Tax reform should top the agenda as MPs begin new term

Politically, with the Hutton inquiry already having delivered several damaging blows, the government looks more vulnerable than at any time in the past six years. And fiscally and economically, the Downing Street garden is looking far from rosy.

Recent weeks have seen Treasury secretary Paul Boateng warn ministers outside of the health, transport and education departments to expect no favours in the autumn spending round. Critics have read the warning as a sure sign that tax rises are around the corner. And if those tax rises materialise, our already creaking tax and benefits system is likely to suffer further.

In that sort of climate, to most of us, now might seem the ideal time to simplify and modernise the tax system. We will certainly hear the opposition calling for such reform during the party conferences, just as surely as they will complain that much of the increase in public spending in recent years has been eaten up by public sector (pay-driven) inflation.

But what we won’t hear shadow ministers saying – nor, for that matter, will we hear government ministers acknowledging it – is that our tax system might be a lost cause. We may have a tax law rewrite committee working away in Westminster, but removing the layers of complexity that have been allowed to build up would be a costly and politically risky exercise.

And benefits – as measured by the ballot box – are unlikely to be sufficient to persuade anyone to make it happen.

The best we can perhaps hope for is that politicians can avoid making the tax system more complicated and the tide is stemmed.

And where’s the incentive to change? From Marks & Spencer to Hoechst, case after case has shown the growing influence that Europe has over the UK tax system. Westminster, even if it was minded to address the problem, could only do so much.

But what it really boils down to is that MPs campaign on a platform of tax cuts, not tax simplification. Even if you hear anything to the contrary in Blackpool and Bournemouth in the next few weeks, don’t expect change to follow.


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