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Taxpayer's Alliance calls for lower taxes

Pope's religion unconfirmed.

The Taxpayer's Alliance and Institute of Directors have released a report calling for the tax system to be redesigned from scratch, around a much lower target of public spending and taxation revenue, and with most of the income coming from a new flat-rate 30 per cent tax.

The pressure groups recommend a six-step process to introduce the changes:

  1. Cut taxes to 33% of national income. Taxes currently account for 37.5% of national income.
  2. Ensure that marginal tax rates do not exceed 30% and the personal tax allowance should rise to £10,000.
  3. Taxes on capital and labour income “disguised” as business taxes should be abolished and replaced with a tax on distributed income.
  4. Transaction, wealth and inheritance tax should be abolished.
  5. Consumption taxes should remain for the moment but transport taxes should be cut.
  6. Local authorities should raise half of their spending power from local taxes.

If fully enacted, the plan would require cuts in spending to continue beyond 2017, when the current coalition plan sees the budget deficit finally being eliminated, to 2020. As Will Straw of IPPR pointed out this morning, the extra cuts required total around £160bn, roughly the entire budget of the NHS.

The report itself minimises the effect of these spending cuts, arguing that the extra growth which would be induced would more than make up for them. While it accepts that this growth would take 10 to 15 years to accumulate, it doesn't address the impact of potential unequal distribution of the benefits of economic growth.

As we have seen in the last twenty years, extra income often disproportionally ends up with the wealthiest in society. While the argument may be made that increased inequality is fine providing everyone is being made better off, the concern is that if the growth is coming from a destruction of the social safety net, it is in effect a transfer of wealth from the poorest to the richest in the nation.

The full report weighs in at a hefty 420 pages, but throughout the week we will be dipping in to various parts of it for analysis and comment.

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Is anyone prepared to solve the NHS funding crisis?

As long as the political taboo on raising taxes endures, the service will be in financial peril. 

It has long been clear that the NHS is in financial ill-health. But today's figures, conveniently delayed until after the Conservative conference, are still stunningly bad. The service ran a deficit of £930m between April and June (greater than the £820m recorded for the whole of the 2014/15 financial year) and is on course for a shortfall of at least £2bn this year - its worst position for a generation. 

Though often described as having been shielded from austerity, owing to its ring-fenced budget, the NHS is enduring the toughest spending settlement in its history. Since 1950, health spending has grown at an average annual rate of 4 per cent, but over the last parliament it rose by just 0.5 per cent. An ageing population, rising treatment costs and the social care crisis all mean that the NHS has to run merely to stand still. The Tories have pledged to provide £10bn more for the service but this still leaves £20bn of efficiency savings required. 

Speculation is now turning to whether George Osborne will provide an emergency injection of funds in the Autumn Statement on 25 November. But the long-term question is whether anyone is prepared to offer a sustainable solution to the crisis. Health experts argue that only a rise in general taxation (income tax, VAT, national insurance), patient charges or a hypothecated "health tax" will secure the future of a universal, high-quality service. But the political taboo against increasing taxes on all but the richest means no politician has ventured into this territory. Shadow health secretary Heidi Alexander has today called for the government to "find money urgently to get through the coming winter months". But the bigger question is whether, under Jeremy Corbyn, Labour is prepared to go beyond sticking-plaster solutions. 

George Eaton is political editor of the New Statesman.