The stealth tax rise

Paul Johnson

Hello and welcome to this episode of the IFS Zooms In. I'm Paul Johnson, director of the Institute for Fiscal Studies, and today we're going to be talking about what's happening to tax thresholds and allowances as we enter the new financial year, which starts early in April and that's the point at which new rates and allowances and all the tax changes announced over the previous year tend to come into force. Today I'm joined by Helen Miller, who's deputy director here at the IFS, and head of the tax sector, and Tom Waters, who's an associate director here and works on taxes and benefits policy.

We haven't had a lot of big announcements you might think, in terms of what's going to happen to our taxes this year. There were no announcements really in the March Budget of any substance, and you look back to the autumn when Jeremy Hunt undid most of the things that Liz Truss and Kwasi Kwarteng wanted to do, and you might be forgiven for thinking this is a really quiet year for tax policy. The truth, though, is rather different, because by freezing a bunch of things, actually the government is imposing a very big tax increase, and that's the issue that we're going to try and unpack in the next half hour or so.

And just before we get going on this podcast, just a warning to listeners in Scotland: not everything that we're saying is directly relevant to Scotland, because of course the Scottish Government has control over some elements of the tax system, and in particular, has reduced the point at which you pay higher-rate tax, though Scotland doesn't have control over the personal allowance threshold, and has kept some of the other thresholds the same as in England. But what we're going to say about higher-rate taxpayers doesn't particularly apply in Scotland.

So, Tom, perhaps you could just very quickly take us through what actually is happening as we enter the new financial year?

Tom Waters

Usually each April, most tax thresholds and income tax and National Insurance go up in line with inflation, so that means that in real terms they stay the same. But we are in the second year of a six-year tax freeze, which means that in cash terms they will stay the same, but in real terms therefore they'll fall, and because inflations high they'll fall by quite a bit. And so that amounts to, in real terms, a tax rise. In addition to that, we also have the additional-rate threshold, so that's the point at which you start paying 45% tax, is coming down from £150,000 to about £125,000 so that's also a tax rise for people with high incomes.

Paul Johnson

So, these are big changes, so more and more of our income is being dragged into tax. So if your earnings are going up, and whilst earnings might not be going up as fast as prices, they are going up in historically quite high rates, in cash terms, because the point at which you start to pay tax, the point which you start to pay higher-rate tax, the point at which you start to pay the additional-rate tax, they're all coming down in real terms, we're all going to end up paying more tax than if everything had been indexed as it is normally. So, these freezes in, so let's take the freeze in the personal allowance, you've said that this is a tax rise, but if my earnings are flat, they don't go up, is it a tax rise then?

Tom Waters

Yes, it is a tax rise. And so that's because normally these thresholds go up with inflation. Suppose you earn £30,000, so that means about £17,000 and something you're paying income tax on, if we didn't have this freeze, the personal allowance would go up from £12,500 to 13 and something, and so a smaller share of your income would get taxed, but because we're freezing it, it means that a larger share of your income is taxed. And so compared to not freezing thresholds, this does amount to a tax rise, even if your pay stays exactly the same in cash terms.

Paul Johnson

You said, Tom, that this is happening for six years. If you look over, first of all just this year 2023, and then look over a longer period, what is the scale of this change?

Tom Waters

We're talking about pretty significant numbers. So, if we just look at this year, for a typical basic-rate taxpayer, this freeze amounts to about a £500 increase in tax in real terms, and for a higher-rate taxpayer, a typical higher-rate taxpayer, about £1000, that's just this year, so that's a fairly chunky tax rise for one year. Those numbers are higher still if you look over the course of the freeze as a whole, although because inflation is so high right now, it’s really now this year where the freeze particularly bites. But when we look over the freeze as a whole six-year freeze for most of these thresholds, by the end of it, the government will be raising something in the neighbourhood of £28 billion more each year than they otherwise would have if thresholds had instead gone up in line with inflation. So, getting on for a £30 billion tax rise is a pretty significant amount, and to a large extent it's accidental. When this policy was initially announced, inflation wasn't expected to be so high, and therefore freezing the thresholds didn't matter as much, but it now amounts to a very big tax rise.

