Now is the time to champion tax justice and a fairer economic model

Phil Brickell

Over the last few months, Covid-19 has seen thousands of avoidable excess deaths – each one a disaster and a stain on this government’s conscience. It has also seen businesses go to the wall, jobs lost, relationships strained and our public services stretched to their very limits. With borrowing already £33bn higher than expected this year, there is an unprecedented challenge to be faced in order to ensure that the government spending needed over the coming months to support businesses, retain jobs and secure long-term funding of our public services is fairly distributed.

The likes of Boris Johnson and Rishi Sunak proclaim an end to an era of austerity. But if the last ten years of Tory rule are anything to go by, we know that the government will claim to give with one hand while the press are watching and in reality take with the other whilst our attention is focused elsewhere. As we look beyond the immediate public health crisis, Labour needs to reconsider how we reform the tax burden to ensure it falls fairly on all our shoulders. We must look again at whether the contribution made by those with the greatest means really is enough. Because in 2020 it can’t be right that the government continues to provide tax breaks to some of the wealthiest earners, whilst public sector worker struggle to make do with below-inflation pay rises.

Now is the time to champion a system that values the contribution of the care worker the same as that of the fund manager; a fairer model of economic justice, which realises that whilst we must all contribute more, we must also value the wider societal benefit provided by all workers across the UK. Labour must hold a mirror to the government’s actions and demand a more progressive system of taxation. 
Outlined below are a number of measures Labour might pursue in order to secure a more equitable tax system that provides the funds needed for public services.

First, on pension tax relief we must look afresh at the current regressive system, which allows higher-rate income tax payers to save up to £40,000 a year subsidised by the government. That’s a tax break twice as high as that enjoyed by basic rate payers. At an anticipated cost of nearly £40bn per year to the Treasury, Labour should be calling for significant reform with a flat rate of relief for all taxpayers regardless of how much they earn. This would rectify a long-serving injustice whilst providing a clear additional source of income to invest in public services.

The government allows for an annual capital gains allowance of £12,000 a year, rated at 20% for higher-rate taxpayers – far below the income tax rate. Who benefits from it? Certainly not those on the lowest incomes. It is a sum of which few except the very wealthiest in society will ever make use. It allows those who have amassed significant assets to avoid paying tax on gains beyond most of our imaginations. Gains in assets should be taxed at a similar rate to income. The same applies to income received by shareholders from dividends. Labour should be championing this cause, calling out the injustices of a tax break for those with the deepest pockets.

VAT increases are inherently arbitrary in their impact on the wider population, and are ineffective in narrowing the wealth gap. The shadow Treasury team should make clear that it does not support them, and criticise any move by Rishi Sunak or Boris Johnson to do so. Instead, Labour should be bold in championing a windfall tax on carbon intensive industries to support work towards funding green, renewable technologies and powering the shift to the cleaner industry that we all want to see.

Most importantly, we should not duck the difficult discussion that needs to be had to ensure our NHS and social care services are properly funded. Dating back to 2011, the Dilnot commission recognised the systemic issues facing social care funding – many of which remain unaddressed to this day. A hypothecated increase in income tax would be honest with the electorate and demonstrate we really are all in this together.

And we may be leaving the EU, but only by working collaboratively with our closest allies and partners will we be able to pioneer a comprehensive system of clamping down on tax evasion and aggressive tax avoidance. Labour must stand up to the party of offshore billionaires and oligarch donors by calling for greater powers and funding for the HMRC and by holding the Tories to account on cross-border tax initiatives, effective data sharing and their woeful record on enforcement action.

Up and down the country, millions of us have been working remotely for the last few months. Hooked up to email, glued to Zoom, keeping the lights on in our bedrooms and kitchens, we’ve shown just how many office jobs can be carried out regardless of where workers are based. This has allowed many of us to focus our energies outside of work on caring for loved ones. But it also calls into question why 25% of all office space in England and Wales is concentrated in central London. Labour should renew calls for greater rebalancing of the economy across the country, supported by the regional development banks featured in manifestos past. And it must champion the benefits of flexible working, allowing a just recovery across the four nations and enabling us all to contribute to the economic, social and cultural renewal for which we all yearn.

The virus plaguing all of our everyday lives has irredeemably scarred Britain’s economy. As the government turns its attention to the reopening of shops and pubs, and as the furlough scheme falls away in the autumn, Labour must ensure that the recovery we all need is balanced on the shoulders of those with the greatest means – not offloaded onto future generations. Now is the time to call for greater justice in how our public services are funded.

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