Economics, Fiscal Policy (Government Expenditure + Tax Evasion/Avoidance) and Monetary Policy

Spokesperson: Kayed Al-Haddad (alhaddadkayed@gmail.com)


Economics 

Vision 2050: The Liberal Party by creating the conditions of a fair, sustainable and prosperous economy aims to create a country whereby the UK is ranked as being not only one of the best places to live but also as an innovation-led place to do business by 2050. In addition, the party is committed to making a success of Brexit; harnessing the fourth industrial revolution; and investing in infrastructure in every part of the country thus spreading opportunity to everyone. 

We primarily aim to do the above by the following: 

  • Set a target of investing 1 trillion in infrastructure by 2050 (approximately £250 billion a decade) – upgrading our transport and energy systems, building schools, hospitals and homes, empowering all regions and nations of the UK and developing the climate-friendly infrastructure of the future. 

  • Enabling a skilled, adaptable, future-focused workforce empowering individuals through a new skills wallet worth £10,000 for every individual, having workers on boards and implementing collective bargaining in all large companies. 

  • Maintain public expenditure at no more than 50% of GDP (25% of which would come from Local Government), investing strategically across the cycle in frontline public services. In addition, we shall try and avoid unsustainable increases above this level, which would result in yet another cycle of unaffordable spending followed by more austerity. 

  • We shall maintain a commitment to strong public finances by setting a strategic target for average public sector deficits across the cycle of approximately 2.5% to 5% of GDP. This will ensure that public sector debt falls gradually as a percentage of the overall economy, given trend growth in nominal GDP. 

  • The economic narrative over the last forty or so years has been one of ‘trickle down’ economics; however, the party unequivocally rejects this narrative and thus calls for a new narrative to be fostered – one of ‘trickle up’ as well as the adoption of Localism. 

  • For every budget produced we will make sure it to be a ‘wellbeing budget’ (similar to what they do in New-Zealand) and base decisions for government spending on what will improve wellbeing as well as on economic and fiscal indicators.

Fiscal Policy 

The focus of any fiscal policies we take will always prioritise those on the lowest end of the income-spectrum first as well as the millions of SMEs up and down the country which form the backbone of our economy: 

  • Replace Business Rates/Council Tax with a Land Value Tax:

Business Rates 

  • The total value of the commercial property minus the value of improvements or the value of the commercial property last tax year, altered by a growth/decline percentage.  

  • This base land value will be taxed at 100% of the unimproved rental value. 

Council Tax 

  • In the short to medium term, replace Council Tax with a Proportional Property Tax levied at a local level (varying degree of rates depending on the price of the property and its relative location in the country).

  • In the long term, replace it with a Land Value Tax on residential land. 

  • This base land value will be taxed at 100% of the unimproved rental value. 

Taxation

  • Taxation: 0-20K (phased: 15K, 17.5K, 20K): 0%, 20-150K: 25%, >150K: 50% 
    • The Personal Tax Threshold to 20K would be phased in over a period of 3 years (until 2025). 
    • Merge income tax and both employee and employer National Insurance contributions into a single system rate to boost transparency. 

  • Equalise Income Tax and Capital Gains Tax/Dividends Tax at the same rate.

  • Reform inheritance tax: increase the threshold from the current £325,000 to 1 million (2 million including couples) and thus abolish all tax reliefs: 
    • Anything above 1 million there would be a 25% tax rate.

  • Free up to 1.2 Million SMEs from paying Corporation Tax rate (over 80% of companies) by lifting the minimum threshold to £100,000.
    • £100,000-£250,000: 15% 
    • > £250,000: 20% 
    • Full expensing: let companies deduct the cost of any investment they do at 100%, from their corporation tax bill straight away. 

  • Reform of VAT: 
    • Raise the VAT threshold registration from the current rate of £85,000 to £150,000 for businesses and self-employed with an exemption for businesses/self-employed individuals in their first two years of operations. 
    • Reinstate VAT-RES: allowing international tourists to claim the value added tax on items purchased during their stay in the UK. 
    • VAT at 0% for sanitary products, charities etc.  
    • VAT at 10% for everything else (get rid of all exemptions). 

  • Carbon tax at £250 per metric tonne 

  • Frequent Fliers Tax: 
    • The levy would only kick in when an individual takes their second flight of the year, reducing the cost of travel for those taking just one annual trip involving flights.

  • Increase the Digital Services Tax from the current rate of 5% to 10% to ensure tech giants pay their fair share. 

  • 10% buyers tax on foreign home ownership and companies that own UK residential/commercial property. 

Abolishing taxes: 

  • Replace Air Passenger Duty with a Frequent Fliers Tax. 

  • Replace Council Tax with PPT/LVT. 

  • Replace Stamp Duty Land Tax with LVT. 

  • Replace the s106/Community Infrastructure Levy with LVT. 

  • Replace Annual Tax on Enveloped Dwellings with a 10% buyers tax on foreign home ownership and companies that own UK residential/commercial property. 

