Labour gave no positive clues on where they might raise revenue during the election campaign. So, what might they do in the October budget? And what should Rachel Reeves trail today?
The audio version of this video is here:
This is the transcript:
Who should Labour tax?
It seems like a glaringly obvious question that should have been asked by Rachel Reeves a long time before she arrived in the Treasury, but it appears that she didn't. There is now a significant debate going on about what might happen in October's budget when you would have thought, given all the time that Labour had to prepare for office and all the opportunity that they had during the election campaign to explain what they might do, they would at the very least have worked out a strategy for what to do in this first budget.
But so far, we are completely in the dark as to what is to happen, except with regard to the fact that pensioners are going to be punished and children in poverty are going to stay in poverty.
Very few people think that strategy by Rachel Reeves is fair, and I am one of those. I believe that Rachel Reeves should not have cut the winter fuel allowance, and hands up, I would benefit if she had not.
I also do not think she should have left nearly a million children in poverty. I do not have children who will be in poverty, but I am entirely sympathetic with all those parents who are struggling to meet bills to try to provide their children with the means to survive, which Rachel Reeves is not helping.
I believe that Rachel Reeves should be taxing more. And I think so for a number of very good reasons.
Let's remember that tax is not just about raising revenue but if it were, there are some very easy ways to do that. I've explained it before, and I'll do so very briefly now.
She could, for example, align the income tax rate with the capital gains tax rate. And if that she did so, the amount of capital gains tax paid in this country would increase by about £12bn.
There are other easy ways to raise more tax. She could, for example, raise £5 billion by getting rid of unnecessary reliefs within inheritance tax on agricultural property and business property.
She could charge National Insurance at higher rates, i.e. on incomes over £50,000 a year, and raise maybe £10 billion a year.
She could also charge the equivalent of National Insurance on investment income arising in the UK, which at the moment is entirely free of it, although National Insurance is charged on all people who work, and raise £18 billion a year.
And she could restrict reliefs on pension contributions so that everybody gets the same rate of 20 per cent on the contributions that they make, which would be entirely fair, and the consequence would be that she could raise maybe £14 billion a year.
I have just offered her every opportunity that she wants to be able to raise additional tax if she needs it for revenue purposes, but I don't think that's the only reason why she should raise extra taxes, because revenue is not essential to fund government expenditure.
We know that.
We know that government expenditure is funded by the Bank of England.
We know that spending has to come before taxation.
And therefore, what I am suggesting is, in fact, that those with the broadest shoulders, who Labour have said during the course of election campaigns, and always have said historically, should bear the greatest burden of taxation liabilities, should do so.
Labour should want to reduce inequality in the UK, and that requires redistribution of income and wealth from those who have an excess of it, to those who have far too little of it.
The number of people with far too little income and wealth is significant. We know that there are many pensioners in poverty. Several million.
We know that the figure for children in extreme poverty Is approaching half a million and in significant poverty, another half a million or so. We know that that is also only the tip of the iceberg. These measures are quite tight. There will be plenty more children who are living in hardship, but not in poverty.
These people need support. And there are, of course, people with disabilities who were penalised by the Tories, time and time again with their benefit reforms, all of whom now should be restored to the status they had in 2010, when the support provided by the state to those who needed assistance in that way was much better than now.
We should be getting rid, for example, of the bedroom tax. And we should be restoring a great many of the benefits that have been denied because people who are unable to work have been forced to do so simply because the benefits system has demanded it as a result of false standards of availability for work being set.
All of that is possible.
But it does require that Labour imagine that one of the reasons for tax is not to raise revenue, but to redistribute resources in society.
If so, it would be increasing capital gains tax for that reason.
It would be increasing inheritance tax for that reason.
It would be trying to create a genuinely progressive tax system, which the absence of national insurance on higher levels of earned income, and, on investment income in its entirety, prevents, because work is penalised and, by and large, those who work for a living earn less than those who have investment income.
It should also be wanting to reform land taxation in the long term so that council tax was not the only tax we have on land, but that we might be looking at tax on landed estates, for example, as an additional charge over and above anything else that might be paid by such properties.
We might be looking to increase inheritance tax in general, because the number of estates that are charged to inheritance tax at the moment is tiny. Maybe one in 25.