Paul Johnson

That's a very big accident, an accidental £30 billion tax rise, and just so listeners get a sense of this, £30 billion is genuinely, as Tom says, a really big tax rise, this is equivalent to what? Putting 4 or 5p on the basic rate of income tax, so that's really substantial. And £30 billion is well over 1% of national income, and as Tom says, this is for a basic-rate taxpayer, that's people earning with income between about £12,500 and £50,000 a year, a £500 tax rise, and this is a really important part of the cost of living squeeze over the next year, actually, because not only are people's earnings going up generally less quickly than prices, but also they're going to be paying a substantial chunk more in tax.

Helen, I seem to vaguely remember that this government, or certainly the coalition government in the early 2010s, weren’t they doing exactly the opposite?

Helen Miller

Yep, so if you look back further to the early 90s, we had this trend where more and more people were being taken into tax, so more people earned above the personal allowance, more people are paying income tax and that was a pretty steady trend. And then around 2010, the government made a conscious policy choice to increase the personal allowance, which is the point at which income tax starts to be paid, and take more and more people out of income tax, so there was a large fall in the number of people paying any tax at all. So, this is kind of a very sharp about-face, so now having had this decade of fewer people paying income tax, we're now going to have these six years where more people are being dragged into tax. We're going to be turning the clock back to around early 2010. So, yeah, a big policy change, not one that was announced, as you said, in a kind of a very transparent way, but the effect will be that more people will now be back, so we backtracked on that decade of policy.

Paul Johnson

It doesn't say much for a tax strategy, does it? This is supposedly, effectively, the same government, even if most of the personnel are now different, and they spent years spending billions, actually, increasing personal allowances with a clear desire, they said, to make the tax system more progressive, and reduce the number of taxpayers, and now they're doing precisely the opposite.

Helen Miller

And actually, it's even worse than that, because it's not even the case that they've said we want to undo the policy and go back to a certain level. They haven't really announced what they want the thresholds to be, or how many people they want to be paying tax; they're going to let inflation make that decision for them effectively. So, it's not even that they're unwinding their own policies in a very explicit way; they've just said we're going to freeze them and then we'll see what happens, effectively.

Paul Johnson

And Tom, this is something that I know really irritates you! It is, as you say, it's kind of random what the effect of this is. When the policy was announced, we didn't know inflation was going to be anywhere near this high, and so it's a much bigger tax rise than then-Chancellor Rishi Sunak thought it was going to be, and probably the Treasury are rubbing their hands in delight that this nice easy hidden tax rise is going to bring in so much money.

Tom Waters

Yeah, exactly. When the policy was announced, they thought it would raise £7/8 billion, something in that neighbourhood. They have actually made some policy changes since then - it was only a four-year freeze to start with, now it's a six-year freeze; they've added more thresholds in - but most of the change in the extra cash that the Treasury is going to get is coming just from the fact that inflation is much higher, so it matters much more to freeze thresholds. And as you say, it's something which means that it comes about in a fairly kind of stealthy way, because no one sees, overnight sees their tax bill go up in cash terms, but it just means that they, in real terms, they feel the effect.

Paul Johnson

And Helen, you mentioned that this creates more taxpayers and more higher-rate taxpayers. Can you give us some sense of scale there?

Helen Miller

Sure. So, currently around 64% of adults are taxpayers, so they earn above the personal allowance, their income is above the personal allowance. That's due to rise to 68% of adults, so that's a fairly big increase, that's 4 million people. In terms of number of higher-rate taxpayers, that's going from around 11% of adults to around 14%, and that interestingly is part of a much longer-run trend. So, from around the start of the early 90s, we've had increasing numbers of people being subjected to higher tax rates. So, I think at the early 90s it was something like 4% of people, of adults, that were higher-rate taxpayers, and now, as I say, we're going to be coming up to something like 14%. So that is the kind of continuation much longer-run trend, where more people are being subjected to these higher rates.

Paul Johnson

There's two very striking numbers there. I think a lot of people might be surprised to hear that more than a third of adults don't pay income tax anyway, which means they've got incomes of less than £12,500. It's worth saying some of those people are genuinely poor, but some will be often women who have given up work for a while but have perfectly good household incomes, a lot will be students, others will be individuals in households which are quite well off. But it is very striking that more than a third of the adult population has a personal income, at any one time, of less than £12,500.

Helen Miller

Yeah, it is, yeah. And as I say, we should point out, kind of obvious point, that that doesn't mean that's for all taxes - people will still be paying other taxes, possibly council tax, VAT - but certainly for income tax, which is our single biggest tax in the UK, that's right, a decent chunk of people at any one point in time are not subjected to income tax.

