Greg Wright: Loan charge suspension would allow new PM to break from flawed ways of the past

REGIME change usually leads to fresh perspectives on old issues.

The loan charge is causing real damage to thousands of individuals, according to MPs. Picture Jonathan Gawthorpe

The Brexit positions of Jeremy Hunt and Boris Johnson will be analysed with microscopic care over the next few weeks, as both aim to take giant strides towards Number 10.

But there are other issues causing concern and distress for thousands of people, which are going largely unreported in the national media.

Sign up to our Business newsletter

Sign up to our Business newsletter

The loan charge is just one of many powerful political issues which have failed to gain the attention they deserve because of the obsession with Brexit.

In more stable political times, it would surely dominate every news bulletin. Anyone who doubts the significance of the loan charge - and its impact on everyone affected by it - should read the report compiled by the All Party Parliamentary Loan Charge Group (APPG).

The loan charge was introduced in response to the Treasury’s concerns about “disguised remuneration schemes” which involved individuals being paid through loans, usually via an offshore trust in a low or no tax jurisdiction, which they did not have to repay.

According to the Treasury, the loan charge means people paying themselves through loans will have to contribute their “fair share” to pay for our public services.

The APPG’s report presents a blistering attack on the rationale behind the loan charge and its impact on honest. hard-working people.

In April, the House of Commons passed a motion for a pause to the loan charge and an independent review, although this has so far been ignored by Treasury ministers.

A letter signed by 204 Parliamentarians in support of the review and suspension refers to the fact that the loan charge “is causing businesses to close, leading people to give up work and some people are being pushed into bankruptcy – meaning they will not work again”.

It also describes “the real damage to thousands of individuals and families”.

The letter adds: “Already, many people are facing the prospect of financial ruin, of losing homes and pensions, and of having no choice but to go bankrupt.”

A group of Tory MPs has written to the two leadership candidates, calling on them to sign “The Loan Charge Pledge”.

The candidates have been asked to pledge that, if elected as leader, they will suspend the 2019 loan charge before the end of September and order a proper review, that is independent of HMRC and the Government.

The MPs also want the new Prime Minister to instruct the Chancellor to tell HMRC that all settlement activity linked to the loan charge must be put on hold and that all settlement agreements, including agreed payment plans, must be suspended until this review is completed and Parliament has considered its conclusions.

The APPG’s report concluded that: “In the vast majority of cases examined, these arrangements were not entered as aggressive tax avoidance, but after professional advice. A substantial number of people, especially in the public sector, did not even understand their pay involved loan payments.”

To quote David Davis MP: “The people affected by this policy are not wealthy city slickers, bankers or financial specialists. They are nurses, doctors, locums and care workers. All of whom are suffering mental strain day in, day out. It must be a priority for the next Prime Minister to put right this serious injustice.”

At the hustings, both Mr Johnson and Mr Hunt have acknowledged the potential need to review the loan charge. There is, of-course, often a discrepancy between what a candidate says on the hustings and what they actually do once they are in office.

But the new Conservative Prime Minister will need to be acutely sensitive to the mood of their backbenchers. The backers of the loan charge pledge are just the sort of stalwarts the new PM will need on their side if they want to build a stable administration. Introducing a loan charge suspension would also help a leader with a tiny majority win friends across the House.

What better way for a new Prime Minister to signal a break from the flawed ways of the past?