We should also be looking at increasing the amount of tax charged on property transactions. I know stamp duty is unpopular, but let's be clear about this. Something has got to be done to reprice property to make sure that young people can afford it when at present. Most think they never will.
These things are the essential basis for re-establishing equity in our society. So, Labour should be doing them, not because they have any jealousy or anything else. There's no envy in here. This is about trying to establish social justice and to make sure that people have a fair chance in life which then lets them go on and do all those other things like create businesses and opportunities and flourish which society would want of them but which are almost always deprived to those who simply struggle to make ends meet.
What else should we be taxing? Well, clearly we are under taxing with regards to climate change at present. We are not taxing the bads that are threatening our very well-being. There's insufficient tax on carbon, however much we might groan about the fact that petrol and diesel prices and so on are high.
There is insufficient tax on cars. It's one of the reasons why the size of cars has grown by about 50 per cent over the last decade or so. All the savings in efficiency that have come from smaller engines, higher fuel efficiency and so on have been absorbed by the fact that cars have grown enormously in size.
We should also be looking at the way in which we can increase taxation on other ways in which we consume carbon.
For example, excess consumption.
Why isn't there a yacht tax?
Why isn't there a private aircraft tax?
These things are deeply unnecessary in our society. No one needs them. And they do consume large amounts of carbon.
The same would be true of excess flying. I'm not challenging the right of people to go on holiday. A flight a year to go on holiday? No carbon tax. Five flights a year to go on holiday? I think that's a different story. I think we should be charging people to excess carbon tax on the cost of flying, based upon the fact that they're going to present the same passport each time they go, and therefore we can easily monitor their number of flights.
That would be true of business as well. The number of flights that are required for business is not that high. But, by the way, only 8 per cent of all flights are business related, most are for our pleasure, and they are consumed by a tiny proportion of the world's population as a whole, and therefore there should be a tax on them.
I'm making the point that tax is not just in existence for the sake of raising revenue. I'm making the point that tax is there to reorganise the economy, to create social justice, to reprice those things that are harmful to society, and, maybe, to put into play those things that actually are beneficial to society.
And we should be using tax to change the way we consume. If we did that, Labour would come up with a progressive, modern approach to taxation.
Instead, it's walking around looking frightened. Looking frightened of the rich because it doesn't want to upset them because, apparently, they provide it with most of its funds.
Looking in a way that is frightened at large corporations, and yes, maybe they too should be paying more tax because of the privileges they get from society.
Looking too to be frightened because the mere mention of the word tax is enough to send a lot of the population into absolute fear, and yet it needn't because what I'm suggesting is about making the majority of the population better off.
And Labour could be saying that. But it's even too frightened to communicate the fact that what it could do would be for the well-being of most people in this country.
I don't understand where Labour is on tax. But what I know is that tax has the power to change the way in which we structure our society.
What should Labour tax? Those things that cause harm; those things that create inequality; those things that we should be changing to make sure we have a society in the future. I think that's a basis for taxation which is ethically justifiable, irrespective of the questions about revenue that might or might not arise.
Come on Labour, please let's have a decent tax policy and not something which is about pandering to the rich which is all it seems that, so far, you're willing to do. It's time for a genuinely social attitude on this issue.
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Buy me a coffee!
Richard,
Given the disparity that exists between house prices across the UK what about using the Northern Irish Domestic Rates scheme on the mainland?
Possibly coupled with a ‘multiple residential property tax’ I suggest as part of it the Land Registry would have to be amended so property owners have some sort of ‘account’ that links all property they have owned/ own against the individual.
I also suggest a Marine Fuel Duty for private craft coupled with some sort of ‘mooring duty’ on yachts over a certain size. I would suggest that there could be some sort of offset so if MV Gin Palace calls at Dartmouth it would have to pay a tax of (say) £1000 which it could then offset against duty on any fuel bought.
I like that Land Registry reform
The US has one and it is available online county-by-county vis county government.
Moorings are already taxed. Often by various local river authorities, but all marine moorings below HWM attract an annual charge from King Charles 3rd, through his “ownership” of the sea bed. It raises the funds for his lifestyle, plus surpluses from Crown Estate revert to government. It used to cost me about £100 pa for my 2.5tonne capacity mooring, a decade ago.
