The pandemic has left a chasm in the national finances, and it rests on the slender shoulders of Rishi Sunak to ensure our Covid debts are not insupportable.
But he should resist siren calls to attempt this through tax grabs on property and other wealth.
If the Chancellor is as astute as I believe him to be, he will treat the notion of a property tax that has been aired this weekend with the contempt it deserves.
The pandemic has left a chasm in the national finances, and it rests on the slender shoulders of Rishi Sunak to ensure our Covid debts are not insupportable
The idea is to scrap council tax and stamp duty and instead impose a charge based on current property value.
But any such levy on family homes would be deeply unfair and would alienate the Tories from some of their most loyal supporters. It would be divisive, vindictive and ultimately, ineffective.
No 11 rejected proposals last week for an emergency wealth tax of 5 per cent on assets, including homes, of more than £500,000 per person.
The mooted property tax should be given similarly short shrift. Since most people have the majority of their personal assets tied up in their homes, a property charge amounts to a wealth tax in disguise.
No doubt the advisers trying to persuade Mr Sunak of its merits will present their plan as ‘levelling up’ because the burden will fall most heavily on the property-rich South, where the value of bricks and mortar has soared over the decades.
But it would be perceived as ‘levelling down’, and a punishment for prudence.
The effects on individuals would be harsh. Older people who bought houses years ago, and who are living on a small income, could struggle to pay their tax bill and be forced to sell a cherished family home.
And not every owner-occupier in the South has benefited from huge windfall gains. Young people with huge mortgages on recently purchased tiny flats in the capital would be hammered too, with a chilling effect on their aspirations.
Any such levy on family homes would be deeply unfair and would alienate the Tories from some of their most loyal supporters
The housing market has held up well in the pandemic, as many of us re-evaluated our lives and decided we want to move.
The property sector should be a motor for economic recovery. Every new build, house move and step up the property ladder has a multiplier effect as money is spent on solicitors, mortgages and furniture.
A new property tax would slam on the brakes. It is also profoundly at odds with Conservative values, the beating heart of which is home ownership. It gives people a stake in their community, lets them put down roots and can be a store of wealth and security to be passed to future generations. Any Tory Chancellor who undermines that does so at his or her peril.
Mr Sunak has to work out how to pay for the damage wreaked by the pandemic, and start recouping the £280billion spent by the Government to prop up the economy.
He is looking down the barrel of a budget deficit predicted to be £394billion. The real number may well turn out to be more.
The national debt is more than £2trillion. A dangerously deluded strain of thought is gaining traction – that the ‘wealthy’ can somehow be made to pick up the tab for Covid while the rest of us remain unscathed. This idea lies behind proposals for tax raids on pensions, increases to capital gains tax, and now this truly terrifying plot to pounce on people’s homes.
Hitting the so-called ‘rich’ may touch a chord in the current climate.
The failings of some fat-cat corporate bosses are grist to the mill for wealth tax campaigners. But the people caught in the property tax net are not tycoons – just middle-class professionals.
The genuinely rich are adept at finding ways to evade the tentacles of HMRC.
No chancellor wants to put up income taxes, National Insurance and VAT. That, however, is the only way to raise enough to scratch the surface of our debts – wealth taxes will not bring in enough money.
MR Sunak will have to repair the balance sheet in the long term. But the coming Budget is not the time to embark on draconian tax policies. Interest rates are low and our national credit rating is strong. He should use this to promote growth.
There are plenty of sound economic reasons for this approach – and psychology can have a very real effect on prosperity.
Confidence is the most valuable commodity the nation has, and he should concentrate on creating more of it.
The Budget should set out a blueprint for a stronger post-pandemic economy, fuelled by tech, innovation and research.
Rishi must give us a plan for growth, and not reduce himself to mean-spirited tax measures. The sooner the economy thrives again, the sooner we can tackle our debts.