Paul Johnson

And that number, as you said, went up through the early 2010s as the personal allowance rose. Now, the other figure that you mentioned is the number paying higher income tax, the 40% level, which starts at £50,000. Now I remember 20/30 years ago, when to be a higher-rate taxpayer really meant you're pretty well off, you were in the top few percent of the earnings distribution, as you said, only 3/4/5% of adults were paying it. This has changed the structure of the tax system, hasn't it, from a world in which we essentially had a basic rate, which the vast majority of people paid, and a few people paid a higher rate, to really a full two-rate system where large numbers of people are paying that higher rate?

Helen Miller

Yeah, it's very different, yes. Most people for most of their life before could have just completely ignored the higher rate of income tax, it would have been completely irrelevant for them. That's no longer true, as we said, now around 14% were paying the higher rate in any one year, and of course, more people might be paying it over their lifetimes. And actually, now we have other higher rates too, so Tom mentioned we have the additional rate of income tax, which is the explicit rate that the government's put in that kicks in at 45% once you're earning, well it will now be £125,000. There's also this very bizarre part of the schedule, where there's a 60% tax rate, which has come about - which you won't see if you just look at the stated policy - but comes about because when individuals reach £100,000, their personal allowance is withdrawn, steadily, so for a very strange band between £100,000 and £125,000, there's a funny marginal tax rate of 60%. And actually now if you look at the people subjected to that, there are 2½% of people in that range, so where I’m going with this now is that the numbers of people we used to see being subjected to just the higher rate are now being subjected to these even higher rates, so quite a big difference in the bands and the people who are being subjected to different rates.

Paul Johnson

Yeah, and Tom, this is something that's changed over time, hasn't it? We've now got 20%, 40%, then we got 60%, and then we got 45%, so a very strange system where actually you've got this 60% band, and then it goes back down to 45%. Now this 60% band was introduced by Alistair Darling - came into effect in 2010, I think - but this is something else that has been frozen. That started at £100,000 in 2010, it's still at £100,000 in 2023, so again, as Helen says, it’s dragged more and more people into these higher rates.

Tom Waters

Exactly, and so when we were talking about the freeze we’re in at the moment, that is a time-limited freeze, it's six years, which is a long time, but it is a time-limited one, whereas this £100,000 threshold, that is indefinite, it's been £100,000 since 2010, and there's no government policy for it to ever change. And that means that steadily more and more people will get dragged into it just because of inflation and because of nominal earnings going up, and as Helen was saying, we've already seen a substantial increase in the number of people who are above £100,000 and therefore see some or all of their personal allowance withdrawn, and we're getting towards the point where there'll be as many people who are paying these higher rates if you like, this 45% or 60% rate, as was paying the higher rate of 40% back in 1990.

Paul Johnson

It's just worth dwelling on that a little bit. Actually, we're doing this podcast in the week in which we've heard of the sad news that Nigel Lawson, Lord Lawson, has died, and it was he back in 1988 who abolished all of the rates of income tax above 40%. So, before 1988, we had rates of 40, 45, 50, 55 and 60% for higher earners, he abolished all of the ones over 40%, and at that point, as Helen was saying, 3 or 4% of adults were then paying that higher 40%, and the rest of income taxpayers were paying at the then basic rate of 25%. So, we had that system of a basic rate, and then the higher rate. We've now moved to a world in which we've got a basic rate of 20, then lots and lots more people paying that 40% rate, and pretty much as many paying 60 or 45 as back in 1990 were paying 40p rate. So pretty significant undoing actually what Lord Lawson was aiming to do back in his 1988 Budget.

Tom Waters

Yeah, that's right, and I think there is a way in which it can seem more rates is kind of better, because it allows the system to be more progressive, but the thing that's worth remembering here is that even if you just have a two-rate system, basic rate and a higher rate, as your earnings rise, more and more of your earnings fall into that higher rate. And so, the share of your income that is paid in tax does continue to go up, and that's not to say that the two-rate system is necessarily exactly what we need, but you don't have to have lots and lots of rates in order to achieve actually quite a lot of redistribution and progressivity.

