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.

Article

Art

Culture

Politics

28 June 2024

5 min read

Art makes life worth living

Why society, and churches, need the Arts.

Jonathan Evens

Jonathan is Team Rector for Wickford and Runwell. He is co-author of The Secret Chord, and writes on the arts.

A choir sing at the front of a church while an audience looks on.

St Martin-in-the-Fields choir performance.

Arguing for the significance and role of the arts and culture during an election in an era where a cost-of-living crisis has followed austerity and a pandemic, may seem to be a hard task. The Arts being thought of often as frivolous and unimportant in comparison with the basics of survival. Yet it is essentially a task that the current government has attempted, as in June 2023, a ‘Creative industries sector vision’ was published which included a commitment to an additional £77 million in funding.

At that time, the government estimated that creative industries generated £126bn in gross value added to the economy and employed 2.4 million people in 2022. A range of research has also been examining the way in which creative industries and the arts can positively impact wellbeing, for example through public health interventions.

The foreword to ‘Creative industries sector vision’ stated:

“Our creative industries are world-leading, an engine of our economic growth and at the heart of our increasingly digital world. From 2010 to 2019 they grew more than one and a half times faster than the wider economy and in 2021 they generated £108bn in economic value. In 2021, they employed 2.3 million people, a 49% increase since 2011. Their impact reaches beyond their borders to other sectors, with advertising, marketing and creative digital innovation supporting sectors across our economy.

The importance of the creative industries also goes well beyond the economy. They provide the news that informs our democracy, the designs that shape our cities and the content and performances that enrich our lives and strengthen our global image. The sector has proved that it is an essential positive force for society, bringing joy, inspiration and opportunity to our lives. The creative industries form the national conversation through which we define our shared values.”

The arts and culture help tackle social injustice as theatres, museums, galleries and libraries are the beating heart of our towns and cities bringing communities together and making life worth living.

This positive view of the creative industries was echoed in a report ‘The arts in the UK: Seeing the big picture’ published in November 2023 by management consulting firm McKinsey. The report described the UK as a “cultural powerhouse” with a globally recognised arts sector and 91 per cent of UK adults engaging with the arts in the previous 12 months.

The Arts Council estimates that art and culture contribute £10.6 billion to the UK economy as the UK has a creative economy worth £27bn and culture brings £850m to UK, through tourism, each year. They also contend that the arts and culture help tackle social injustice as theatres, museums, galleries and libraries are the beating heart of our towns and cities bringing communities together and making life worth living. In addition, our creative industries are successful throughout the world - our leading cultural institutions are a calling card worldwide and have important trading links from the US or Germany to China and South Korea. Last year our National Portfolio Organisations earned £57m abroad.

Churches feature within these arguments because they often host or organise cultural events, exhibitions, installations and performances which contribute towards the economic, social, wellbeing and tourism impacts achieved by the arts and culture. The Arts are actually central to church life because, as well as being places to enjoy cultural programmes such as concerts and exhibitions and also being places to see art and architecture, many of the activities of churches take place within beautiful buildings while services combine drama, literature, music, poetry and visuals.

The artist Makoto Fujimura has suggested the creation of cultural estuaries in churches, schools and informal associations as a strategy for enhancing culture. Estuaries are where salt-water mixes with fresh in a confluence of river and tidal waters. They are environments not of protection but of preparation as critical nursery areas for fish that come downstream after hatching.

This suggestion has been taken up by Sam Wells, Vicar of St Martin-in-the-Fields, who advocates for churches to minister in and through the 4Cs; commerce, culture, compassion and congregation. He writes in ‘A Future that’s Bigger than the Past’ that:

“… the image of an estuary is helpful for a church regarding itself as a meeting place of human and divine, gospel and culture, timeless truth and embodied experience, word and world.

Churches work hard to make themselves inspiring locations where people are drawn into a sense of the presence of God; but they can work equally hard to make themselves hospitable locations where people of varied backgrounds may gather in a spirit or mutual appreciation, generous regard and constructive challenge. The two purposes of church need not be mutually exclusive.”

The arts, he suggests, provide a perfect example of how such an estuary space may flourish with participatory, aspirational and commercial activities all taking place in the same space. In a short time, he suggests, “a secluded, secretive space may be opened out to become a centre of community activity, energy, and creativity.” All that’s needed “is for a church to let go of the need for direct outcomes and linear trajectories and to let the Holy Spirit govern the interactions and catalyse its own surprises.”

The Bible adds to this missional assessment of the importance of the arts. At the point we are told of human beings as having been made in the image of God the one thing we know for certain of God is his creativity, making our own creativity central to our understanding of how we live in his image. Later, the very first people to be spoken of in terms of being filled with the Spirit of God are the artists and craftspeople who make the Tent of Meeting for the people of Israel as they journey through the wilderness. The Bible, itself, is a library of various genres of literature with many of its texts having been preserved through oral performance, whether spoken or sung.

Given these theological, missional, social and economic reasons for seeing the arts and culture as central to personal wellbeing and to national life, in this election period it surely makes sense to check the commitment of politicians in all parties to maintaining and developing the cultural industries and the vital place that the arts and culture have in the life of our nation.