What puzzles me, is that Keir Starmer has 411 MPs, he leads a party whose roots are in a mix of Methodism & the Trade Union movement, and has both the means & the opportunity to do the obvious & doable things you suggest. If a Labour gov’t did these things it would increase its currently v low popular support, as well as neutralise the appeal of Reform UK, which thrives on the current inequalities (but will not challenge them in practice).
But Starmer/Reeves won’t do it.
Which raises the big question – who is running the country, and what can we the people do about it? I wish I knew the answer.
I think Starmer has been made aware of the reality of the West’s current trajectory. We cannot continue on this moronic quest for “growth” because the Global South is very close to overthrowing the economic imperialism that has been sucking their resources away to ensure countries like ours are so rich.
War is coming and we are being prepared for hardship.
Maybe….but I doubt it
Thank you.
A fortnight ago, former French diplomat, foreign minister and PM Dominique de Villepin gave an interview to France Inter, https://www.middleeasteye.net/news/war-gaza-former-french-minister-dominique-de-villepin-denounces-greatest-historic-scandal.
On his way out, he chatted to staff and forecast “a day, even, an age, of reckoning is coming for the west”, said how he and his then boss, Jacques Chirac, supported multipolarity, a stance made even more important by the invasion of Iraq, and wondered if Gaullism would return as the EU and NATO were arms of the US.
Was nodding in agreement…… until you mentioned the “yacht tax”. Almost choked on my coffee as I sit on my “yacht” in the Western Isles of Scotland. But I doubt my boat would meet the minimum price threshold of any proposal.
However, the forerunner of VAT (purchase tax) was charged at higher rates on luxury items. Could it be reintroduced on some things?
Yes, in a word
And apologies to your coffee for its mistreatment 🙂
Clive,
Since you seem to have a penchant for sailing these waters, if the tax comes your way; you could, perhaps set up a lucrative sideline as a small (non-vehicular) ferry operation. There is a gap in the market; a gap known locally as CalMac.
An interesting blog, much of which I agree with. However, I do not agree with removing reliefs for agricultural businesses. I cannot see what the benefit would be of farmers taking over from a parent having to sell up to pay the tax.
There are problems of excessive wealth – I read that Lord Clinton when he passed away earlier in the year had 25,000 acres – that is in my view too much!
Reforming inheritance tax so that the recipient pays would be far fairer. If someone had assets of say £300,000 and received an additional £300,000 from a relative, they would pay a specific amount of tax on that (preferably on a graduated scale), if they only had £100,000 or nothing at all they would pay little or no tax.
As for land and business holdings, we need to have some threshold above which the holdings would be taxable, for land based on area not value.
The other issue related to taxes on wealth is that you also have to look at the earnings of the individual involved. There is an enormous difference between someone relying mainly on income from farming and someone who also gains income from say another business or a hedge fund.
I come from a farming background and am aware of the issues involved.
There is no proven evidence that this relief provides almost any benefit to real farmers – most of whom are tenants now of landlords using IHT reliefs
Thank you, Peter.
Land ownership / reform and use are particular interests of mine. I have maps and books on the subject going back to the 18th century.
The Clinton estate was at least twice that size in the late 19th century. There are much bigger ones, including one being built quietly by a certain electrical appliance magnate, in part to take advantage of tax breaks.
In Lincolnshire, I believe.
Yes , and I have heard this too in fact my local legal team pointed it our a number of years ago.
I spent 15 years in agriculture. There is a big difference between family farms, tenanted or owned, and huge landed estates (owned by conglomerates, oligarchs or a small number of v rich titled gentry).
Any tax system needs to distinguish between them. Small farms no longer support even one full time income, especially on environmentally sensitive marginal land (hills, Dartmoor, Lake District, Dales). IMHO the priority on agricultural land would be to use the tax system to promote environmentally sustainable food production – which requires radical change.
We abandoned domestic food security under the Tories, esp Johnson & (productive) British agriculture is in a parlous state, both with regard to profitability and labour shortages. Brexit has damaged it, but Brexit allows HMG to design a bespoke UK repair strategy.
Any rollover inheritance reliefs should be geared to protect small family farms rather than huge shooting estates in Scotland or agribusiness in E Anglia.
Noted
“Any rollover inheritance reliefs should be geared to protect small family farms ”
How big or how small is a “small family farm” in the UK?
