHT using them.
I think that's where a bit of reform comes in beyond just adding new taxes. I am in two minds about inheritance taxes because I can sort of see their purpose, but at the same time the inheritance will have already been taxed, and if I were grieving the loss of a relative the last thing I want is for the taxman to come along asking for a share of what's been left to us. There are also countries that can make things work without it, but I won't go as far as to say we should get rid of it just yet.

The Clarksons and Dysons do use their land - they don't just leave it idle and unfarmed. Here in Lincolnshire, Dyson's invested significantly - he has a large strawberry farm under glass, which is being further developed. The myth of them parking the land is because they also get benefits from passing on assets as farmland, rather than as money or shares.
I did not know that, so thanks for bringing me up to speed about James Dyson's farming assets. To be honest, if I were a man of his fortunes I'd also probably like a nice farm somewhere myself. I'd most likely pay for other people to do the work of course since I'm not a farmer, but I'd see it as a fair trade. I once heard a story about a French millionaire/billionaire who owned a vineyard and allowed a family to live there in exchange for doing the work, but I can't verify it unfortunately.
 

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I've worked on successful government IT projects
Indeed, every now and then, the government gets it right. We also have a silly rate of failed or massively over-budget large IT projects. NHS being the obvious target with that.
and I've seen unsuccessful investment in rail capacity and speed - shall we look at HS2?
Indeed, we have royally messed up HS2 also. HS2 may actually grow the economy mind.
If we're talking about investment, let's be really clear what we mean by that - and then expect a return. Not just in terms of a BCR, important though that is, but also actually in direct return to government. Otherwise all those benefits flow outside government, and the costs fall on taxes.
Agreed. Unfortunately we can't stop our politicians running vanity projects or giving contracts to companies who enter the lowest bid but have a track record of screwing the government over.
 
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