As Angela Rayner contemplated her future this weekend, she might usefully have considered joining the ranks of those who advocate for greater tax simplicity. We are right to expect more from cabinet ministers than from the average person, but when even the Deputy Prime Minister can’t get it right, perhaps it is time to acknowledge that the tax code is far too complex. The truth is that it should not be the business of the tax system to decide how people organise their home lives.
Her membership of the club of high-spending socialists – while undesirable for many reasons – need not be fatal: even a high tax economy could raise its dues in simple and honest ways. Socialists presumably wish to maximise receipts for the Exchequer rather than bolster revenues for private wealth advisers. Ergo, one would not expect socialists to build a system so complicated that it frequently creates opportunities for evasion, whether deliberate or accidental.
The values that we Conservatives hold – individual freedom within the law, support for enterprise and an effective state whose job it is to do a few things well – demand a tax system that earns public trust and encourages enterprise. Aside from our belief in the moral virtues of lower tax and the benefits of economic growth, by simplifying the code, we would free resources, reduce compliance costs and encourage investment.
Yet the direction of travel on tax simplification has not reflected that. Between 2019–20 and 2023–24, the cost to HM Revenue & Customs of administering the system rose to a staggering £4.3 billion per year – an increase of 15% in real terms. That’s a lot of tax officials paid to not answer the phone when you call.
As Angela Rayner discovered – much to her chagrin – our complex system of taxes on property is particularly disastrous. Different stamp duty and capital gains tax rates abound for first or subsequent properties, all depending on the particular circumstances of the buyer. It would already be complex enough to apply in an Amish community, but in our heterogeneous society with divorce, family breakdown, elder care responsibilities and new ways of remote working, it quickly produces an array of unfair and undesirable outcomes.
Why, for example, is a family purchasing a second home near an ageing parent to enable some caring duties to be punished with higher tax? Or take the young couple priced out of the London house of their dreams by Sadiq Khan’s shameful failure to build – spreading themselves between a studio crash pad in London and a modest cottage in the country. Why are they liable for higher rates of tax than a millionaire in a single Notting Hill mansion? As the state is forced to push the retirement age later and later, more may choose to split their time in later life between multiple properties. The very same people who celebrated the end of the state discriminating between couples of the same or different sex, seem remarkably enthusiastic about it now telling people how they may split their property habits.
The real issue around housing is, of course, supply. Averaged across the first year of Labour’s term, approximately 186,600 net additional homes have been delivered in England, lower than in previous periods and light years away from Labour’s 1.5 million homes target. The House Builders Federation last week reported the lowest level since 2012.
Just as I hope that, in time, we Conservatives will come forward with plans to radically simplify property taxes, so too must we do so on planning – removing constraints on supply and deregulating to reduce the cost of building the homes we desperately need.
Many in Whitehall still cling to the idea that our tax system is somehow competitive with other modern economies. The truth is very different. Our tax system remains a patchwork of infuriating complexity – a byzantine bureaucracy that weighs down entrepreneurs, erodes public trust and ultimately throttles growth.
Britain has long wrestled with overly complex taxes. Way back in 1853, William Gladstone famously lamented ‘the present obscure and complicated system of rates and taxes’. It is telling that, nearly two centuries later, the cry for simplicity still echoes – and yet seems to fall on deaf ears.
