Lord O’Neill and leading economists back plan to reform Britain

•   Open letter from a coalition of economists, policy experts and public figures call for serious structural reform to Britain’s institutions •   UCL’s new report, Prosperity 2030 is fully costed, lowers bills, and creates £38bn of fiscal headroom with zero new borrowing

In an open letter to the next government, a coalition of economists, policy experts and public figures from across the political spectrum call for serious structural reform to Britain’s institutions.

The signatories include Lord O’Neill of Gatley, former Chairman of Goldman Sachs Asset Management and crossbench peer, Professor Dame Henrietta Moore, Founder and Director of UCL’s Institute for Global Prosperity, Professor Jonathan Portes of King’s College London, Professor John Muellbauer of Nuffield College, Oxford University, Danny Sriskandarajah, Chief Executive of the New Economics Foundation and Barry Knight, Chief Executive of CENTRIS.

Seven prime ministers in ten years have inherited the same structural challenge, a mounting debt crisis with spiralling costs of living, and failed to address it. The signatories argue Britain’s incremental tinkering on fiscal, welfare and infrastructure policies is simply not enough.

The open letter coincides with the launch of Prosperity 2030 by UCL’s Institute for Global Prosperity. It is a five-year programme of structural reform to reshape the public purse, boost infrastructure spending and get young people working across 30 interconnected policies.

Among the 30 policies to remake Britain, it removes Stamp Duty, scraps Council Tax and cuts the tax bill for nearly three-quarters of full-time workers with only waged income.

The whole programme is fully costed with zero new borrowing, includes a £100 billion headroom over its roll-out and leaves £38 billion of fiscal space for an incoming government’s own priorities.

Britain’s current tax system is too complex. The answer is radical simplification, sweeping away a tangle of overlapping taxes and replacing them with a single, predictable levy that rewards contribution.

At its core is a tax cut for working Britain. Taxes on wages fall for most full-time workers. A new police constable, Band 5 nurse, new teacher or firefighter, with no other income, keeps £550 to £720 more a year, and every full-time wage from the minimum wage to about £44,000 pays less tax than today.

Today, the marginal rate peaks at 62% between £100,000 and £125,140. Under the simplified framework, a £100,000 salary, where the salary is the only income pays about £2,200 a year less on wages than today.

Professor Dame Henrietta Moore, Founder and Director of UCL’s Institute for Global Prosperity, said:

Prosperity 2030 shows that Britain does not have to choose between fiscal responsibility and improving people’s lives. The programme is fully costed and creates headroom for government. After years of short-term fixes, we need structural reform that matches the scale of the challenge.

Andrew Percy, Co-Chair, Social Prosperity Network at the UCL Institute for Global Prosperity and lead author of Prosperity 2030, said:

Prosperity 2030 is a plan to cut taxes for working people, abolish the taxes holding back the housing market, and get young people into paid work. The question is no longer whether Britain can afford reform. It is whether we can afford another decade without it. The centrepiece is National Contributions (NC), a single levy that replaces six separate taxes, Income Tax, employee and self-employed National Insurance, Dividend Tax, Inheritance Tax and Capital Gains Tax.

In their place sits one continuously progressive tax that scales from 0% to a 22% base rate and then on to a 46% top rate applied to a flat definition of income. NC raises £52 billion in its first year, rising to £75 billion after five years through a simpler, more efficient system rather than higher borrowing.

NC also brings benefits into the tax system to help fund nine new Universal Services to repair Britain’s social fabric.

Universal Services transform the welfare state with support delivered in kind rather than cash, and because services cut the cost of living an average of 21% more than the equivalent cash, every pound goes further.

The plan abolishes Stamp Duty outright, the transaction tax economists across the spectrum blame for freezing the housing market, deterring people from moving for work and discouraging older homeowners from downsizing.

Council Tax goes too, replaced by a simple 1% annual property value tax that ends the absurdity of a modest terrace paying proportionally more than a high-value mansion. A deferral option means no one is forced to sell to pay it.

The plan ends the Jobcentre model and replaces it with Skills Centres, turning a place that refers people to work into a place from which people work. Rather than processing benefit claims, Skills Centres employ people directly, new entrants can join with no experience as a Trainee, earn a guaranteed wage, and follow a structured pathway to qualify as an Apprentice, with training run alongside local colleges to upskill Britain’s workforce.

Each Centre provides local firms with an on-demand pool of skilled and unskilled labour. Flexible workers at published, all-in rates, available at short notice and without the administrative overhead of direct employment. Across five years, Prosperity 2030 will generate 500,000 jobs to help get Britain’s NEETs working.

For business, the GB Energy Network reform tackles one of the biggest drags on British competitiveness, among the highest industrial energy costs in the world. The plan strips the network system charges out of commercial and industrial energy bills and moves them onto national taxation, keeping continuous pressure on Whitehall to bring those costs down rather than passing them to the firms trying to invest, hire and grow.       

To read the full report visit: https://prosperity2030.uk/

ENDS

NOTES TO EDITORS

About The UCL Institute for Global Prosperity The UCL Institute for Global Prosperity (IGP) is a research institute at University College London, part of The Bartlett. It works to redefine prosperity and to design the policy and institutional arrangements that deliver the conditions for people and planet to flourish.

Headline figures (at steady state, end of the five-year programme)

• Total new revenue: £101bn a year (£75bn National Contributions, £18bn property tax, £8bn Air Passenger Duty), 3.8% of GDP
• Gross cost-of-living reduction: £51bn a year across all households
• Household facing Universal Services: £42bn a year; other services: £23bn a year; capital investment: £14bn a year
• Benefits brought into NC: £16bn a year, redirected into the Universal Services
• Fiscal headroom for other priorities: £38bn a year (1.4% of GDP)
• New borrowing: £0; the programme runs a £100bn headroom over the five-year roll-out
• Net new jobs: 547,000, more than 90% full-time
• National Contributions: base rate 22%, top rate 46%; lower than the current system for 72% of full-time workers who depend only on wages
• Distribution: bottom quintile 100% better off (+£1,037/household); lone-parent families +£1,249 (89% better off); top quintile contributes £4,303 more