Abandoned national insurance and a 45p tax rate, says Burnham

Andy Burnham must scrap national insurance, stamp duty, inheritance tax and the 45p top rate of income tax if he is to revive Britain’s stagnant growth, a right-wing think tank has urged, in what would amount to the biggest shake-up of the UK tax system in generations.

Policy Exchange, in a report published on Tuesday, says the incoming prime minister should reduce the UK’s tax burden, to reach a post-Second World War peak, which is one of his first economic priorities when he enters Downing Street next week.

For the millions of small firms that write a national insurance check every month, the most eye-catching recommendation is the last one. The think tank describes NI as “one of the most economically damaging aspects of the UK tax system” and calls for it to be scrapped entirely, for workers and employers alike. That would quickly wipe out the £28bn tax burden on NIC employers blamed on redundancies and renting fridges across the high street.

Family firms will also feel the difference. Along with the stamp duty, Policy Exchange is calling for an end to inheritance tax altogether, a surprising proposal at a time when strict inheritance tax exemptions are already forcing family businesses to rethink succession plans instead of investing in growth.

The catch, and it’s huge, is the price. The think tank says the entire package should be financed by reducing the country to 33 percent of GDP. Under current plans, public spending is on track to reach 42.7 percent of GDP by 2030-31, so the report proposes a reduction in the size of government in a small modern example.

Policy Exchange takes care of medication adherence. The first step would eliminate the most “economically damaging distortions” in the system, including the withdrawal of tax credits above certain income thresholds. These barriers can leave workers facing unemployment rates in excess of 100 percent, meaning an employee would be better off refusing a raise, which is a common scenario for any owner who has watched a key manager cut overtime.

The second measure would remove the 45p rate and inheritance tax while reducing spending to 41 per cent of GDP, to prevent planned increases in defense spending. It is only then that the national insurance will go away, which is funded by full unemployment up to 33 percent.

The stage is a grudging acknowledgment of the ghost in this particular deal: the September 2022 mini-budget, whose unfunded tax cuts created a market crisis so severe that the Bank of England had to intervene in an emergency. Policy Exchange argues that similar spending cuts, introduced gradually, could avoid a repeat. The Truss package, in contrast, was not adjusted at all and remained within double-digit inflation forecasts.

Sir Sajid Javid, former chancellor, lends the report a foreword. “The tax burden is now at a 70-year high. In addition, the structure of the system itself has become a brake on growth. The most damaging examples of this do the most damage relative to income. Fix that, and we’ll start fixing the economy,” he said.

Whether any of them stay with the incoming administration is another matter. Burnham has so far only signed a modest tax “movement zone”, focusing on rebalancing business values ​​towards online warehouses, while promising fiscal discipline. With the Office of the Budget’s tax take forecast to peak after the war, SME owners hoping for a comprehensive Policy Exchange scheme should not hold their breath. But the report puts the size of the state, and who pays for it, squarely on the new prime minister’s desk.