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 Fletcher 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.

Article

Comment

Justice

Leading

Politics

7 July 2025

5 min read

The consequences of truth-telling are so severe our leaders can’t admit their mistakes

When accountability means annihilation, denial is the only way to survive

Leah Brown

Leah is a campaigner for restorative practices and founder of The WayFinders Group.

Baroness Casey.

BBC.

Why do our leaders struggle so profoundly with admitting error?

Media and inquiries regularly report on such failures in the NHS, the Home Office, the Department of Work and Pensions, HMRC, the Metropolitan Police, the Ministry of Defence, and so many more public institutions. Often accompanied by harrowing personal stories of the harm done.

In a recent white paper (From harm to healing: rebuilding trust in Britain’s publicly funded institutions), I defined “harm” as a holistic concept occurring where physical injury or mental distress is committed and sustained and explained that harm is generally something that is caused, possibly resulting in injury or loss of life.

When we look at harm from an institutional perspective, structural power dynamics inevitably oppress certain groups, limit individual freedoms, and negatively affect the safety and security of individuals. But when we look at it through the lens of the individuals who run those institutions, we see people who often believe that they are acting in good faith, believe that their decisions won’t have a significant impact, who don’t have time to think about the decisions they are making, or worse still, prefer to protect what is in their best interest.

Even well-intentioned leaders can become complicit in cycles of harm - not just through malice, but through their lack of self-awareness and unwillingness to put themselves in the shoes of the person on the receiving end of their decisions.

Martin Luther King Jr supposedly said, “the ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy.” In contemporary politics, leaders are neither selected nor (largely) do they remain, because of their humility. Humility is synonymous with weakness and showing weakness must be avoided at all cost. Responsibility is perceived as something that lies outside of us, rather than something we can take ownership of from within.

So, why do leaders struggle so profoundly with admitting error?

The issue is cultural and three-fold.

First, we don’t quantify or systematically address human error, allowing small mistakes to escalate.

We then enable those responsible to evade accountability through institutional protection and legal barriers.

Finally, we actively discourage truth-telling by punishing whistle-blowers rather than rewarding transparency. Taken together, these create the very conditions that transform errors into institutional harm.

Nowhere is this plainer than in Baroness Casey’s recent report on Group-based Child Sexual Exploitation and Abuse that caused the Government to announce a grooming gangs inquiry. In this case, the initial harm was compounded by denial and obfuscation, resulting not just in an institutional failure to protect children, but system-wide failures that have enabled the so-called “bad actors” to remain in situ.

Recently, this trend was bucked at Countess of Chester Hospital where the police arrested three hospital managers involved in the Lucy Letby investigation. Previously, senior leadership had been protected, thus allowing them to evade accountability. Humble leadership would look like acting when concerns are raised before they become scandals. However, in this case, leadership did act; they chose to bury the truth rather than believe the whistle-blowers.

Until we separate admission of error from institutional destruction, we will continue to incentivise the very cover-ups that erode public trust.

The answer to our conundrum is obvious. In Britain, accountability is conflated with annihilation. Clinging onto power is the only option because admitting error has become synonymous with career suicide, legal liability, and is tantamount to being hanged in the gallows of social media. We have managed to create systems of governing where the consequences of truth-telling are so severe that denial is the only survival mechanism left. We have successfully weaponised accountability rather than understanding it as the foundation of trust.

If Rotherham Metropolitan Borough Council had admitted even half of the failures Alexis Jay OBE identified in her 2013 report and that Baroness Casey identifies in her 2025 audit, leaders would face not only compensation claims but media storms, regulatory sanctions, and individual prosecutions. It’s so unthinkable to put someone through that that we shrink back with empathy as to why someone might not speak up. But this is not justice. Justice is what the families of Hillsborough have been seeking in the Public Authority (Accountability) Bill: legal duties of candour, criminal offences for those who deliberately mislead investigations or cover-up service failures, legal representation, and appropriate disclosure of documentation.

Regardless of your political persuasion, it has to be right that when police misconduct occurs, officers should fear not only disciplinary action and criminal charges. When politicians admit mistakes, they should face calls for their resignation. Public vilification is par for the course. Being ejected from office is the bare minimum required to take accountability for their actions.

The white paper shows that the cover-up always causes more damage than the original error. Institutional denial - whether relating to the Post Office sub-postmasters, the infected blood scandal victims, grooming gang victims, Grenfell Towers victims, Windrush claimants, or Hillsborough families - compounds the original harm exponentially.

In a society beset with blame, shame, and by fame, it is extraordinary that this struggle to admit error is so pervasive. Survivors can and will forgive human fallibility. What they will not forgive is the arrogance of institutions that refuse to acknowledge when they have caused harm.

The white paper refers to a four-fold restorative framework that starts with acknowledgment, not punishment. The courage to say “we were wrong” is merely the first step. Next is apology and accountability followed by amends. It recognises that healing - not just legal resolution - must be at the heart of justice, treating both those harmed and those who caused it as whole human beings deserving of dignity.

Until we separate admission of error from institutional destruction, we will continue to incentivise the very cover-ups that erode public trust. I was recently struck by Baroness Onora O’Neill who insisted that we must demand trustworthiness in our leaders. We cannot have trustworthiness without truth-telling, and we cannot have that without valuing the act of repairing harm over reputation management. True authority comes from service, through vulnerability rather than invulnerability; strength comes through the acknowledgement of weakness not the projection of power.

We must recognise that those entrusted with power have a moral obligation to those they serve. That obligation transcends institutional self-interest. Thus, we must stop asking why leaders struggle to admit error and instead ask why we have made truth-telling so dangerous that lies seem safer.