Tax and Benefits system

This is going to be a long one, for which apologies in advance.  However, the following system is designed to:
- Simplify and clarify tax arrangements
- Remove the vast majority of tax loopholes (as it turns out, a Jimmy Car-style arrangement is impossible under this system)
- Reward and encourage work at all levels
- Remove the Benefits Trap
- Encourage growth
- Avoid losers through the change as much as possible

Impossible?  Maybe.  Let's give it a go:

1 - National Insurance is abolished.  Both for Employers and Employees.  However, most of this is loaded onto the relevant income taxes for clarity.  Thus corporation tax becomes 35% (from 24% today; the small business rate is also abolished but the Flat-rate VAT system for companies with small turnoveris retained and lowered from 12-15% to 10% to balance this) and income tax also becomes 35% (from 20%/40%/45% today).  The flattening of the tax bands is not a highly regressive step - they are in effect 20+12; 40+2, 45+2 (so 32/42/47) today.  The higher rate at the bottom end is more than balanced by the next step; the lower rate at the top end by the third step ...

2 - The tax-free allowance is also scrapped.  So are Tax Credits.  So is JSA, Income Support, Housing Benefit and Council Tax Benefit (however, DLA, Carers Allowance and Incapacity Benefit are retained).  These are all replaced by a Citizens Basic Income payable to every citizen in the UK at the following rates:

0-17: £40/week (payable to parents)
18-21: £75/week
22-64: £100/week
65+: £140/week

All income is taxed, with the exception of dividends from shares in companies which pay all their corporation tax in the UK (as in effect they have already been taxed at 35%).  The IR35 unit in the Inland Revenue is abolished as there are no loopholes left for people to use here anymore.  Note that income from loans is also taxed at 35% - however loan repayments garner tax deductible status which is used to directly reduce the repayments.

3 - Council Tax, Land Duty Stamp tax and Inheritance Tax are scrapped.  they are replaced by a Land Value Tax on residential properties charged at 1.2% of value annually with the first £80,000 exempted.  The average value of this is slightly above the average value for Council Tax but is far more progressive.  Pensioners may elect to have their contributions "rolled up" and taken out of the estate on death - effectively trading an exemption from the equivalent of Council Tax for an optional Inheritance Tax.

4 - There will be a major social housing building programme - today we have approximately 750 million people on the waiting list for social housing (and, incidentally, about 2 million people who are in social housing who earn too much to be eligible for Housing Benefit).  The average tenancy length is c. 30 years.  To remove the disincentive to move out once on ones feet, social rents are to be charged at 20% of gross incomes.  For those at the bottom, this is lower; for those better off, it starts to approximate rents in the private sector.  The Government will also pay 75% of all moving fees for someone moving out of social housing.  I'm allocating £10bn per year to this programme; this should build approximately 100,000 units per year and provide a decent stimulus to the economy as well as help to moderate overall house prices.

5 - ISAs, TESSAs, PEPs are abolished - these mainly benefit upper-middle-class savers only, who should be happy enough at the lower tax rates in any case.  Most tax credit schemes for companies (eg R&D Tax Credits) will be scrapped; if there is any need for subsidies, they will be explicit subsidies.

6 - There are two main classes of losers from the tax'n'benefit changes (well, three if you count those employing tax avoidance schemes who'll see virtually all loopholes vanish in simplicity): Wealthier pensioners and young single mothers.  The former may lose out because private pensions never attracted NI before - this will be offset to a large extent by the fact that the Citizens Basic Income at age 65 is significantly larger than the pension, so the effects aren't very noticeable.  We're talking small numbers losing small amounts and this is more than balanced by the poorer pensioners being significantly better off.  Young single mothers will be provided for by a series of well-equipped and plush mother-and-baby homes, provided to all single mothers with babies up to the age of 3 years old.  These are to be well run, well outfitted and well supported (£150 million per year to be made available for them). All education up to A-level and apprenticeship level to be encouraged and supported; free childcare for any young mother working or in education or training in these establishments.  Staff will be well paid and equipment well sourced; I'm putting £250 million per year aside for these facilities.

7 - During the transitional period until sufficient social housing is available for those who need it (before enough who don't need it move out and more is constructed), Housing Benefit is payable to those in the private sector as before.  I'm allocating £5bn per year for this.

8 - Planning Gains to be paid to the relevant Local Authority rather than central government. This will encourage the granting of planning permission (overriding NIMBYism) without causing untrammelled and uncontrolled development by ensuring that the appropriate incentive goes to the appropriate body (as the Local Authority will have to deal with any increase in local costs and requirements by a development, it is appropriate that they should receive the planning gains).

Overall effect is closely cost neutral (I make it zero change +/- £3bn dependant on assumptions; this may be unduly pessimistic as most tax avoidance schemes become impossible and the collection rate should increase significantly).  The small shift away from corporation and income tax onto LVT is pro-growth to the tune of c. 0.2% per year of GDP; the construction boost is a larger stimulus and I expect the supply-side reforms of the incentive changes to those formerly in the Benefits Trap (for many, a marginal effective rate of 95.5% from tax, NI, Tax Credit withdrawal, HB withdrawal and CTB withdrawal will convert to 35-55%.  To put it another way, the least beneficial will be a ten-fold retention in marginal earned income for the poorest in the Benefits Trap).