According to a report by Sky News, the Government is considering ending the freeze on alcohol and fuel duty to help fund the boost to the NHS.
This move suggests that whatever the rhetoric coming out of Number 10, there is no “Brexit dividend”.
Rather, we are going to have to raise extra revenue from elsewhere. I have no doubt that so-called “sin taxes” can be an appropriate method to raise the money.
People avoid paying extra tax on alcohol and tobacco by reducing their consumption, the effect being improved health, thus reducing the cost for the NHS. However, we need to be judicious about this. Whilst there’s nothing wrong with enjoying a drink from time to time, there is something deeply concerning about the binge drinking culture.
The proposed fuel tax concerns me most: it is not nearly so easy to avoid paying it. Shifting either to a smaller or electric car can be expensive. Furthermore, the cost of fuel inputs into everything else in the economy: if a lorry transporting food to Tesco finds that its fuel costs have gone up, who picks up the bill?
Being a rational company with shareholders, Tesco will do what it considers necessary to preserve its profits - it will raise its prices. Raising prices on food and other essential items disproportionately hits the poor.
Furthermore, higher fuel taxes make it more difficult for people to get to work. This tax is extremely regressive. Rather than do this, the Government should be looking at programmes including a scrappage scheme, to move the country onto a lower-carbon path.
If we cannot tax fuel, then what can we tax? It is worth noting that corporation tax has been cut; even so, many firms still shift their profits overseas, thus reducing the effective tax rate to well below the official rate.
This leads to nonsensical situations of companies that make millions or billions of pounds worth of sales in the United Kingdom pleading poverty. Surely, before looking to the average person to pay any more, it is incumbent on government to devise a means to end this scam, which is why I agree with recent proposals to tax these companies on their sales rather than their reported profits.
We can also look at individual tax avoidance. A report published on 1 June 2018 suggested that staffing levels at HMRC had fallen by 2,000 since the EU Referendum.
Given that we need more officials to not only implement a new customs regime as well as combat avoidance, this seems perverse. Most of us don’t have expensive accountants who can tuck income into far-flung corners of the banking system; none of us should be able to do so.
I fear, however, that the government will pull the easiest levers; it would not shock me if they proposed another rise in VAT. I will continue to remind them of whom they will hurt.