A DIY approach to taxation won’t work – what the UK needs is a structured path


If I had to point out a major opportunity for the government to increase revenue while improving efficiency, it would be the introduction of a national road pricing system. Advances in technology now allow authorities to charge motorists for trips on different roads at different times and at different prices – and sometimes even for free – and thus push their behavior towards what is economically desirable.Governments could either continue to receive the annual revenue from these taxes, or sell the right to collect the revenue and thereby accumulate substantial capital.

In his next budget, the Chancellor will likely develop a new set of fiscal rules, governing the desired borrowing rate and the level of the debt-to-GDP ratio. Recent chancellors have tended to like these rules, so much so that they have frequently established new ones. Indeed, if Rishi Sunak proposes new budgetary rules this fall, it will be the sixth in 10 years.

Yet the Chancellors have never presented a forward plan for the tax system that embodies both the basic principles and a roadmap of how and when they intend to move from A to B. We have one in particular. need now. Given that it is surely premature to seek to cut the deficit drastically, it is time to give the Treasury serious thought on the desired form of the tax system, drawing on the Mirrlees Review, published in 2010-11.

The last thing we need now is a set of random tax increases designed to increase revenue. More than ever, we need strong economic growth. And maximizing growth requires a structured tax system to strengthen incentives and increase efficiency.

Roger Bootle is President of Capital Economics


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