Ten ways George Osborne should fix our personal finances

The post-election euphoria has died down and Conservative ministers, unmediated by the Liberal Democrats, are getting down to business.

George Osborne, the chancellor, is expected to name the date for a summer Budget any day now, as the Tories weigh their considerable manifesto commitments against the UK's £57bn budget deficit and £12bn of threatened welfare cuts.

Amid rising fears of stealth taxes as the chancellor attempts to balance the books, here are ten personal finance policies he should consider, and why:

1) Scrap the lifetime limit

To sweeten the pill of revenue raising, reward prudence by scrapping the lifetime allowance on defined contribution pension schemes. Before she was made pensions minister this week, Ros Altmann railed against cuts to the allowance. Top-rate taxpayers are already smarting from the expected removal of pensions relief and a U-turn on this seems unlikely. Having restricted what can be paid in, the £1m limit - to apply from 2016 - effectively penalises successful investors whose funds perform well.

2) Safeguard secondary annuities

Ms Altmann is rightly concerned about the looming introduction of a secondary annuities market, which will allow pensioners who have already purchased annuities to sell them on. A sensible safeguard would be to insist that pensioners with more than £20,000 in their pot obtain independent advice before selling. They won't like having to pay, but the alternative could be far more ruinous - for both savers and taxpayers.

3) Change childcare

Mr Osborne's promise of "making work pay" fails to resonate with tens of thousands of professional parents whose take-home pay after childcare costs is close to zero. The Tory pledge to double free childcare is capped at £2,000 per year, per child - equivalent to less than seven weeks in the average private London nursery. We may wait in vain, but as well as increasing female board directors and senior managers, radical reforms would also help tackle the skills shortage and the UK's productivity puzzle.

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The "mansion tax" may have been one of the most-feared Labour pre-election pledges, but faced with the size of the UK's fiscal balancing act, the chancellor should be bold enough to tackle the unfairness of property taxation. Adding three upper valuation "bands" to council tax would help correct the disparity that sees owners of top-rated Westminster piles paying a measly £1,345 a year (a snip, considering the average house price in Belgravia is just under £4m). The charge should be increased for properties left unoccupied by foreign investors - the so-called "empty bank vaults in the sky" - which give buy-to-let landlords a bad name. As a nation, we have become addicted to the drug of rising house prices, but this is an unsustainable habit. Estate agents will hate it, but in the long term, reform makes for both sensible economics and good politics.

5) Think outside the (shoe) box on housing

Help to Buy has aided those holding shares in the housebuilders, but has not radically increased the number of homes built. Consider switching the focus to increasing supply, rather than stoking demand, and away from home ownership. A separate planning class for the private rented sector (PRS) would encourage UK institutions to build US-style multifamily housing. Extending the tax-free Rent a Room Scheme threshold beyond £4,250 (unchanged since the late 1990s, despite soaring rents) would also increase options for younger renters and older landlords - and relieve pressure on the "bank of mum and dad".

6) Stall the social housing sell-off

Slammed by groups including the Institute for Fiscal Studies and CBI, extending the right to buy to buy in the teeth of the current crisis will do nothing to solve the supply crunch, and could hit the financial viability of housing associations, which have borrowed £62bn from banks and bond investors to date. Comparing proposals to Henry VII's dissolution of the monasteries, they have vowed to fight this in the courts.

7) Grasp the non-dom nettle

This is Mr Osborne's chance to consign non-dom status to the history books, strengthening his wider tax avoidance measures, and proving we're "all in it together". The FT has long argued it should be scrapped - but limiting non-dom status to 10 years, ending the ability to inherit it and excluding British citizens would be a start.

8) Don't rush RBS

We await to hear details of the promised Tell Sid-style sale of Lloyds shares. However, the government's stake in lossmaking RBS will generate poor value for the exchequer if it happens before two disputes with US regulators are settled, expected by the end of this year.

9) End the 60 per cent tax trap

As previously highlighted by the FT, a kink in the income tax regime means almost 1m UK taxpayers earning between £100,000 and £120,000 will be paying a marginal tax rate of 60 per cent by the end of this parliament, due to the tapering of the personal allowance. This must end.

10) Focus on fees

While not strictly a Budget issue, the chancellor should consider how to crack down on opaque and often high investment fund costs and charges - an issue that is all the more important now that workers are being auto-enrolled in pension schemes. The pensions minister has previously called for "pounds and pence" disclosures by pension funds - please back her up.

Claer Barrett is editor of FT Money. [email protected]; Twitter: @claerb

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