Helen Miller

And just to add to that, it's perhaps worth digging into the kind of what the design problems are with our current structure, so, it's, I think as Tom was saying, it's fine for politicians to make choices about progressivity and how much you want the rich to pay and to have higher rates if you want them, but the way in which the government is doing that is bizarre in a couple of ways. So, one is this, as you mentioned, this weird 60% band where it's very opaque, most people don't know there's a 60% band, and it goes up and down again. So as a way to tax higher earners, that's a particularly silly way to do it. And again, these freezing of thresholds means that you're not explicitly setting policy for a group, you are letting it evolve in a very uncertain, arbitrary way, so even conditional on wanting a tax system that has higher rates, the way in which we're doing it is not sensible.

Paul Johnson

That said, we do get a lot of money from these people, don't we? I mean, it's very striking. So, Helen, how much of total income tax revenue do we get from the very high earners?

Helen Miller

So, if you look at the top 1% of adults, they're paying about 30%, roughly, of income tax.

Paul Johnson

How much income do you need to be the top 1%?

Helen Miller

To be in the top 1% of adults, you need to have around £125/130,000. So, it's striking, if you look at all of income tax revenue, in broad-brush terms, around a third is paid by the bottom 90%. Around a third is paid by the next 9%, and around a third is paid by the top 1%. So, it's partly because we have a very skewed income distribution, but even conditional on that, we get a lot of income tax revenues from the top, we are very reliant, for our revenues, on really a very small number of taxpayers.

Paul Johnson

That's very striking, I hadn't actually quite, I hadn't quite thought of it in those terms. So, a third from the bottom 90%, a third from the next 9% and a third from the top 1%.

Helen Miller

Yep.

Paul Johnson

Just income tax?

Helen Miller

Just income tax. Other taxes differ.

Paul Johnson

And that top 1% is, broadly speaking, those who are past the 60% band.

Helen Miller

Yes.

Paul Johnson

In fact, a relatively small group who are paying 45% rate of tax on all their income. And if you go right to the top, I think people will be quite surprised actually that, in a sense you, quotes, 'only' need £125,000 to get into the top 1%; the top 0.1%, you're looking at over half a million quid, aren't you, to get into the top 0.1%?

Helen Miller

Yeah.

Paul Johnson

And they pay, themselves, a very high fraction of income tax.

Helen Miller

Yes, they do. So yeah, you need much more. The top 0.1%, are actually really quite different from even the top 1%. So, there's the rich then there's the very, very rich. So, you need more, over half a million to get into that group, and then, yeah, they also pay a disproportionate share of income tax.

Paul Johnson

And just very briefly, to come back to Nigel Lawson, one of the other things that he did in 1988 was to align capital gains tax rates with income tax rates, so you paid capital gains tax at the same rate as income tax. Now that's no longer true, and one of the consequences of that is that some of those super-rich people take income in capital gains and pay less tax as a result.

Helen Miller

That's right, yes, it's no longer even close to true. We talk about a top income tax rate of 45%; if you add NICs onto that, you get to 47%. Capital gains are taxed somewhere between 10% and 28%, so at much, much lower rates. And we know that it's people right at the top of the distribution who are more likely to be able to take their income in the form of capital, particularly if you're a business owner and you can effectively, rather than paying yourself a salary each year, you can keep money in your company and then take capital gains. The broad-brush things we talked about are still true - the money is still at the top, the revenue still comes from the top, and people at the top on average definitely pay more - but it is true that for some people at the top, who can get their income in capital gains, they do pay lower tax rates.

Paul Johnson

Now, Tom, in the briefing notes you've written 'ludicrous shenanigans' around the 100,000 mark. Tell us about the ludicrous shenanigans in the tax system.

Tom Waters

Yes, there are shenanigans, and they are ludicrous. Yeah, so we've already touched on one of them. So, at £100,000 you start to lose your personal allowance; that creates this in effect 60% band that Helen was talking about. Then in some ways there are other parts that are even sharper, which relate to childcare and these actually become even more significant in virtue of the childcare announcements we got a few weeks ago at the Budget. For example, it will be the case after this new childcare policy is fully in, that you can get 30 hours a week free childcare for children aged 9 months to 4 years free, as long as both parents are in work and neither of them earns over £100,000. But as soon as you go one penny over £100,000, that's it; that 30 hours is completely washed out, you don't get anything. And so that creates a really strong incentive to keep your income below £100,000 if you can. There's also another childcare policy called tax free childcare, which kind of amounts to a subsidy, a 25% subsidy on some childcare expenditure, for that as well you have to have income under £100,000. And so, you get this really sharp kind of cliff edge in your income, once you account for these childcare packages, really sharp decline in your income at around £100,000. And so, for someone who has a couple of kids aged under 3, it's possible to be in a situation where you could be at £99,000, and get a pay rise of about 30 or 35 grand, and you actually become worse off after you account for all of the loss of these childcare bits and pieces. And so that's really a very unusual and really quite difficult to justify, I think it's fair to say, disincentive to increase earnings.

