Three ways Sunak could raise £10bn to help Britons struggling with energy bills
Suppose the chancellor wanted to follow Scottish Power’s advice, and give Britain’s most hard-up households £1,000 towards their energy bills this winter? Would it be possible to raise the £10bn needed in a way that didn’t just tax the same people he would be trying to help? I can think of at least three options, any of which would do the job, and all of which would make the tax system better as well.
First, Rishi Sunak could raise capital gains tax rates to match income tax rates, and reintroduce an inflation allowance, as his predecessor Nigel Lawson did in 1988. It was the top recommendation by Sunak’s own advisers, the Office of Tax Simplification, in 2020. This could raise up to £16bn. While some people will doubtless delay cashing in gains to avoid the tax, the chancellor should comfortably reach £10bn even accounting for this. A reformed capital gains tax would also be fairer, reducing the opportunity for some to game the system to pay lower effective tax rates.
Second, he could apply national insurance contributions consistently across all sources of income. If you earn an average income, you’ll be paying 13.25% in national insurance on every extra pound you earn. Someone with a higher income – your MP, for example, on a salary of almost £85,000 – is paying only 3.25%. And landlords pay a tidy 0%. Other oddities include that national insurance is currently at zero after pension age, even for those in work, and effectively 1.25% on dividends. Fixing all these inconsistencies to tax all income consistently would raise more than £30bn, so the chancellor would have some money to spare to cut taxes, invest in education, or undo the cuts to the aid budget.
Third, he could introduce an annual wealth tax of 1.1% on
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