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.

Interview

Assisted dying

Culture

Politics

S&U interviews

13 February 2025

5 min read

Marsha de Cordova: the personal experiences driving her passionate politics

“What disabled people need is assistance to live, not to die.”

Robert Wright

Robert is a journalist at the Financial Times.

A woman wearing a red jacket stands formally beside an office stair case.

When Marsha de Cordova talks about most issues relating to her work as the Member of Parliament for Battersea, in south London, she sticks to the standard position of her Labour party. Meeting at her constituency office by the busy Clapham Junction railway station, she dutifully defends her party’s government, elected last July. She points to ministers’ work to reform planning and improve renters’ rights as evidence they are making progress.

But when conversation turns to the Assisted Dying Bill currently going through parliament, her tone becomes unmistakeably more urgent and her passion more obviously personal.

The strong feelings mark de Cordova out as one of a group of Labour MPs who have been spurred by personal experience and, in many cases, religious conviction to oppose the Assisted Dying Bill introduced by a colleague, Spen Valley MP Kim Leadbeater. While the legislation is a private member’s bill without official government support, it has been widely seen as reflecting the views of Prime Minister Keir Starmer.

De Cordova, who is Black, expresses similarly trenchant views about the government’s rhetoric on immigration. She is also a strong supporter of rapprochement with the European Union.

However, her views on assisted dying – informed partly by being a committed Christian – are particularly forcefully expressed. She answers tersely, “No, I’m not”, when asked if she is happy about the political capital the new government has expended on the Assisted Dying Bill. She adds that she voted against it at second reading, the first parliamentary vote on a bill. She intends to oppose it again at third reading, before it passes to the House of Lords.

“We didn’t need to expend so much capital on it,” de Cordova says. “The aim now has to be to ensure the bill doesn’t pass third reading.”

Many of the Labour MPs who have opposed the legislation have cited religious objections. In the Cabinet, they include health secretary Wes Streeting and foreign secretary David Lammy, both Christians, and justice secretary Shabana Mahmood, a Muslim.

De Cordova also links her opposition to her disability. De Cordova is registered blind because of nystagmus, in which the eyes repeatedly move involuntarily, disrupting vision. There have been fears assisted people could come under greater pressure than others to seek assisted death.

“As a disabled woman, I’m incredibly concerned,” de Cordova says. “What disabled people need is assistance to live, not to die. That should be our government’s priority.”

“My faith is an integral part of who I am. It really is part of my values, my beliefs, my politics.”

The assisted dying fight has garnered unusual levels of publicity for the Battersea MP, who entered parliament seven years ago when barely expecting to do so. De Cordova, now 49, was serving as a Lambeth borough councillor when the 2017 snap general election was called and decided to seek the Labour nomination for Battersea, then held by the Conservatives.

The seat was one of several Conservative seats in pro-Remain areas that fell to Labour’s surprisingly strong showing in the election in the wake of the 2016 Brexit referendum.

“No one really thought I could win here,” de Cordova says. “Obviously, Brexit I would say played a role in that I’m a strong Remainer.”

De Cordova increased her majority in 2019 and last year’s general election. She sees strong continuities between serving as an MP and her previous role in the charity sector. She had been working when elected as the engagement and advocacy director for the Thomas Pocklington Trust, which supports blind and partially sighted people.

“I didn’t grow up wanting to be a politician,” de Cordova says, of her upbringing in Bristol. “I’ve always had the desire to be making a difference. All of my work before becoming a politician centred around that – being that voice for the voiceless.”

She links her work to her faith. She became a Christian in her late 20s and now attends Holy Trinity Clapham. The church is famous as the spiritual home of William Wilberforce and the “Clapham Sect” of early 19th century campaigners against the slave trade and other social evils.

Her faith has led to her appointment as second church estates commissioner – the liaison between parliament and England’s established church, who answers questions in the Commons on behalf of the church.

“My faith is an integral part of who I am,” de Cordova says. “It really is part of my values, my beliefs, my politics.”

It becomes clear speaking to her that her objections to the policies of the government – and the Assisted Dying Bill, which many of her party colleagues support – are clustered around areas involving challenges to fundamental rights.

She objects to the Assisted Dying Bill because she sees it as part of a steady erosion of disabled people’s rights.

“The issue will have a hugely, hugely disproportionate impact on disabled people,” she says. “That, for me, is a no-no.”

Provision for disabled people was “hollowed out” under the last Conservative government, she says.

“That, for me, will always be the issue,” de Cordova says. “I want to campaign and fight for full equality for us.”

She also views immigration issues through the prism of immigrants’ rights.

Asked if she wishes the government took a less hostile tone on the issue, she replies: “From my perspective, when I think about immigration, I tend to think about it in a compassionate way.”

She calls for the establishment of “safe routes” to ensure people fleeing persecution can claim asylum from outside the UK, without making dangerous Channel crossings. The government has shown no signs of introducing such rights.

“Let’s think about immigration in a positive way,” de Cordova says, adding that her grandparents were immigrants to the UK from the Caribbean. “The Tories and the right have always tried to portray it as a negative. It’s not always a negative.”

For de Cordova, the unglamorous role of church estates commissioner forms part of that pattern of advocating for the voiceless.

The job entails dealing with every aspect of MPs’ questions about church life, including the status of historic buildings and other less obviously morally important questions.

However, de Cordova, who was appointed a month before publication of the Makin Report on the church’s handling of abuse by John Smyth, is clear the church has urgent problems to resolve.

The Makin Report has to be a “turning point”, she says.

“I understand steps are being taken to address the challenges,” de Cordova says. “They need to set out over time how they’ll ensure such abuse never happens again.”

The campaigning approach is part of de Cordova’s wider philosophy. She says she has faced many challenges as a result of her disability and tried to overcome them.

“I want to ensure that I can break down the barriers for people coming after me, so that people don’t have to face those same experiences,” she says.

Join with us - Behind the Seen

Seen & Unseen is free for everyone and is made possible through the generosity of our amazing community of supporters.

If you’re enjoying Seen & Unseen, would you consider making a gift towards our work?

Alongside other benefits (book discounts etc.), you’ll receive an extra fortnightly email from me sharing what I’m reading and my reflections on the ideas that are shaping our times.

Graham Tomlin

Editor-in-Chief

Find out more and sign up