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.

Article

Comment

Ethics

Politics

War & peace

23 June 2025

5 min read

We must invest in defence, fast - it’s the only moral thing to do

The responsible use of force today precludes pacifism

Emerson Csorba

Emerson Csorba works in deep tech, following experience in geopolitics and energy.

Amid a bombed alley, a victim is helped to walk by a rescue worker

Aftermath of a Russian drone attack, Odesa, Ukraine.

Dsns.gov.ua, CC BY 4.0, via Wikimedia Commons.

In May 2016, I was hiking the Southwest Coast Path in a group, trudging through dense forest between Lyme Regis and Weymouth, when a distinctly unsettling event occurred. As we moved along a narrow trail, a buzzing sound began—we assumed we had disturbed a bee’s nest. We quickened my pace, but the buzzing continued. Eventually, we emerged from the woods and looked up. The sound had not come from bees, but from a drone that had been following us.

I will never forget that sound; the eerie sense of something pursuing you, but unseen. In a recent BBC special on the war in Ukraine, a journalist documents the now-pervasive use of drones, the journalist and Ukrainian soldiers hiding under the cover of forest as a Russian drone scans the area, before escaping to their car in which an AI voice says ‘Detection: multiple drones, multiple pilots, high signal strength’ as they journey overground. This is the new era of covert warfare, where the enemy strikes without being easily identified. You hear the hum, but the source is elusive.

In the coming years, this kind of psychological warfare will make its way into Western cities. Terrorist attacks will shift from in-person confrontations—like the Novichok poisonings in Salisbury—towards remote, anonymous assaults: drones drifting from overseas into coastal cities to target civilians, or swarms carrying out mass attacks in dense downtown cores. The aim will be psychological trauma at scale. Civilians will grow hesitant to leave home, hyper-sensitive to the buzz of anonymous drones in their own areas. Iran recently declared that no US, British, or French base is safe from retaliation in the emerging Israel–Iran war. It is not difficult to imagine Western cities soon being viewed as legitimate targets.

We are entering a time of intensified conflict, with national security becoming the dominant framework for policymaking. The watchword of UK government policy is ‘security,’ and—writing now from Montréal—the recent Canadian election was framed around which party and leader could best protect Canadians from external threat. In this context, even domains once governed by cooperation are transformed into zero-sum contests, because national security framing by its nature shifts focus from reciprocity to limitation of the other.

Free trade, for example - fundamentally the mutually beneficial exchange of goods and services as part of the creation of value - becomes, in a security-focused world, a question of containment. Trade, in a security-focused world, is turned on its head, free trade becoming trade wars. Fairness (in which the pie is grown and shared across multiple people) is replaced by interest, whether the interest of countries or communities and individuals within them seeking to protect themselves. As US–China competition escalates, we can expect human relations—among both states and citizens—to become even more zero-sum.

In such an environment, do morals still matter? When the enemy grows more ruthless and more innovative in an era of national security, must we match them in kind? Or is it still possible to uphold principles while defending ourselves?

Restraint and humility are still critical virtues—but must not be mistaken for weakness.

In a recent Times column, Juliet Samuel suggested that gestures of non-aggression—such as Finland’s 2015 destruction of its one million landmine stockpile—now appear dangerously naïve. Ukraine, for its part, has rightly disregarded the Ottawa and Oslo (banning cluster munitions) conventions. Its survival depends on ingenuity, rapid technological development (for instance through the work of funds such as D3), and collaboration with its allies to prototype and deploy advanced systems.

Reinhold Niebuhr, in Moral Man and Immoral Society, contends that to be moral, one must possess the capacity for force—‘power must be challenged by power.’ That power, however, must be exercised with responsibility, humility, and moral purpose. Nigel Biggar, my former doctoral supervisor and a key figure in the Niebuhr tradition of Christian realism, argues in In Defence of War that war can be justified on balance when it meets the criteria of jus ad bellum: just cause, legitimate authority, right intention, proportionality, and reasonable prospect of success.

War, in this reading, can express a ‘kind harshness’—a form of judgment exercised in defence of victims. Like Niebuhr, Biggar grounds his argument in Augustinian realism: the world is fundamentally good, yet broken. Because evil persists, the moral use of force becomes necessary to uphold what is right. I believe this to be true, and directly applicable to the national security-focused world in which we find ourselves.

What does this mean then for Western countries as national security reasserts itself as the central organising principle of governance?

It means significant and urgent investment in defence and deep technology, including for instance emerging capabilities like cognitive warfare and neuroadaptive systems (wearables that enhance soldiers’ performance in live combat), counter-drone systems for urban, rural, and maritime environments, and next-generation electronic warfare and geospatial intelligence.

If drone attacks intensify at sea—such as those carried out by the Houthis to disrupt global shipping routes—counter-drone systems will be vital to ensure safe passage. In a world of manipulated narratives and disinformation, geospatial intelligence will serve as a source of truth, helping establish what is actually happening on the ground. And as agentic AI grows increasingly capable of manipulating users—through sycophancy, persuasion, and other techniques—oversight technologies like Yoshua Bengio’s new LawZero project will be essential for maintaining objectivity and integrity.

The responsible use of force today precludes pacifism, averting violence altogether. It means maintaining—and advancing—the capability for overwhelming force, so it is ready if needed. Morality in an era of national security demands investment in defence technologies at speed, to stay several steps ahead of adversaries. A ‘whole-of-society’ approach, as recommended in the recent UK Strategic Defence Review, means preparing citizens with such a mindset. Restraint and humility are still critical virtues—but must not be mistaken for weakness. Western nations must be prepared to act swiftly, decisively, and with the deterrent power that peace requires.

This is the world we are entering: one in which governments and civilians alike must be ready for unexpected threats. The hum of a drone overhead is more than a sound—it is instead a warning, reminding not only Ukrainians but those currently in peaceful situations, to prepare ourselves for potential conflicts to come. The appropriate response is not retreat, but the responsible and moral exercise of power: a necessary duty if we are to preserve peace, freedom, and justice in a world increasingly intent on contesting them.

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