Just as we thought we were set for some uninterrupted Government, the Chancellor and the Prime Minister fall out within a month of a much delayed budget.
Just how much of the prepared budget belonged to Sajid Javid and how much to Dominic Cummings we’ll never know. What we do know is that the new budget will be delivered by Rishi Sunak who knows a bit about funds, comes from the charmed world of elite public schools and helped to save his village pub as a crowd-funder.
I have no idea of what is going on and whether this will delay whatever was going to be announced in the budget. But I’m with Jo Cumbo in thinking that the resignation will make it less rather than more likely that we will have radical tax reform (which may be why the FT is writing an article a day demanding it).
Sajid Javid, who resigned today as Chancellor, had been looking at big reforms to #pension tax relief. Much speculation now on whether Boris Johnson will push through big, bold reforms to the #pension tax system, without Mr Javid, and his team, in place. https://t.co/z2rxgdcquC
— Josephine Cumbo (@JosephineCumbo) February 13, 2020
Claer Barrett’s opinion piece, which appears in today’s FT, hopes the re-shuffle will buy more time for the consequences of “radical” tax reform to sink in. The trouble is that you can’t save £10m in tax-reform without it hurting someone and – as this blog has said again and again- flat-rate tax relief is not going to happen. It will have to a flat rate incentive paid mitigate the pain of TEE but a flat rate incentive is “TEE with a bung” unless it’s “TET with a bung”.
Claer quotes our old mate Will Aitken explaining why simply reducing tax relief for the higher rate tax-payers will lead to an exodus to non-contributory salary sacrifice arrangements which will lose HMT even more revenue (as they’ll not be collecting a lot of NI or income tax). It was only the prospect (presumably leadked to the FT of the bung being set at 20% rather than 30 or 33% – when this all got rather alarming!
Is this the Osborne funk (pt II)?
Famously, George Osborne ducked radical reform of pension tax-relief in 2016, not to scare back-benchers. Cummings and Johnson can’t have the same fears today but perhaps they are feeling some “uptown funk” and perhaps Javid was a little too much like the genuine reformer (who’s Dad drove a bus).
But this speculation will be sorted out by March 11th , when we’ll find out whether the Wickamist alternative is prepared to see through reform or not.
Those who argue he will have to find the money from some way will consider the £10bn plan a tax-raid. Those who think Javid was genuinely trying to move the system from subsidy to the rich to incentive to the poor, will think Javid a latter-day Robin Hood.
We will wait to see if we get radical reform – or a consultation leading to radical reform in the second 2020 budget in the autumn) . If we get neither and we get some tinkering with the taper and mealy mouthed promise on the net-pay issue, we will be able to characterise Cummings as the Sheriff of Nottingham and Boris Johnson as King John.