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Budget and the Economy: UKIP Policy

Saturday, 20th March 2010

Britain’s economy is being suffocated by high taxation, excessive EU regulation, overgenerous welfare and punitive bureaucracy.

Meanwhile, the recession has seen the economy shrink sizeably. The current tax code is more than 10,000 pages long and requires dramatic simplification. There are nearly eight million people - or one in every four UK workers - employed in ‘Education, Health and Public Administration’ - two million more than in 1997. Radical reform is essential. UKIP will:

· Take all minimum wage earners out of tax by raising the tax threshold to £11,500; encouraging many to work, in tandem with UKIP’s welfare reforms

· Introduce a flat tax which will make all taxpayers better off and take a further 4.5 million lower paid workers out of income tax altogether. The flat tax will merge existing income tax bands and Employees’ National Insurance contributions into a single rate, starting at that £11,500 threshold.
Pension income below the higher-rate tax threshold will stay at 20%

· Stimulate job creation by phasing out Employers’ National Insurance (the ‘tax on jobs’) over a five-year period (20% reduction p.a.). The revenue will be recouped either as PAYE tax, corporation tax, sales tax revenue, or by the reduced need for State welfare
 
· Recognise the dangerous levels of national debt and accept there is no alternative to major cuts in government spending. We do not accept that service improvements require ever-increasing government expenditure, and believe there is substantial waste and inefficiency that can be eliminated while vital front line services remain fully protected. UKIP also believes profligate government spending is killing off the productive activity that provides tax funds, and that easing the burden will be the route to revitalising the economy

· Aim to reduce the public sector to the size it was in 1997, cutting many unnecessary and non-jobs over five years. The goal is to exchange two million public sector jobs for one million new skilled jobs in manufacturing and related services and at least one million additional jobs created as a result of lower personal taxes and reduced business taxation and regulation
 
· Cut council tax by scrapping EU laws like the landfill tax that costs every district council an average of £3 million p.a., as well as culling non-jobs and political correctness

· Replace the EU’s Value Added Tax (VAT) with a ‘Local Sales Tax’ (LST), collected in the same way, but with a proportion going direct to councils so that local authorities raise at least half their income from local taxes

· Normally allow a standard 50% of Uniform Business Rate (UBR) collected in a local area to be paid direct to the appropriate local council, with the remaining 50% to be paid centrally

· Abolish Inheritance Tax at the earliest opportunity (once economic conditions allow) as this is a small tax with major implications for all but the relatively wealthy

· Stop the tax and welfare system penalising married and unmarried couples

· Scrap up to 120,000 EU directives and regulations that impact on the UK economy. In particular, UKIP would repeal the forthcoming AIFM Directive that threatens hedge funds in the City of London, and the Temporary Workers Directive that threatens Britain’s flexible economy. UKIP would also have none of the EU’s proposed direct taxes and make sure financial regulation is returned to UK control

· Restore responsibility for overseeing the UK banking system to the Bank of England (BoE), which must remain independent. Banks will have to increase minimal capital ratios from the current 4% to at least 8% of total assets

· Require the BoE to enforce a rigid division between retail banks and investment banks (where much instability has occurred) based on the US Glass-Steagall legislation. Retail banks will be allowed only to take deposits from private and commercial customers and advance loans to the same customers up to the limit of their deposits, guaranteed by the BoE. Investment banks will be free to raise money by bonds and shares, but will not be allowed to take deposits

· Reinstate the banking ‘corset’. We will require banks and other authorised lenders to make non-interest bearing deposits at the BoE when lending beyond approved limits

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