Chris Giles, the long-time economic commentator in the FT, noted in an article published this morning that:
When it comes to tax changes, the word ‘progressive' has become a synonym for ‘good'… And now people hate the results.
Chris Giles suggests something that seems important: that progressive taxation has become unpopular because people do not like its consequences. However, that claim needs careful unpacking, because it rests on a false premise. Despite what Giles claims, the UK tax system is not especially progressive. It is, in fact, incoherent and often regressive. Let me explain.
First, many of the measures Giles cites are not examples of progressive taxation. They are examples of badly designed withdrawal systems.
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Removing child benefit at arbitrary income thresholds creates cliff edges and absurd marginal tax rates.
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Means-testing winter fuel payments does the same.
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Student loan repayments at high interest rates are not taxes at all; they are just disguised debt collection.
These measures do not create vertical tax equity. They create traps. They also destroy horizontal tax equity because two households on the same income can face very different tax burdens depending on family structure, pension saving, or student loan status. That is not tax justice, and that is what people do not like.
Second, the UK tax system is riddled with reliefs that favour wealth over work.
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Capital gains tax rates are lower than income tax rates.
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National insurance falls away on high incomes and does not apply to many investment returns.
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Wealth itself is lightly taxed, if at all.
The result is simple. A graduate on £65,000 with a student loan and children can face a marginal tax rate higher than a millionaire living on dividends. That is not progressive. It is absurd.
Third, complexity is not the inevitable result of fairness. It is the result of political cowardice.
Successive chancellors, both Labour and Conservative alike, have refused to tackle wealth taxation, tax avoidance, and corporate abuse. Instead, they have layered withdrawal rules and stealth taxes onto PAYE earners because they are easy to reach. This is the politics of convenience masquerading as progressivity. Giles totally misrepresents this.
Fourth, Giles is wrong to suggest that resentment proves progressivity is unpopular. What people resent is unfairness. They resent:
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rules they cannot understand;
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marginal tax rates that feel like punishment;
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reliefs that benefit those with accountants;
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the sense that the rich still escape.
In other words, they resent a politics of destruction in taxation, not a politics of care.
What are the consequences?
First, public trust in tax collapses. People who believe the system is rigged withdraw consent.
Second, labour market behaviour is distorted. People might alter hours, pay methods, or employment status to avoid thresholds.
Third, the far right gains traction. When tax looks arbitrary and punitive, it is easy for populists to blame migrants, social security claimants, or public services instead of structural injustice.
Fourth, progressive reform becomes harder. Voters who distrust tax resist the very policies needed to fund care, climate transition, housing, and health.
So what should we conclude?
First, we need genuine progressivity. That means taxing income from wealth at least as much as income from work.
Second, we need simplicity built on fairness, not simplicity built on surrender. Align income tax and national insurance. Remove arbitrary withdrawal cliffs. Replace student loan pseudo-taxes with honest funding of higher education.
Third, we need horizontal equity. People on similar incomes should face similar tax burdens.
Fourth, we need to tax wealth properly through fair property taxes, fairer, more progressive, and loophole-free inheritance taxes, capital gains taxed at income tax rates, and increased taxes on corporate profits, whilst taking further measures to challenge those shifted offshore. Without this, any claim of progressivity is fiction.
Finally, we need to say something else very clearly. Tax is not a punishment. It is the price of a civilised society. It is essential to the government funding cycle to control the inflationary impact that government spending would otherwise have. Whilst tax might never fund social security, healthcare, education, infrastructure, and much else, without tax investment, none of those would be possible.
Chris Giles is right that people are angry. He is wrong about why.
People do not hate progressive taxation. They hate a tax system that pretends to be progressive while protecting wealth and punishing work.
A politics of care would design taxation differently. It would start with fairness, transparency, and accountability. It would tax real ability to pay. And it would use the proceeds to build a society in which no one is abandoned.
That is the debate we need to have. Now.
And there is more on all of this in the Taxing Wealth Report, of course.
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You’ve omitted Council Tax which is over 10% of my income as a single person in a Band B property. Over the last 10 years my income has been below the tax threshold for much of the time, yet I’m still expected to pay over a £100/month for local services which I’m a very light user of. Yes I get a 25% discount,but despite living in the lowest band property available the amount I pay is totally disproportionate to my income or my usage of services.
I talked about fair property taxation.
And I agree with you, which is why I said that.
I’m in favour of a local income tax and if property based it must be fairer for those living in smaller properties and properly tax those in mansions.
Effectively then, tax helps to make the way for more money and investment to follow on in its role of cooling down inflation.
It makes sense to me, I have to say. But I could be wrong.
Correct
Tax makes space
You are right…. but Giles does state some truth. But he reaches the wrong conclusions
He is “right”…. sort of. Simply said, everyone is in favour of other people paying more tax to pay for the services that they use (with apologies to MMT). That, sadly, is largely true.
With regards to “Progressivity” he is is also right…. but only in the same way that Laffer is “right”. Eventually, if too progressive, the tax take falls as people choose not to work – it’s simple maths. The error of both is to assume we are already at tax rates that are too high – the evidence says otherwise. Historically, we have had far higher tax rates in the UK (83% in 1978 and 60% in 1987) and other countries happily manage with higher rates than we have.
Where we can all agree is that it is nonsense to withdraw allowances/benefits, load Employers NI and freeze personal allowances (as wheezes to raise tax with out moving “headline” income tax rates).
Noted…
The withdrawal of the personal allowance at 100k is another where the nominal tax rate jumps far above rates higher up the income scale.
Where it’s particularly non progressive is families, particularly single income families, who lose benefits quicker and pay higher taxes than a double income household with comparable gross earnings.
We know the birth rate is well bellow the replacement rate, but our policies really encourage that state to continue despite the future risk of an ageing population
Agreed
I have no specialist tax knowledge or financial qualifications.
I don’t write for the FT as a financial journalist.
Yet I already know enough to agree with you and profoundly disagree with the FT article’s assumptions.
Maybe it was 5 years running a foodbank, or 27 years as a pastor, or merely half a century as a reasonably awake adult, watching the rules change year by year as a more progressive system was dismantled after 1980?
What makes me very angry is how easy it seems to be for our masters to perpetrate lies about tax, and national insurance, despite the years of hard work that you have done to both raise awareness AND change the rules.
I’ve given up being tactful about this stuff. When the truth is the exact opposite of “received wisdom” it’s difficult to be polite about it.
KUTGW!
Why be polite in the face of what is wrong?
Name it!
Very much so Richard. You /we are not alone – . Indeed, Stewart Lansley – with whom I think I had some contact years ago – did a well researched paper for Compass last year, much of which chimes with your thinking.
https://www.compassonline.org.uk/wp-content/uploads/2025/03/FINALV4-PAYING-FOR-A-DECADE-OF-NATIONAL-RENEWAL.pdf
Thanks
sometimes, one is caught between a rock and a hard place when advising those with substantial DC pension pots. Why? Well, imagine that you have had 40% tax relief on personal pension contributions and have benefited from generous employer contributions, too. The fund has enjoyed highly tax-privileged growth and stands at exactly £1m (there are more of those out there than you might think). If you wish, you can draw income from the fund at, say, age 60 with £12,570 coming from the taxable element (or from an annuity taxed under PAYE), and have the rest as tax-free cash (25% of the fund – £250,000) eked out on a monthly basis. So, after being a 40% taxpayer whilst working, you can, for a few years at least, pay no tax at all on your income! You can’t do this with any other pensions and, admittedly, things will change when the state pension arrives, but, still!
As you say…but still