The National:

RISHI Sunak enjoyed himself yesterday. He took great pleasure telling anyone who might listen that he was imposing tax increases in Scotland without seeking the consent of the Scottish Government.

Admittedly he looked a little more uncomfortable trying to justify why this government was breaking yet another of its manifesto promises, in this case not to increase tax.

But whilst it was an interesting day in politics, the real question is whether Sunak needed to impose a national insurance increase on anywhere in the UK, let alone Scotland? The obvious answer to that is that he did not.

It is indisputable that there are NHS and social care funding issues throughout the UK. However, whilst this may be true the Westminster government has borrowed £26 billion less than expected in the first four months of this financial year. Given that the planned tax increases will raise only £12 billion a year it is apparent that the Government could already afford to cover the additional costs of the NHS out of existing budgets. There was no need for any tax increase now in that case. That makes the increase a straightforward con-trick.

In addition, the claim made that this tax increase is needed to control the UK national debt is completely false. As a matter of fact the whole cost of the UK Government deficit is currently being funded by the Bank of England through its quantitative easing programme. Using that arrangement the Bank of England is currently repurchasing all the debt that the Government is supposedly creating to fund its deficits using newly created money that does not come from taxpayers. Well over £800bn of UK Government debt has been cancelled in this way to date.

None of the money created by the Bank of England to do this need ever be repaid, or even have interest paid on it, and there has never been a hint that this process is inflationary. In that case another £12bn a year for the NHS could easily have been found in this way. So, yet again, no new taxes were needed to pay for this.

In that case why did Rishi Sunak want to increase tax in just about the most unfair way that he could? National Insurance is the tax that hits the lowest paid more than income tax does in many cases. What is more, it always demands less in real terms of the wealthy than it does of those with low pay. Sunak claimed he had no choice but do this, but again, he was wrong. There were much better alternatives available.

My suggestions for better tax increases all focus on taxing those with high pay and wealth more, because those groups have done especially well from the economic support packages Westminster created during the Covid crisis. The value of their savings has, in particular, increased considerably over the last two years.

For example, even if National Insurance changes were essential there were better ones to make. Those earning over £50,000 only pay national insurance at 2%. Those earning less than £50,000 pay at 12%. Simply changing the rules so that everyone paid at the same 12% national insurance rate could raise £14bn a year in my estimation and not demand a penny more from a lower paid worker. That would have been socially just.

Equalising the tax rates due on income and capital gains would also have worked. Capital gains are the profits people make when selling assets like shares and investments. They are usually taxed at half the rate of income at present. Charging those gains at income tax rates would have been another socially just thing to do and could have raised £9bn.

Charging an extra 15% tax on investment incomes above £5000 a year because they are not subject to National Insurance would also have been fair. That could have raised maybe £7bn a year.

And reducing the tax relief due on the pension contributions of the wealthiest so that they only get the 20% tax relief rate that all those earning less than £50,000 a year enjoy could have saved maybe £10bn a year - and stopped the absurd situation where the savings of the wealthy are subsidised more than those of the low paid.

There were, in other words, fair options available for delivering extra taxes if they were required (which I doubt). But they weren’t chosen. Instead the lowest paid are going to pay more tax so that wealthy pensioners can pass more of the value of their estates on to their children. And that is what this reform is really all about. There’s not a hint of social justice in this, but as part of a Tory plan to increase inequality this new tax will work, and that’s exactly what I think it was really all about.