UK Tax Experts Say Brown Has Many Alternatives To Income Tax Hike

by Justin Gorringe, Tax-News.com, London

03 December 2001

Following an Institute of Fiscal Studies report which suggested that there was potentially a £17 billion 'black hole' in the Chancellor's spending plans, UK tax experts have pointed out that Gordon Brown's options extend far beyond a simple income tax hike.

Speaking on Radio Four last week, the Chancellor revealed that he would not rule out an income tax increase after 2004 in order to fund increased spending on the National Health Service. However, other possibilities have been posited by tax experts in the United Kingdom, although the majority are only marginally less controversial than an income tax increase.

One option for the Chancellor could be to remove or increase the upper limit on national insurance contributions. According to figures released recently, this could potentially raise between £1 billion and £5 billion, depending on the extent of the increase.

Other suggestions made last week included the abolition of capital gains tax exemption on main residences, which it is estimated would raise around £4.8 billion, and the imposition of VAT on food, which could raise around £13.7 billion, but is unlikely to be seriously considered as it would hit the poor disproportionately.

Some experts have raised the possibility of abolishing tax relief on approved pension funds, although this would almost certainly lead to a massive drop in their popularity, and others have suggested the imposition of higher inheritance taxes in order to plug the revenue gap. It seems clear, however, that whichever path the Chancellor chooses to take post-2004, he will cause controversy.

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