Helen Miller

Just to add, to make sure everyone understands how ludicrous that is, if you have two parents where both of them are earning £99,000, and they both get all their free hours and the tax support, whereas if one person is earning, I don't know, is doing two days a week at minimum wage and the other partner is earning £101,000, then they get nothing, and they're – basically you should, at that point, shove money in a pension to get around the cut-off, or reject a pay increase, because you'll be substantially worse off as a family. That's mad.

Paul Johnson

Yeah, it's pretty extraordinary, isn't it? And we could go into, but we won't actually, the other big change that Nigel Lawson proclaimed in 1988 was the move from what was then joint taxation - husbands' and wives' incomes were treated together, and in fact there was no privacy between them - to independent taxation and in various ways we managed to make a mess of that since as well, but maybe a topic for another time.

So, Helen, we've been talking about people earning over £100,000 here. We've talked about 60% tax rates over the first £25,000 and then 45% tax rates. We've been talking about the withdrawal of childcare benefits. There might be quite a lot of people listening, thinking, £100,000, I wish I had that, why should I care? Why do we worry about these poor dears on £100,000 or more? Is this a problem?

Helen Miller

Yeah, I think it absolutely is a problem. I think it's a problem regardless of what you think of people on that income range. So of course, having £100,000 of income is a lot of money, you are getting more income than most people in the population, and we might want to tax those people at higher rates and that's fine. But we're having a situation here where somebody can go from having £100,000 of income, to £134,000 of income and be worse off. It's not just they're paying higher tax rates; their after-tax income will actually be lower, they will be poorer. So you can get a £35,000 pay increase and be poorer, that is mad, regardless of how much income you start with. So, if you want to tax these people at higher rates, that's fine, we can tax them at higher rates, but tax them at a rate over 100% I find very hard to justify, regardless of how well off they are. We should tax them more explicitly at high rates if we want to, but not be taxing people at over 100%.

Paul Johnson

The other thing that you've pointed out earlier, of course, is that £100,000 threshold is now equivalent to where the sort of 40% higher rate was coming in 30 years ago. So, £100,000 because it's a big round number feels like a huge amount, but actually it's, for people who remember that far back, it's no more than what was the old higher-rate threshold, and more and more people are coming in to be affected by these higher rates. And even thinking about, ignoring the childcare issue and thinking about rates of 60% or 45%, is there any evidence that they cause a problem? Or could we happily really raise - everyone over £100,000, let’s just charge 60%. Would that be a problem?

Helen Miller

So, what would the problem we would be looking for? We'd be looking for people basically working less, and we should think about when we put up higher tax rates, if people respond to tax by working less, or in the extreme by moving out of the country, that would be a concern. There is some evidence of this, it's a hard thing to get a handle on. I think for the sort of like the quite rich, but not very rich, we could raise higher tax rates and I think not very much would happen: people would be poorer, but I don’t think we'd be having them fly out of the country. I think once you start getting up to a very high rate and very high incomes, we might worry more, especially people can do things like take capital gains rather than income and get income tax. So, if we wanted to tax these people at higher rates, we could do so, but we should do it explicitly and decide when we want that high rate to kick in and not do it by accident with moving personal allowances or by setting things in thresholds.

Paul Johnson

Tom, there are also some fairly ludicrous shenanigans, to use your term, around what happens to people with children earning between about 50 and 60 thousand aren't there?

Tom Waters

Yes, that's right. So historically, for many decades, we've had a universal child benefit, so if you have dependent children, you get a certain amount each week, in virtue of that doesn't matter how much your income is. That was in place for decades up until 2013, and then the government instituted a policy which amounts to tapering away your child benefit if either parent earns more than £50,000. So, between 50 and 60 thousand pounds, that child benefit is steadily tapered away to zero. Again, this is going back towards joint taxation, in that it's based upon whether either partner earns more than 50,000: you can have both at 49,999 and you get the full thing, or if one of them is at 60,000, then you get nothing. Over that range, that 50 to 60 thousand pound range, your child benefit is withdrawn, and so that effectively raises your tax rate over that region, and the amount by which it raises your tax rate is dependent upon how many children you have, because the more children you have, the more child benefit you're eligible for, and so the more cash is being withdrawn as you increase your earnings. And so, this can lead to really pretty high tax rates. If you have three kids you're looking at a tax rate in that region of something in the order of 70%, much higher than the kind of explicit tax rates that are in the system.

