The deadline for pre-Budget representations to HM Treasury is approaching, and activist “keyboard warrior” advisers have until September 10 to make their views known to the government.
From pensions to Isas, many financial products are in a byzantine mess because of layers upon layers of incremental changes, regulations and tax concessions from chancellors with big egos, all wanting to make their mark in history.
We do not need incremental change, but a financial revolution. The best opportunity for urgent radical reforms is at the beginning of a new parliament when time is on the government’s side, and its bandwidth for change is at its widest.
Here is my “wish list” for urgent reforms, even if chancellor Rachel Reeves decides, as seems likely, that spending cuts and tax rises must take priority in the Budget on October 30.
Restore the Office of Tax Simplification
Tax simplification can generate prosperity, productivity and ultimately revenue for the government. That is fundamental. Yet, in a penny-pinching move, the Office of Tax Simplification was abolished by the last government — a retrograde step. It is an ideal organisation to give tax a makeover. Bring it back.
Fix bread-and-butter products like Isas first
Isas are advisers’ bread-and-butter tax-planning vehicles for all ages but they need rationalisation. There are too many types and they are too complex.
AJ Bell director of public policy Tom Selby and others have campaigned for just one Isa. Why not? I have been writing about Isas and their predecessor personal equity plans for more than 30 years.
If an experienced financial journalist cannot coherently explain all the Isas options in 600 words, how can clients be expected to know what is best for them. Complexity leads to apathy and even worse the erosion of a savings culture, chipped away at every Budget twist and turn.
Too much choice leads to indecision. Have you ever been to a large hypermarket with 30 brands of lettuce? Who apart from foodies can tell the difference between a more limited choice?
It is increasingly the same with Isas. “Keep things simple, stupid,” — this old KISS principle still works. The government should merge cash and stocks and shares Isas, the two main Isa products .
Increase the limits on lifetime Isas at £400,000. Such is inflation that this is too low for now for many first time buyers in London — £500,000 is more realistic. A grotty central London flat often costs at least that.
A 30-something professional relative and his partner have just bought their first home: a modest two-bedroom flat in Zone 2 for £400,000. They were lucky, making use of the lifetime ISA. But there is no chance of a house with a garden at under £500,000, even in outer London in “beyond the pale” Zone 6. A house with a garden should not be beyond the reach of a professional two-income family on above-average wages.
