The ii Budget Panel: what you want from the chancellor on 3 March

Our first Budget Panel of interactive investor customers has sent a strong message to chancellor Rishi Sunak about what it wants to see in his Budget on 3 March.  

The Budget on 3 March could be a real showdown, as chancellor Rishi Sunak is tipped to unveil how taxes could rise to repay the country’s £289 billion bill for Covid-19.

Mooted changes include a new wealth levy, watered down pension benefits and hikes to capital gains tax (CGT) and inheritance tax (IHT).

We asked interactive investor customers on our very first Budget Panel what they wanted to see the chancellor bring in – and avoid. 

If you're an interactive investor customer and would like to be featured in our post-Budget Panel, please send your name and contact details to editorial@ii.co.uk.

Chris Walklett, tax adviser and DIY investor

What policy announcements do you want to see in the Budget on 3 March, and why?

The Conservative manifesto in December 2019 promised that there would be no increases in income tax, national insurance, and VAT, although that was before the pandemic and the billions the Treasury has since had to spend on supporting the economy.

That leaves taxes on wealth and savings as Rishi Sunak’s only options. Pensions are an easy target and changes to CGT are widely speculated. 

The chancellor needs to be careful not to stifle people’s ability to save for their future. The young will be particularly hard hit by the pandemic. 

One solution might be to increase the ISA allowance. Further innovations to encourage savings in these wrappers can only be a good thing, but because they are funded from ‘after tax earnings’ they do not result in a tax hit to the Exchequer on the way in.

I would like to see the government using policy consultations to review the savings industry, so we can make it easier, cheaper and more effective for people to save for the future, achieve financial independence sooner, and be more financially literate.  

What policy announcements don’t you want to see?

It seems likely that corporation tax will increase in next week’s Budget. The theory being that business that has benefited from support, and made profits, can and should contribute towards paying for the pandemic. Meanwhile, the government has completed a consultation on reforming the CGT regime. Removing reliefs and increasing rates in line with income tax will undoubtedly raise material revenues. However, this, allied to increasing tax on business, risks putting the brakes on the economy.

Increased corporation tax reduces the resources businesses have to invest, and a more draconian CGT regime risks a reduction in the movement of capital around the economy as people vary their investment and wealth management decisions.  

The chancellor needs to exercise extreme caution in that respect – we cannot afford to cut off the flow of capital to business, at a time when we are reliant on the business population, and inward investment, to drive the economy out of the double whammy of Brexit and the pandemic.

Michael Byrne, Cheshire

Rishi is stuck between a rock and a hard place. On the one hand he has hundreds of billions of pounds of debt to pay off, but also an economy on life support, with worse to come when furlough and other schemes are removed later in the year. 

What policy announcements do you want to see in the Budget, and why?

Let’s start with £1,000 each to care givers in the NHS and government-run care homes. Also, we should gift £250 to the non-care givers, such as cleaners.

There also needs to be a massive modernisation of the NHS, especially admin, purchasing and IT systems.

Let’s increase taxes on cigarettes and booze, including nicotine-based e-cigarettes. 

Let’s also start a consultation on how it may be possible to tax foods that are unhealthy. It’s not easy, but if we don’t try, we’ll get nowhere. 

Let’s also start increasing taxes for sin materials and VAT on fuels that have a carbon footprint, by 1% initially and then increasing by 1% every year.

We have a time bomb with pensions. The current Generation Z and millennials just cannot afford the level of pensions that we’re paying. The triple lock also has to go, I’m afraid. 

Now, let’s think about how we get rid of the massive Covid-19 debt. In the war, the government issued long-dated gilts and allowed inflation to take care of the debt. We should be doing the same.

Charities are on their knees right now. Let’s allow them to pitch for the current overseas aid money on a level-playing field.  

Corporation tax – sorry, someone has to pay, so let’s cancel the corporate tax reductions from next year onwards.

Let’s make the CGT rate the same as you pay for income tax – but also start reducing the allowance, pending the harmonisation of income and capital taxes.

It’s also a good time to start tax simplification. Income is now easy to convert to capital and vice versa. Let’s just look at the total amount of money coming through the door and stop this arbitrary differentiation. 

The various classes of National Insurance are just weird. Everyone should have access to the same benefits and should pay the same for them.  

There’s also an inter-generational wealth imbalance right now. The boomers have the money and the millennials want it. Let’s try and redress that balance a little and introduce a ‘care’ tax.  

For people that pay tax, they’d pay an additional £10 for each year they’ve been alive. As you need more care, the price goes up.  

There’s a weird discrimination in IHT against some people with health issues. If you have children and give them your house, you pay no tax on the gift. If you cannot have children and give your house to your brother, sister, niece or nephew, you don’t get tax relief.

What policy announcements don’t you want to see?

We can’t do massive tax rises this year. The economy is so fragile. We need to allow those people lucky enough to have savings after the last year to spend them.

House prices have gone up by the thick end of 10% at the same time as gross domestic product has fallen by a similar amount. That’s madness and the bubble’s going to have to pop. So, why on earth would we extend the stamp duty reduction?  

A wealth tax is the work of the devil. It’s just so complicated to put into practice that it would split society. How do we deal with people who are asset rich but cash poor?

Tony Jackson, semi-retired academic economist, University of Dundee

What policy announcements do you want to see in the Budget, and why?

Overall, a budget that is expansionary, and not ‘austerity’.  

Although Treasury borrowing is already at record levels, there are several factors supporting further deficit spending.

First, the current cost of servicing government borrowing is very low, because both the government and the Bank of England can borrow at historically low rates of interest.

Second, the economy is in recession not because of traditional reasons which take time to turn around, but because of government-enforced lockdowns. These can quickly be lifted.

Third, unemployment rates are already high and partially masked by furlough arrangements. Further government deficit spending is needed to help lift the economy once lockdowns finish.

There should be increased incentives for policies that boost green behaviour.

Finally, I would like to see some anomalies in government spending and taxation removed. One is the underfunding of efforts to remove dangerous forms of cladding following the Grenfell disaster.  

Also, the switch from bursaries to student loans for nurses remains a serious disincentive, and will continue to frustrate the government’s own targets for training significantly more nurses until better financial arrangements are introduced.  

What policy announcements don’t you want to see in the Budget and why?

Although the Chancellor of the Exchequer might raise some taxes because of technical reasons, I do not want to see a hike in personal taxation levels, especially for those on lower incomes.

Likewise, no attempt to reduce incentives for those saving via SIPPs or ISAs.

And no boost to VAT or other forms of indirect taxation, which would have a deflationary impact on the economy and prolong the effects of lockdown.

Finally, no shifts in the burden of public spending from central government to local government. 

Another respondent, who wished to be anonymous, said: 

“I want to see a higher state pension, Personal Independence Payment (PIP), benefits and tax relief for retirees on low incomes.”

A second said:

“I’d like to see some strategic cuts to public services that have let us down during lockdown. I think VAT should increase 2%, and National Insurance should also rise.

“We should freeze personal allowances and tax bands, and bring in modest increases in business rates.

“There should also be increases in money purchases, the level of tax-free dividends, an extension of VCT rules and increased payments from public sector staff into their pensions.”