Article

Economics

Politics

24 October 2024

1 min read

How can taxes build a better society?

As we await Rachel Reeve's budget announcement, Laurence Fletcher wonders what positive tweaks can be made to our economic system.

Laurence Fletcher

Laurence is a journalist at the Financial Times.

Few doubt that Chancellor, Rachel Reeves, will be putting up taxes when she presents her first Budget on October 30. The political narrative of recent months has very much been of an alleged fiscal “black hole” of £22bn - or is it £40bn? - that somehow needs to be filled.

While the size of the shortfall and the identity of those responsible are both hotly disputed, and despite a lack of detail from the Treasury about what it actually consists of, the questions now being asked are not whether taxes will rise but which ones and by how much.

Months of speculation have focused on employer National Insurance, capital gains tax and freezing income tax thresholds as areas that Reeves could look to for the additional revenue. But beyond the immediate issue of raising enough revenue to make good any shortfall, lies a deeper, trickier question about the way in which taxes should be levied for the good of society. If a government is to force people and companies to hand over their money, then what is the most ethical way to do this? Who should pay and who shouldn’t? How can tax be used to reduce inequality and build a better society?

Answering such questions is, of course, far from straightforward, because there are plenty of other factors in play.

For instance, some taxes are surely levied because they are simpler to collect. Take income tax - an unpopular measure introduced in 1799, then abolished before being reintroduced as a supposed temporary measure. It could certainly be argued that taxing people’s income - their attempt to get on in life and improve their lot in life - is less “fair” than taxing wealth that has been accumulated by someone’s ancestors years ago. Working hard and earning income is often surely a way of breaking down class divisions. But income tax - contributing 28 per cent of UK government tax take in 2023-24, according to The Institute for Fiscal Studies - has the advantage that it is relatively difficult for the average worker at a UK company to avoid it. Ease of levying it is surely a driver.

Equally, some taxes that might seem “fairer” have deliberately not been levied because of the difficulty in collecting them, and/or because to try to do so could be counterproductive. A wealth tax, for instance, would be “economically damaging”, according to one of the UK’s highest profile tax experts, Dan Neidle. Or take the politically contentious issue of non-doms, a colonial era tax break allowing rich foreigners to avoid UK tax on overseas income. It would be fairer, the argument goes, to tax them on the whole of their income. If they are going to be resident in the UK, then surely they should be taxed like a UK resident whose home is here?

Former Chancellor Jeremy Hunt abolished this regime earlier this year but left a number of concessions that the incoming Labour government pledged to abolish. But non-doms are tax-sensitive and highly mobile, and a number of jurisdictions compete to attract them. Many are entrepreneurs and wealth creators that many countries need. Reports have suggested a clampdown could raise no money or even cost money and could drive people away.

So what can be done to use tax in an ethical way? Paul Williams, research professor of marketplace theology and leadership at Regent College, Vancouver and chief executive of the Bible Society, takes a perspective that he believes offers some solutions.

He takes as his starting point a story in the gospels, where Jesus is asked whether people should pay taxes to Caesar. The question is a trap - either Jesus gives his backing to taxation that is highly unpopular with the Jewish people, or he rejects the tax in an act of rebellion against the Romans.

Jesus replies that they should “pay to the Emperor what belongs to the Emperor, and pay to God what belongs to God.” We are to pay our taxes to those in authority, but we are also to honour God.

While Williams believes that too much emphasis is placed on the Budget and political parties’ promises to be able to fix everything, and that a more radical rethink of our economy is required, he also sees room for positive tweaks to the current system.

One key area is the property market, the manifestation of so much inequality in society, with some people owning multiple houses while others cannot afford to buy one. Williams argues that the ready availability of debt finance has allowed those who already hold assets to easily acquire properties, turning real estate into an investable asset class to the detriment of many of the poorer in society.

“The reason there’s so many homeless people and empty houses is due to debt finance. It makes it easy for a relatively small proportion of the population to acquire a large percentage of the assets.

“The system has allowed a structure in which a small advantage in the beginning can lead to big, big differences over time.”

Williams highlights parts of Devon and Cornwall that have been “completely ruined” by wealthy people from elsewhere buying second homes that used to belong to locals, leaving property out of reach of anyone who lives and works there.

Nevertheless, he believes taxation can be used in this area to help level the playing field.

He proposes a “pretty punitive” marginal rate of tax on ownership of more than one home. (Stamp duty only partly does the job and is a blunt instrument also affecting people moving homes, thereby makes mobility expensive).

“You want to disincentivise the way the housing market is used for speculation,” he says.

“Housing is being treated as a commodity. The problem is, it’s not; it’s not just an asset. It has utility value and a communal and quasi-spiritual value, enabling people to feel rooted.”

Buy-to-lets, meanwhile, are better than having empty second or third homes, but “wouldn’t it be better if occupiers could buy that house?” he adds.

Meanwhile, research by the Financial Times recently found a huge wealth gap between the average millennial and the top 10 per cent of millennials, who are benefiting from family wealth to accumulate substantial housing assets.