Agricultural land in cultivation is taxed (all types of tax) at a much lower rate than agricultural land non-cultivation in the USA. Most taxes (90%) are local not federal.
Nobody in politics dares to touch land reform. We can’t even fix the mess that is the Council Tax. Property terrifies politicians. The logic of inertia that Property has exercised over politics is gradually destroying Britain; and nobody will ever take the first step to address the problem, still least fix it. This is real inertia, verging on an aggressive form of catalepsy, leading to permanent paralysis. Property in British politics has been embalmed like a lost Pharaoh, since John Locke (1632-1704).
For the government to plead poverty whilst it strangles its own means of income – printing cash and taxing for income – is simply to me an abrogation of its duty and raison d’etre.
It has done this because it is occupied and captured by the wealth it should be taxing.
And through these actions it is not a genuine government nor is it a democracy.
Sorry – but to me, these people, these ‘politicians’ are invalid. Good luck to anyone who wants to engage with them I say. You are talking to politicians listening to back seat drivers who have money-power.
Maybe instead of writing to your MP, we should be writing to those on the Sunday Times rich list or even those abroad who are calling the shots?
Is there a list of these people we can write to?
and would you return to paying 0.1% interest on QE?
Not a tax of course.
( I noted Reform nicked that policy for the election )
I totalled your proposals here at £59Bn, Richard; therefore considerable progress could be made even scaling back your proposal. And that is without turning to the conventional wisdom of central bank thinking (at least outside the UK), that would pay interest only on ‘tiered’ reserves. Am I correct at setting that public sector profit bung to the British commercial banks at a current £45Bn (for collateral required by the BoE only because – nobody responsible in Government can trust commercial banks not to blow up the whole financial system in pursuit of greed and bonuses).
In total that is over £100Bn in play; and even half of that total would provide £50Bn. And that is without examining the benefits to be gained from resourcing adequately HMRC so it can actually do its job properly, without being tripped up Government in order to defeat the implementation of policy. We do not spend enough time contemplating how treacherous and devious Government is in the pursuit of policies. Often government is obliged to legislate but does not desire the consequences. It therefore ensures the legislation is inoperable by starving the functioning of the legislation of resources. The government receives the political praise for passing the regulation, but can ensure it fails. Either nobody ever notices; or not until there is a Public Inquiry after some ghastly incident caused by the failure to implement. The Inquiry Report is then reported, everybody feels that is the problem fixed; but the Report is never implemented, and we go round on the same endless cycle.
Britain is now very close to being the first Advanced Failed State.
Much to agree with
@Richard
I must respectfully disagree with you on the subject of stamp duty.
Increasing stamp duty simply to raise revenues may be a good idea but increasing stamp duty will not help (solve??) the housing problem in the UK.
Many areas of Florida have a housing shortage problem (Tampa & Orlando) and/or a housing distribution problem (Naples-Collier County & Fort Myers-Lee County). I have listened to many true experts speak on both problems. According to the “experts”, the only way to solve both problems is to build more housing. The “experts” all said, in different ways, that counties and other municipalities should do everything in their power to expedite housing construction at all price points.
From everything I have read in the English media, it seems to me that local councils do not really want more housing units built no matter what they may say or claim they want.
Thank you, Richard.
Further to your reply to me about the gentleman and his eponymous firm, yes, Lincolnshire (including some of Lord Carrington’s estate) and also Norfolk (he went to Framlingham), Berkshire (M4 corridor) and Gloucestershire.
I bet he disn’t go to the same school in Fralingham, that Ed Sheeran did
I know the place
Why so coy about naming “the gentleman”? He’s hardly going to sue you for revealing this information when his own website has a handy map on the front page showing the locations of his various estates. https://dysonfarming.com/
Spluttering at your “Why isn’t there a yacht tax?” comment! There are yachts and there are motor yachts. Sailors try hard never to use their engines if they can use the power of the wind rather than a diesel engine and take pride in their ability to partake in low carbon travel.
Yes, I consider myself very privileged to own a sailing yacht, but during my sailing career I have tried hard to use sailing as a means of passing on valuable life skills (team work, resilience and respect for the sea as a member of a maritime nation) to others – particularly the young.
Bravo sir!
That has to be the most passionate argument I’ve ever heard from you.
I will share it far and wide.
Thank you