For all the Tory hype, last month’s budget was extraordinarily thin for most people. Austerity is not over, with 3% cuts scheduled for most unprotected departments. Universal credit cuts have not been rolled back. At best, a change to the income tax thresholds largely benefited the better-off, but also meant those on as little as £12,500 would receive £155 a year.
Some of my Labour colleagues wanted us to oppose these threshold moves, arguing that they were regressive. And certainly, increasing the threshold for the higher paid wouldn’t be our priority. But after eight years of Tory austerity, with real wages still below their 2010 level, and with even the relatively better off feeling the pinch, it is hard to justify taking even this small amount away from people. In addition to coping with ever rising basic energy and food prices, the pressure of increasing costs for housing, travel and childcare have become intolerable even for many middle income earners. Nor could we turn our backs on a rock-solid manifesto promise not to increase income taxes for the bottom 95% of earners.
A radically different approach to taxation is needed – one which targets the real problem of inequality, and goes for the real sources of wealth. Labour’s 2017 manifesto promised £6.4bn of additional taxes on the top 5% of earners – those on more than £80,000 a year. We fought for an amendment to last week’s finance bill to introduce these changes. In addition, we expect to raise £19.4bn of extra corporation tax from raising its rate back to 2011 levels. We’re committed to providing universal services like the NHS, free university education, and the new National Education Service through a fairer taxation system.
Our approach is different to the last Labour government, when only £4.1bn was raised from increasing taxes on the very wealthiest, and all of that as a response to the global financial crisis. Corporation tax was cut at that time from 33% to 28%, causing a loss, on estimates from the Institute of Fiscal Studies, of £6.8bn. The spending increases that New Labour delivered were absolutely essential, and made a real and positive difference to people’s lives. The NHS was turned around and, thanks to tax credits and other benefit reforms, nearly a million children were lifted out of poverty. The seemingly inexorable rise in inequality under the preceding Conservative governments, turning Britain into one of the most unequal countries in the developed world, was at least restrained.
But the failure to reverse inequality is critical. Labour in government raised more than £100bn to fund its spending programme. Yet these additional taxes largely did not come from the very top of the income distribution. On the contrary, avoidance turned tax into an optional extra for the super-rich, while major giveaways were introduced to the few genuine wealth taxes we have, like capital gains tax.
Instead, New Labour funded its programme by leaning on those further down the income scale. The huge fortunes of those at the very top, like those with non-domiciled tax status, were left almost untouched. Over time, the effects of inflation and rising wages meant that more and more people at far more modest incomes were dragged into the higher rates of tax – while those at the top saw no change in their headline rates before 2010.
The problem in our society isn’t that headteachers, train drivers, or senior police officers are somewhat better off than average and need to be squeezed. It is that a tiny handful at the very top have run into the distance, too many of them taking their wealth with them. The top 10% of the population own 44% of the nation’s wealth. That’s where we need to look if we want to create a genuinely fair tax system. And over the longer term, it is by delivering the investment the Tories have failed on that we can create the secure, well-paid jobs that will provide a stable foundation for our tax system.
Labour under Jeremy Corbyn is not afraid to take on the very wealthiest, committing to the most comprehensive anti-tax avoidance plan ever presented by a major political party. We’ll shift the burden of taxation back upwards, taxing those on £80,000 or more at 45p, and those on £125,000 at 50p. Our changes to inheritance and capital gains tax will mean starting to claw back some of the wealth at the very top, while a new employers’ levy on very high salaries and VAT on private school fees address obvious unfairness.
As shadow Treasury minister with responsibility for sustainable economics, I also want to see us use taxes to encourage transition to a low-carbon society – and we are looking at ways to shift the balance of taxation away from work and on to the practices that are destroying the environment. Labour are determined to create a fair, sustainable tax system in an economy that works for everyone.
• Clive Lewis is a Labour MP and shadow Treasury minister
Source: Read Full Article