Last year’s pre-Budget process of kite-flying was widely condemned but at least it had the benefit of allowing silly ideas to be put out there in good time for them to be shot down before becoming government policy. Why the government’s advisors on tax didn’t point out the flaws before each strategic leak was allowed to go ahead may be a mystery to some but there is method in their apparent incompetence. The purpose of this kite-flying is not to make good policy decisions but to see whether the idea in question is popular or not. The advisors almost certainly recognise the flaws in advance but having them laid bare in the media is not so embarrassing when there is a ready response available: “this is not government policy; we have no idea where you got that from”. If, on the other hand, a rumour attracts positive coverage (whether or not it will “work”), that is potential political capital right there.
This time around, things are being done differently but because there is no nudge-nudge implication that something might actually happen, coverage is much less thorough. There is a stark mismatch between the headline coverage of proposals and the bottom-of-page-14 reporting of an expert’s explanation of why this would be a bad thing.
Here are two examples (neither is necessarily a “bad” idea but nor has either been properly questioned):
The Prime Minister and the Chancellor have both given the impression (without any detail, so this is definitely not a pre-Budget announcement) that they think capital gains tax rates are too low. Speculation on the front pages, or in TV news bulletins, suggests that rates might be increased to match those of income tax. Rather less prominent are the views of economists (and, indeed, HMRC) that increasing CGT rates could reduce tax revenue. Almost ignored are those who complain that CGT taxes inflationary gains and the current rates are already increases on those settled, or considered “fair”, when indexation was taken away.
Great prominence was given to the Conservative Party conference proposal that there could in future be no inheritance tax to pay on the family home, however valuable. It took a few days for the business pages to start featuring sideline stories that this would encourage people to “upsize” instead of “downsize”. That may not be a shot beneath the waterline but the relative prominence of the reporting is concerning.
‘Twas ever thus, of course, but what we need are reporters who know something about tax to cover the original stories and ask questions of the politicians concerned. Is there any chance of that happening?
