Nonetheless, if you were a chancellor with the task of finding £20bn in front of you, then you would probably like the option of being able to increase the rates of one of the big four taxes: income tax, VAT, National Insurance and corporation tax. Together, they represent two-thirds of the total cash that the government receives.
However, for better or worse, the chancellor ruled out such tax rises in the election campaign, and she has made it quite clear that she is not going to abandon her pledges. So for our purposes, such tax rises are clearly verboten.
That is a significant constraint. Remember that in its last year, the Conservative government cut taxes by £20bn by slashing the rate of National Insurance. One way of raising money would simply be to reverse that cut and take us back to where we were before last November.
So by ruling out a Tory National Insurance cut reversal, the chancellor has made our game of finding £20bn far more… taxing.
But once you’ve put all those tax rises to one side, there are still more potential routes to raising extra revenue that we can look at.
One is through capital gains tax, charged on profits made from the sale of an asset that has increased in value, such as second homes or shares not held in individual savings accounts (ISAs).
But when it comes to capital gains tax “I don’t think immediately it will raise a vast amount of money”, says Judith Freedman, emeritus professor of tax law and policy at the University of Oxford. “It might bring in a few billion, it’s not going to give you £20bn.”
Another route is through inheritance tax. But this “only kicks in when you are quite wealthy”, says Dan Neidle, founder of the think tank Tax Policy Associates.
Between them, capital gains tax and inheritance tax raise less than £25bn a year at the moment, so to get an extra £5bn would still require a sizable jump in those taxes.
However, there are also ways you could raise cash through higher National Insurance or income tax, without actually changing their headline rates.
When it comes to National Insurance and income tax, far bigger amounts are at stake if the chancellor is minded to look at the rules governing the tax treatment of pension contributions.
At the moment, for most people, if you put any earnings into a pension, you don’t pay income tax on those earnings. And if employers contribute to a pension on your behalf, they don’t pay employers’ National Insurance on that, as they would if they gave it to you as salary.
Between them, these perks cost the exchequer about £50bn a year. Most of that benefit goes to higher earners, who not only put more into their pension pots, but who often deduct income tax at a higher rate than the average worker.
It is an area ripe for reform. Indeed, the right-of-centre think tank, the Centre for Policy Studies, proposed a radical reform of the system 12 years ago. A left-of-centre chancellor will be keen on the potential revenue to be found here.
