RUTH SUNDERLAND: Deal with the stealth tax

Divine intervention: Rishi Sunak chose to freeze allowances and thresholds in 2021

A fair and transparent tax system should be the goal of every democracy. Voters have a right to clear information about how much is expected of them and where their money is going.

The opposite of this principle is hidden taxes, where governments use underhanded tactics to plunder citizens’ pockets.

The UK is in the grip of a huge secret tax heist. Many taxpayers will be unaware that this multi-billion dollar underhanded attack is even taking place, let alone how enormous it is.

Nobody except a few crazy socialist millionaires wants to pay more taxes. If there are legitimate reasons, governments should at least be honest. Yet here we are, waking up to the huge impact of a move first announced by Rishi Sunak as Chancellor in 2021. Instead of raising interest rates, Sunak chose to freeze allowances and thresholds.

These typically increase each year to keep up with the cost of living. If you keep them static, people will become poorer. Jeremy Hunt extended the freeze until 2027-28, meaning it will last a total of six years unless he weakens or reverses it.

To make matters worse, the moratorium has raised far more money than expected due to runaway inflation. It was originally expected to raise £8 billion annually by 2026. If only.

The Mail on Sunday highlighted a new estimate from the Growth Commission think tank, based on figures from the Center for Economics and Business Research. This suggests the secret crackdown will cause voters £75 billion in annual losses by 2027/28, equivalent to 9p per pound of income tax, unless Hunt acts.

That’s more than other estimates, including a recent estimate from the Institute for Fiscal Studies (IFS) that puts the amount at £52 billion.

These analyzes differ due to the assumptions made about inflation and wages. However, the consensus is that the actual number, whatever it is, will be colossal.

Millions of low-income Britons are being forced to pay taxes, including many pensioners who were below the tax threshold.

And the number of reasonably wealthy people included in the top 40 percent group will double to at least nine million by 2027/28.

Economists call it “fiscal drag.” Whatever name you use, it’s a very bad way to tax people. It is underhanded, poorly understood and undemocratic.

The full implications have not been properly presented to MPs or clearly presented to the public. A measure originally expected to raise £8 billion a year, which is now raising many times that, deserves informed debate.

The secret raid is relevant to the debate over whether Hunt can afford tax cuts in his fall return. Despite pressure from the Tory Party, he shows little appetite, arguing he is in a fiscal straitjacket.

But the sheer size of Hunt’s unexpected windfall will be ammunition for those calling on him to give some of it back.

A treacherous six-year payment freeze at a time of high inflation risks damaging the economy as people have less money to spend. It reduces incentives to go to work or seek a promotion. That is no way to combat the scourge of economic inactivity, with about nine million working-age people unemployed.

Above all, it is outrageous to try to deceive us.

This is gaslighting on an epic scale.