So would increasing the rate of inheritance tax - one of the most hated of taxes - and/or lowering the threshold also help reduce some of this inequality? After all, how is it fair that one child in the UK is born to inherit large property wealth while another is born to inherit little or nothing? Or, even worse, that second child will only ever be able to afford to be the tenant of the first, paying them rent for the rest of their lives? Williams is not a fan of inheritance tax per se, arguing that it is “not part of the package” in a Biblical image of a flourishing economy. But he adds an important caveat: “the playing field is not level".

“There might be circumstances to impose a one-off tax on the very wealthy… if you want a transition to a more equitable society.”

Such steps are not easy to take. It is, he admits, probably “career suicide” for a politician to adopt such views. But if we are to take steps towards a fairer way of life, and avoid a two-tier society in decades to come, then maybe the conversation needs to shift this way. Perhaps the Budget could be the time to start.

Column

Culture

Migration

Politics

20 November 2025

4 min read

From MI6 to migration: the tangled legacy of empire

Britain’s security dilemmas, from LinkedIn spies to post-colonial legacies, reveal a deeper global story

George Pitcher

George is a visiting fellow at the London School of Economics and an Anglican priest.

Home Secretary Shabana Mahmood.

Home Office.

There’s a food chain in the British intelligence services and the government offices they serve. The Foreign Office is advised by MI6, or the Secret Intelligence Service (SIS) or more usually simply “Six”, which, though it would deny it in favour of claims of collaboration, looks down on the national security service, MI5, which serves the Home Office.

An old acquaintance from Six used casually to call the parochial Home Office the LEO, short for Little England Office. There’s less of that now, to be sure, as they struggle to accommodate their political masters. Foreheads were rubbed wearily at MI6’s HQ by Vauxhall Bridge when Yvette Cooper, fresh from proscribing Palestine Action at the Home Office as a terrorist organisation alongside al-Qaeda and ISIS, was made up to foreign secretary at the last re-shuffle.

Meanwhile, over the river, MI5 faces the challenge of a new home secretary, Shabana Mahmood, who may believe that the prospect of limiting leave to remain to a maximum of 20 years and confiscating their jewellery might dissuade those with ill intent against the British state from embarking on a small boat.

Taken together, these challenges make it not a good time to be an intelligence officer, or even an intelligent one. It gets worse on the canvas of large superpowers. The problems with an erratic clown of American jurisdiction are well recorded. But China is something else.

They’d be chuckling merrily at MI6, if it wasn’t so serious, at the headlines this week, suggesting that China’s principal infiltration of the British state is through agents posing as headhunters on LinkedIn. The immeasurably greater threat from Chinese intelligence has come from the global march that China has stolen in the so-called Internet of Things (IoT), the network of Chinese-sourced sensors, software and chips embedded and monitored in technologies that connect and exchange data globally.

This isn’t tin-foil hat conspiracy territory; it’s real and has been called out for years. It’s significantly why the case against two alleged British spies for China was recently withdrawn. Britain has to keep China sweet for fear of what it knows of and could do with British data. That’s a massive US problem too.

To that end, trade and co-operation are the way to keep China onside, not confrontation. It’s an example that the Foreign Office might set for the Home Office. And, indeed, the two might work more closely together (just a suggestion).

The Home Office has long acknowledged that there are “Push and Pull” factors to our immigration crisis. It almost exclusively concentrates on the Pull, by trying to make the UK a less attractive destination for migrants through limits of right to remain and by nicking their jewellery. The Push factors are war, oppression and economic deprivation and these are very much more the territory of the Foreign Office.

A big problem arises when the Home Office tries to do the Foreign Office’s job, as when Mahmood threatens Trump-style visa bans for the likes of the Democratic Republic of Congo, Angola and Namibia. Good luck with that – it betrays a neo-colonial instinct and there, perhaps, is the rub.

We pay a post-colonial price in both illegal and legal immigration. A predominantly Christian Europe and New World endeavoured to make disciples of every nation and now many of them are coming home. Christian culture as a former weapon of oppression is perhaps overstated, but there’s some truth in it. An even more stark truth is that we have to address the Push elements of migration if we are to find common ground on which we can make progress.

Our colonial oversight left Afghanistan a modern and post-modern historical mess. Syria is almost untouchable in its post-Assad dynastic horrors. The Indian subcontinent is still a wreckage that we abandoned only some 80 years ago.

Trying to deal with the Taliban in Afghanistan or the former al-Qaeda breakaway al-Sharaa interim regime in Syria may not be so much a triumph of hope over experience as of naivety over history. But our current position with China may point a way forward. Tariff-free trade and economic co-development is a surer way to address migration crises than making arrivals unwelcome.

It’s admittedly more complicated than China. A US/UK post-colonial future will need to align neo-Christian western cultures with an enlightened Islam that concentrates on the Quranic instructions of co-existence, respect, fairness and the explicit injunction that there can be “no compulsion in religion”. But if it was easy everyone would be doing it.

That’s the call of the 21st century and it is, quite clearly, a global rather than nationalistic one. The US will need to recover its position in the world. And, in the UK, foreheads will need to be raised from being banged on desks to solve foreign crises before they wash up on our shores.