Today's Budget is arguably the toughest test of George Osborne's career to date. Not only will the Chancellor's plans shape the background against which his party will fight the general election in three years' time. It is also his final opportunity to be truly daring, the last occasion where there is time for the risks to pay off before voters are next at the ballot box.
What, then, should Mr Osborne do? To begin with, there is personal taxation. This newspaper has long argued against the 50p top rate: it simply does not raise sufficient revenue to be worth the hit to the entrepreneurial mood. Given the understandable acrimony that has followed the financial crisis, Britain must be clear that it is not anti-business. Reducing the top tax band is an important signal. Mr Osborne must bite the bullet and drop the rate.
With so many people still sharply squeezed, however, such a move can only be justified as part of a package designed to tilt the whole system towards both equity and economic growth. An approach the Chancellor favours – quite rightly – is to crack down on tax avoidance. Whether it be corporations with financial arrangements that, while theoretically legal, are still clearly abusive, or individuals buying houses via offshore companies to avoid paying stamp duty, such Byzantine elusions must end.
Welcome as the Chancellor's enthusiasm is, tackling avoidance will not be enough by itself. To pursue the policy to its natural conclusion, Mr Osborne should establish the Liberal Democrat "tycoon tax", under which the wealthiest would pay a minimum proportion of their income – say 20 per cent – whatever the multitude of loopholes found by their accountants.
It was back in 2007 that a City grandee pointed out that private equity bosses, for example, commonly paid lower rates of tax than their cleaners. The situation was obscene then and is even more so now, with nearly five years passed and so little progress. To ensure that all pay a reasonable proportion is neither social engineering, nor a hit to Britain's business culture. It is a simple matter of fairness.
Meanwhile, there is also much to be done at the other end of the scale. The Chancellor should expedite plans to raise the income tax threshold to £10,000. The withdrawal of child benefit payments from high earners – albeit tweaked to avoid the "cliff edge" cut-off point – is also long overdue, as is the abolition of top-rate tax relief on pension contributions. But personal taxation is not all there is.
The Prime Minister tried to take the heat off by starting the week with an impassioned speech about infrastructure, full of references to Victorian ambition and setting out a vision for massive investment, funded, to a large extent, by the private sector. But even if the plans are half-successful, the private sector cannot do everything; neither can it do it fast enough. To take up the slack, Mr Osborne would do well to recycle any windfall from this year's under-target government borrowing into infrastructure spending. And while he may make much of the scheme to lower the cost of loans to small businesses, he would do better to cut national insurance for new staff if he is serious about giving a boost to industry.
More than anything else, if the Chancellor really wants the private sector to drag the economy back to life, he must unlock the hundreds of billions of pounds salted away by companies too wary to spend. Further cuts to corporation tax – always appealing to a Tory Chancellor – are not the answer, given the risk that savings simply trickle through into shareholder dividends. Rather, he must hike the tax breaks on capital investment. Arcane? Maybe. But still Britain's best chance by far for desperately needed growth, jobs and return to prosperity. Go on, Mr Osborne, be daring.Reuse content