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Taxes to save our towns

 

Read our latest blog from IED Executive Director, Nigel Wilcock

With the Autumn budget on the horizon, and with the damage that Covid-19 has already done to the UK economy, there is an increasingly strident and polarised debate about whether we can afford to increase taxes – or indeed whether we can afford not to increase taxes.

Clearly there is the deflationary effect of any taxation to consider – but there is a route through some of this that might plug some of the public expenditure gaps and also provide a tonic for our towns and villages. It is time to be brave and create a fiscal environment that changes the dynamics of economic development and raises money.

Here are three taxes – or ‘get-out-of-jail cards’ – for Chancellor Rishi Sunak to consider:

1. Increase tax on supermarket/off licence alcohol

This is an approach appropriated from rural Ireland, but a large increase in tax on off licence sales and perhaps a small reduction in tax on pub/restaurant alcohol sales could incentivise more visits to hospitality outlets, raise large amounts of tax and create a positive public health outcome. It might now be a clear vote winner but it would address an inequality that has been in place for a long time.

2. Place an additional tax on online sales

The rise in online shopping is inexorable but at the same time the impact on town centres and retail employment is creating a serious economic situation. The cost advantages enjoyed by online retailers through lower staff costs could be partly addressed by an additional tariff to try to create more of a balance between clicks and bricks, create some safeguards for retail and raise additional funds for the Chancellor.

3. Change the business rate regime on Business-to-Consumer warehousing

There is currently a huge differential in the business rates charged on retail units compared to warehousing sheds that essentially undertake the same activity. There is a case to link business rates to turnover (rather than property value), but if that is too complicated there is the alternative of a business rate surcharge if the function of the warehouse is to deliver direct to consumers – therefore creating another tax to support the town centre and raise funds.

Nobody is suggesting that three increases in taxation will fix the huge financial hole that we find ourselves in – but at the same time, a suggestion that any taxation would create a wholly negative outcome must surely be too blunt.

There is an opportunity to look again at some of the inequalities in the taxation system that are creating an unwanted negative social impact. The three ideas suggested here are focused on supporting the fabric of our towns and villages – but there are no doubt similar examples that others can suggest. Let us make the recovery of the economy less of a binary debate.

Nigel Wilcock is Executive Director of the Institute of Economic Development

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