Article
Economics
Politics
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.
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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
Culture
Freedom
Justice
4 min read

Free speech for me, but not for thee

A hate crime hoo-ha and the limits of free speech

George is a visiting fellow at the London School of Economics and an Anglican priest.

Two brown bears fight while baring their teeth.
Zdeněk Macháček on Unsplash.

It was the the legendary Manchester Guardian editor CP Scott who said “Comment is free, but facts are sacred.” His dictum hay have held a century ago, but it doesn’t stand up today. In post-truth societies, facts are anything but sacred. And, leaving aside for now whether the opposite of sacred is freedom, comment isn’t free either. 

I don’t mean in the sense of whether or not you have to pay for it – you’re not paying for this, for example – but whether comment, as Scott took it for granted to be, is an act of freedom. Graham Linehan, the Father Ted comedy writer, temporarily lost his freedom to a squad of police officers at Heathrow airport for a social media post he’d tweeted: "If a trans-identified male is in a female-only space, he is committing a violent, abusive act. Make a scene, call the cops and if all else fails, punch him in the balls." 

The subsequent hoo-ha has precisely been about whether Linehan should have been free to make his comment. The police, under prevailing hate-crime laws, felt obliged to arrest him. Subsequently the media, politicians and assembled chatterati – even the Met Police commissioner weighed in – wailed how ridiculous it all was and, adopting serious-face, what a threat it represented to free speech, which is one of the most potent graven images of our time. Facts may be free these days, but comment is sacred. 

 Except it also depends whose comments and opinions are deemed sacred. So some people’s speech is more free than others. Take the Free Speech Union (FSU), founded by the liberally-challenged Toby Young. Here, right-wing freedom of speech is inalienable and non-negotiable. So silly intrusions into the views of Islamophobes and critics of trans-activism? Outrageous. But supporters of Palestine Action (PA), nearly 1,000 of whose supporters had to be arrested by police for peacefully holding placards? Not a word. They’re all lefties, you see. 

As Hugo Rifkind pointed out in The Times, neo-conservative and FSU director Douglas Murray was asked by Daniel Finkelstein whether his free-speech principles extended to PA’s superannuated supporters. Apparently not. And Reform UK’s Richard Tice simultaneously believes that protesters outside asylum hotels are “part of who we are”, but that the correct response to PA protesters is to  “arrest and charge the lot. Jail them.” Forgive me, but I thought a central tenet of faith in free speech is that it’s consistently applied? 

“Part of who we are ” used to be a tolerant, inclusive and pluralistic society. Not just campaign for our lot and bang up all the rest. And I’d contend that we should self-regulate freedom of speech rather than legislate for it. The Met Police commissioner, Sir Mark Rowley, seems to agree with that: “Regulations that were understandably intended to improve policing and laws that were intended to protect the vulnerable are now tying officers’ hands, removing appropriate professional discretion — which some call common sense.” 

That “common sense” is much beloved of freedom-of-speech warriors at places such as FSU. But they always get to define what it is and who gets to benefit from it, because it’s tribal. “If they pick on you, we’ll pick on them,” declares Young on his FSU website. It’s freedom for my tribe to say what it likes, not yours. And freedom of speech is meaningless if it’s not for everyone, including your political enemies. 

Where we agree is that freedom of speech should not be adjudicated by the law. There are enough laws without legalising what people can’t say or write. Where, I imagine, we disagree is that it shouldn’t be adjudicated by Young and Murray and Tice either. As matters stand, we have those who want to legislate for the right to free speech and those who campaign to restrict it. Nothing can come of that. 

By regulating ourselves, the risk is run of sounding conservatively nostalgic for a golden age of civility that never really existed, or rather that was imposed by social authority. It’s the sort of proposed solution you hear when someone says it’s really a question of good manners. It’s true that freedom of speech largely worked in a period of deference, but deference was probably not a good price to pay for it.  

What can be said is that, like any freedom, freedom of speech comes with congruent responsibilities. We hold a responsibility not to cause violence with what we say, even or especially if that means turning the other cheek. In ecclesiological management terms, this would make freedom of speech a pastoral rather than systemic provision. We serve each other; we don’t require the state to serve us.  

Linehan’s post was fine up until it’s final phrase. But it’s peer pressure, not the law, that should have prevented him from using it. Taking the violence out of speech should be an educated, peaceful instinct. And that remains a social duty, not a governance one.

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