Economists propose replacing stamp duty with a levy on property value as part of wider tax reform
Andy Burnham has been urged by a group of economists, including one of his own advisers, to overhaul the UK tax system in a move that could raise more than £100 billion in extra revenue.
A letter signed by Jim O'Neill, a former Treasury minister and Goldman Sachs executive who now advises Burnham, calls on the incoming prime minister to introduce major changes to taxation, infrastructure spending and welfare. Andy Haldane, the former Bank of England chief economist who also advises Burnham, made a similar call in an interview with City AM.
Burnham is expected to become prime minister on 20 July, provided no other Labour MP challenges him for the role, which is considered unlikely.
The letter accompanies a report from UCL's Institute for Global Prosperity, titled Prosperity 2030, which sets out 30 policy proposals. Among them is a plan to replace stamp duty with a levy of 1% on property valuations. The report states this would end what it calls the situation of a modest terrace paying proportionally more tax than a high-value mansion. Under the proposal, a household with a property worth £500,000 would pay £5,000 a year to HMRC.
The report also proposes merging income tax, national insurance, dividend tax, inheritance tax and capital gains tax into a single "national contributions" tax. This would scale from 0% to a base rate of 22%, with a top rate of 46% applied to what the report describes as a "flat definition of income". The authors estimate this change alone would raise up to £75 billion after five years.
The report also proposes a tax reduction for earners between £100,000 and £125,000, a band currently affected by the tapering of the personal allowance.
Further proposals include replacing job centres with training centres for apprentices, shifting the cost of energy system investment from household bills to general taxation, and introducing nine "Universal Services" providing support in kind rather than cash payments.
According to the report's authors, the programme would create £38 billion in additional fiscal headroom under current borrowing rules. They project that reform of the HMRC tax code would generate £101 billion in extra annual revenue and convert £16 billion of non-disability benefits into services.
Other signatories to the letter include Jonathan Portes, of King's College London, who worked at the Treasury until 2011, and Danny Sriskandarajah, of the New Economics Foundation. Sriskandarajah's predecessor at the think tank, Labour MP Miatta Fahnbulleh, currently advises Burnham on policy.
The letter states that UK taxes have risen faster than in comparable countries while public services have deteriorated, and that around £110 billion is currently spent on debt interest. It says the UK's problems are "structural and systemic" and that "incrementalism will not fix Britain."
The Prosperity 2030 report is due to be published on Thursday.
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