In a minute, I will record how other commentators also think it is a gimmick. I have said we are not going to oppose the Bill because we do not want working people to pay more, but we have just seen in this Parliament a tax-raising Budget. I will talk more about that in a moment.
One of the main concerns about this policy gimmick is the serious constraints it will place on the Treasury and the Government’s ability to raise taxes or maintain the flexibility to raise revenue in response to economic events. As Alex Henderson, tax partner at PricewaterhouseCoopers, said:
“Arguably the lock means the Government has less flexibility on where tax revenues could come from, with the burden more thinly spread.”
He also pointed out that it would not constrain Ministers’ ability to raise revenue from the same taxes in other ways—for example, by delaying the uprating of thresholds and removing reliefs. So it is not true that people are not going to pay more; there are other ways. We know the Chancellor used such measures, otherwise known as fiscal drag, to great effect in the last Parliament, because, according to the Institute for Fiscal Studies, they have raised taxes of roughly £64 billion a year by doing so. The headlines people read do not indicate tax rises, but the measures used do.
Simon Walker, director general of the Institute of Directors, said:
“While IoD members are opposed to increases in the rates of VAT, Income Tax and National Insurance, we consider it imperative that the Government’s commitments do not prevent bold tax reforms to both simplify taxation and reduce the burden upon businesses and individuals.”
As Paul Johnson, director of the Institute for Fiscal Studies, pointed out, the tax lock could rule out sensible tax reforms, such as the treatment of national insurance contributions for the self-employed, which has already been referred to.