  • Scrap the Marriage Tax Allowance. 

  • Replace Business Rates with LVT. 

  • Scrap the tax-free dividend allowance and roll into the Personal Allowance of £20,000. 

  • Replace Land and Business Transaction Tax with LVT. 

  • Replace Land Transaction Tax with LVT. 

Government Nationalisation: 

  • Sovereign Wealth Green Fund – creating a fund up to 500bn (by 2050) through Tax Reforms, Asset Sales and windfall from wind power (as well as tidal power and hydro).

  • Move from the current model of Water ownership to a mutualisation model: 
    • Introduce a law that would outlaw sewage dumping. 

  • Nationalisation of the National Grid to a mutualisation model.

  • Nationalise the Green Investment Bank – with £10 billion of initial capital using public money to attract private investment for net-zero priorities. 

  • Create a National Investment Bank with a £100 billion of public money. 

Cost: Circa 100 billion (excluding National Investment Bank)

Tax Evasion/Avoidance: 

  • Introducing a General Anti-Avoidance Rule, setting a target for HM Revenue and Customs to reduce the tax gap and investing substantially in more staff to enable them to meet it.

  • Dramatically scale up the number of targeted audits that HMRC carries out. 

  • Limit the benefits of the Non-Dom rule: 
    • Cut the length of time that the advantage is available so that only those genuinely staying in the country for short periods would benefit: up to 3 months maximum. 
    • The Remittance Basis Charge should become payable once a non-dom has been resident in the UK for tax purposes for four of the preceding six years. 
    • Alignment of the domicile definition for income tax with that for inheritance tax so that anyone resident in the UK for seventeen out of the past twenty years would become deemed domiciled for income tax purposes (as well as Inheritance Tax) and unable to claim the remittance basis. 
    • The charge should be increased to £50,000 per year if you have been here for 7 of the previous 9 tax years, and £100,000 per year if you have been here for 12 of the previous 14 tax years.
    • Ban government members’ partners from claiming non-dom status. 
    • End ability to inherit non-dom status. 

  • Reforming place of establishment rules to stop multinationals unfairly shifting profits out of the UK.

  • Reform Companies House so that it is “fit for purpose” and to align its powers, processes and operations with Whitehall’s desire to enhance the UK’s economic security and its legal, regulatory and corporate transparency and to reduce the scope for UK corporate entities to be used for money laundering and other corrupt and/or criminal practices. 

  • End tax breaks for private equity firms that bury companies in debt. 

  • A global register of beneficial ownership of companies, assets etc. 

  • Ensure the UK and British Overseas Territories have publicly-accessible registers of beneficial ownership of companies registered in their jurisdictions. 

  • The party will implement the planned new offence of corporate failure to prevent economic crime, including tax evasion, with penalties for directors up to and including custodial sentences. It will also levy penalties on firms proven to facilitate tax evasion, equivalent to the amount of tax evaded by their clients. 

  • The party would extend the loss relief rules that the coalition applied to banks operating in the UK. 

Monetary Policy: 

  • End the Bank of England’s authority to increase or reduce the money supply at will. Instead, there will be a rules-based system – a gold standard with direct convertibility. 

  • Mandate the Bank of England to guarantee that household debt rises no faster than median household income. 

  • Monetary competition: individuals, businesses and banks engaged in voluntary exchange should be free to choose which money they use. Precious metals, cryptocurrencies and other free-market money will be taxed on the same basis as Sterling. 

  • In the short term, raise minimum bank capital requirements and end the risk-weighted asset framework.

  • Devalue the Sterling in order to restore competitiveness. 

  • In the long term, move towards ‘free banking’ – abolish deposit insurance and reserve requirements, ban bank bailouts, and allow insolvent banks to fail.

  • Replace the Bank of England’s 2% Inflation Target with a 5% Nominal GDP Target. 

  • End the Bank of England’s stress test programme and instead raise capital requirements. 

  • Issue Green Bonds that pay more than 5% interest rate a year to instil a green transition of UK Finance. 

  • The Bank of England will be mandated to buy newly issued gilts, the proceeds of which should be directly invested by the government in infrastructure projects including the transition to net-zero.

Miscellaneous:

  • Create a Minister for The North and The Midlands: 
    • This would ensure that The North and The Midlands of England gets the same level of parity in terms of investment as London. 

  • Create a Minister for Competition: 
    • This minister would oversee the Competitions and Markets Authority ensuring the UK economy remains free, open and competitive.

  • Strengthen the Competition and Markets Authority.

  • Invest substantially in the Office for Tax Simplification. 

  • Tell people how their taxes are spent using an annual spreadsheet. 

  • End the backdated IR35 (loan charge) tax on individuals rather than businesses. 

  • Uphold fiscal responsibility by requiring OBR forecasts for all fiscal decisions.

  • Cap the ISA tax relief at £100,000. 

  • Repeal The Soft Drinks Industry Levy. 

  • Agricultural land will also be taxed at 100% of the unimproved rental value.