Explainer
Comment
Economics
6 min read

How to tax ethically to avoid a two-tier society

From income tax to property and inheritance taxes, which is fairer?
a pile of coins.
Sarah Agnew on Unsplash.

Few doubt that Chancellor Rachel Reeves will be putting up taxes when she presents her first Budget on October 30th.  

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. 

“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.” 

Paul Williams

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 Biblical perspective that he believes offers some solutions. 

He takes as his starting point a story from the gospel of Matthew, 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, he says, “completely ruined” by wealthy people from elsewhere buying second homes, 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 said. 

“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
Care
Comment
5 min read

The healing touch in an era of personalised medicine

As data powers a revolution in personalised medicine, surgeon David Cranston asks if we are risk of dehumanising medicine?

David Cranston is emeritus Professor of Surgery at Oxford University. As well as publishing academically, he has has also authored books on John Radcliffe, and mentoring.

A doctor looks thoughtful will holding a stethoscope to their ears.
Photo by Nappy on Unsplash.

In 1877 Arthur Conan Doyle was sitting in one of Dr Joseph Bell’s outpatient clinics in Edinburgh as a medical student, when a lady came in with a child, carrying a small coat. Dr Bell asked her how the crossing of the Firth of Forth had been on the ferry that morning. Looking sightly askance she replied;  

 “Fine thank you sir.”  

 He then went on to ask what she had done with her younger child who came with her.  

Looking more astonished she said:   

“I left him with my aunt who lives in Edinburgh.   

Bell goes on to ask if she walked through the Botanic Gardens on the way to his clinic and if she still worked in the Linoleum factory and to both these questions she answered in the affirmative.  

Turning to the students he explained  

“I could tell from her accent that she came from across the Firth of Forth and the only way across is by the ferry. You noticed that she was carrying a coat which was obviously too small for the child she had with her, which suggested she had another younger child and had left him somewhere. The only place when you see the red mud that she has on her boots is in the Botanic Gardens  and the skin rash on her hands is typical of workers in the  Linoleum factory.   

It was this study of the diagnostic methods of Dr Joseph Bell led Conan Doyle to create the character of Sherlock Holmes.  

A hundred years later and I was young doctor. In 1977 there were no CT or MRI scanners. We were taught the importance of taking a detailed history and examination. Including the social history. We would recognise the RAF tie and the silver (silk producing) caterpillar badge on the lapel of a patient jacket.  We would ask him when he joined the caterpillar club and how many times he had had to bail out of his plane when he was shot down during the war – a life saved by a silk parachute. We would notice the North Devon accent in a lady and ask when she moved to Oxford.  

The patient’s history gave 70% of the diagnosis, examination another 20% and investigation the final 10%. Patients came with symptoms and the doctor made a presumptive diagnosis – often correct - which was confirmed by the investigations. Screening for disease in patients with no symptoms was in its infancy and diseases were diagnosed by talking to the patients and eliciting a clear history and doing a meticulous examination. No longer is that the case.     

At the close of my career, as a renal cancer surgeon, most people came in with a diagnosis already made on the basis of a CT scan, and often small kidney cancers were picked up incidentally with no symptoms. The time spent talking to patients was reduced. On one hand it means more patients can be seen but on the other the personal contact and empathy can be lost.  

Patients lying in in bed have sometimes been ignored. The consultant and the team standing around the foot of the patient’s bed discussing their cases amongst themselves. Or, once off the ward, speaking of the thyroid cancer in bed three or the colon cancer in bed two. Yet patients are people too with histories behind them and woe betide the medic, or indeed the government, who forgets that.  

With computer aided diagnosis, electronic patient records and more sophisticated investigation the patient can easily become even more remote. An object rather than a person.  

We speak today of more personalised medicine with every person having tailored treatment of the basis of whole genome sequencing and knowing each individual’s make up. But we need to be sure that this does not lead to less personalised medicine by forgetting the whole person, body mind and spirit.  

Post Covid, more consultations are done online or over the telephone -often with a doctor you do not know and have never met. Technology has tended to increase the distance between the doctor and patient. The mechanisation of scientific medicine is here to stay, but the patient may well feel that the doctor is more interested in her disease than in herself as a person. History taking and examination is less important in terms of diagnosis and remote medicine means that personal contact including examination and touch are removed.  

Touching has always been an important part of healing. Sir Peter Medawar, who won the Nobel prize for medicine sums it up well. He asks:  

‘What did doctors do with those many infections whose progress was rapid and whose outcome was usually lethal?   

He replies:  

'For one thing, they practised a little magic, dancing around the bedside, making smoke, chanting incomprehensibilities and touching the patient everywhere.? This touching was the real professional secret, never acknowledged as the central essential skill.'

Touch has been rated as the oldest and most effective act of healing.   

Touch can reduce pain, anxiety, and depression, and there are occasions when one can communicate far more through touch than in words, for there are times when no words are good enough or holy enough to minister to someone’s pain.   

Yet today touching any patient without clear permission can make people ill at ease and mistrustful and risk justified accusation. It is a tightrope many have to walk very carefully. In an age of whole-person care it is imperative that the right balance be struck. There’s an ancient story that illustrates the power of that human connection in the healing process. 

When a leper approached Jesus in desperation, Jesus did not simply offer a healing word from safe distance. he stretched out his hand and touched him. He felt deeply for lepers cut off from all human contact. He touched the untouchables.   

William Osler a Canadian physician who was one of the founding fathers of the Johns Hopkins Hospital in Baltimore, and ended up as Regius Professor of Medicine in Oxford,  said:  

“It is more important to know about the patient who has the disease than the disease that has the patient”.  

For all the advantages modern medicine has to offer, it is vital to find ways to retain that personal element of medicine. Patients are people too.