RUTH SUNDERLAND: Stealth taxes don’t add up

Stealth taxes don’t add up: There is no excuse for politicians to act like the Artful Dodger – time to brush up on the arithmetic, says RUTH SUNDERLAND

  • Rishi Sunak and the Chancellor Jeremy Hunt are picking our pockets 
  • Rather than transparently raising income tax rates, duo have chosen ‘fiscal drag’ 
  • Stealth taxes to replenish national coffers are a signature style under Sunak 

Sneaky: Stealth taxes to replenish the national coffers have become a signature style under Rishi Sunak

Rishi Sunak’s drive to improve the numeracy of the nation might have unintended consequences for the Prime Minister. 

Were voters to be equipped with better maths skills, they might be more alive to the sneaky ways in which he and the Chancellor are picking our pockets. 

Stealth taxes to replenish the national coffers have become a signature style under Sunak, and ought to concern voters more than his former non-dom wife’s personal tax arrangements. 

Rather than transparently raising income tax rates, Sunak and Jeremy Hunt have chosen ‘fiscal drag’ – the freezing of thresholds and allowances. This is creating a tax grab of epic proportions. 

Millions of people will be pulled into the income tax net and higher rate brackets. Over the coming years, it will raise billions of pounds of additional revenues. 

The pain for taxpayers will intensify so long as inflation remains high and wages climb to keep pace with prices, meaning people will pay more tax even though their standard of living might have gone down. 

When Sunak first embarked on this road in March 2021, he imposed a four-year freeze expected to raise £8billion.The Centre for Economics and Business Research put that at nearer £40billion when inflation took off. 

Hunt has extended the Big Freeze for another two years and lowered the threshold for the 45 per cent rate of income tax from £150,000 to £125,000. This is a Corbyn-esque populist move that will not hurt the genuinely rich but will penalise around 800,000 reasonably well-off professionals whose incomes are already heavily taxed. 

Other thresholds have been frozen for many years, including for inheritance tax (IHT). This has been stuck at £325,000 since 2009 with an additional £175,000 allowance for those leaving property to children or grandchildren. The haul from IHT, unsurprisingly, is at a record level.

The pension ‘lifetime allowance’ – the amount people are allowed to have in their pot before being taxed at a punitive rate on the excess – is frozen at just over £1m. 

According to specialist magazine Investors Chronicle, had the original cap of £1.5m in 2006 been inflation-linked, the allowance would be more than £2.3m – a real terms drop of £1.2m. 

Put it together and this is a disincentive to work and earn more, to leave a legacy or to save for old age. The stealth principle is also applied to bailouts of failed energy firms. It was galling in the financial crisis of 2008 that taxpayers funded a lifeboat for reckless banks, but at least the process and amounts involved were transparent. 

As The Mail on Sunday has revealed, the energy bailout has been approached in an underhand way by hiding the costs in standing charges on energy bills. 

Only after days of digging did my colleagues manage to obtain a breakdown of these charges. The costs of bailing out bust companies makes up a fifth of the current total electricity standing charge, not counting the £6.5billion needed to rescue Bulb. 

The cost of rolling out smart meters has also been tucked away in standing charges, accounting for 7 per cent of the electricity standing charge and 2 per cent of the gas levy. 

These sleights of hand will end up eroding trust. People have a right to know how their own money is being taxed and used. There is no excuse for politicians and regulators to act like the Artful Dodger. Time to brush up on the old arithmetic.