Paul Johnson

And here's the other, here's the other strange thing, isn't it, that particularly since announcements a couple of years ago about reduction, so let's just very briefly talk about this thing called universal credit. We're not going to talk in detail about universal credit, but universal credit is a benefit aimed at people on low incomes. We have this extraordinary situation now, don't we Tom, where we think that someone with £50,000 a year is rich enough to pay higher-rate tax, rich enough to have their child benefit taken away, but some of them are still going to be poor enough to be on universal credit?

Tom Waters

Yeah. Yeah, that's right. It's not tons of them, I think it's, I think it is worth saying, but it is some of them. It is a consequence of the fact that when we're thinking about benefits, when we're thinking about universal credit, the amount you can get is dependent upon your rent and the number of children you have, whereas when we're looking at the tax system, putting aside for a moment this child benefit thing, when we're looking at the tax system, we really only look at your personal income. And so, you could have a personal income that's £50,000, but you've got a few kids and your rent's quite high and so you're nonetheless eligible for universal credit.

Paul Johnson

And it's one of the things I think some people find problematic about actually individual taxation in the way that we do it, that it is, £50,000 is, I don't know, it's somewhere, it's reasonably high up the income distribution, but if you're earning £50,000 and your partner isn't working, you've got a couple of children, you've got a high level of rent, you ain't going to be feeling rich. Whereas if you're earning £50,000, you've paid off the mortgage, perhaps your partner works as well, you don't have any kids, you probably will feel rich. But we don't distinguish between those two states of affairs in the tax system. But anyway, that's probably a big topic for another whole series of podcasts, actually.

So, anyway, to come back to where we are and probably to end the conversation: Helen, we're into the new tax year, we're a couple of years through a six-year freeze and all of these allowances are dragging more and more people into higher rates of tax. It doesn't sound like a terribly great or rational way of developing policy, it doesn't sound like we've got a brilliant structure for income tax. Given that it doesn't sound great, why are we doing this?

Helen Miller

It definitely isn't great, and a couple of reasons to worry about it, and I think we've touched on them. One is just the sheer lack of transparency. Most people are going to have no idea what's happening. As Tom said, people aren't going to see a cash change in their tax bill this month; they're just going to have higher taxes than they would otherwise have had, and therefore it will just go under the radar. But people therefore aren't going to understand what the government is doing. You know, one of the reasons I worry about that a lot is the lack of scrutiny of these policies. Government stands up at a Budget and says I want a 30 billion tax increase, then that will be talked about quite a lot. The government did not do that; the government stood up and if anything said, we're going to freeze these thresholds, and at the time, I think that was, what, an 8 billion increase? But now it's become a 30 billion increase, who's scrutinising that? Nobody. Because at no point did the government announce that; it just sort of happened by accident, so nobody is sitting there worrying about whether that's a good idea. Similarly with these funny rates we have. If we had a top rate of income tax of 70%, I am certain that we would hear screaming about that, but because we have a top rate of income tax of 70% in this weird band in the middle of the income distribution, in this weird circumstance around the child benefit, no one really thinks about it, but it is there, nevertheless. So there's a huge lack of scrutiny of how our tax system looks and how it's evolving that I think is a really big problem. So, given that it's such a huge problem, why did it happen? I think politics is the answer. It happens because raising taxes is hard, politically, because people scrutinise it, and they don't like it necessarily, so the government sometimes tries to do it in ways that are stealthy and go under the radar and they get away with it, by and large, without that scrutiny. So yeah, I think if economically it's silly, but politically I guess it makes sense for politicians, and that's not a good place to be in.

Paul Johnson

You can certainly see the attraction of big tax rises that don't attract the kind of scrutiny that you describe, and indeed are quite difficult to understand, even if Tom will go public about ludicrous shenanigans in the tax system. A fascinating conversation and a really important one, because a £30 billion tax increase is big news, and, as Helen has suggested, we don't talk about it anywhere near enough, and as Tom and Helen have both told us, the way in which this is happening is complex, it's opaque, it's damaging, it's inequitable, it's just not a great way of making policy. Hopefully we'll get back to something better one day.

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