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. 

Essay
Belief
Comment
7 min read

Everyone comes from somewhere

Why young people need to understand the religious landscape.

Roger is a Baptist minister, author and Senior Research Fellow at Spurgeon’s College in London. 

A young person stands in front of railway station platfrorms and below a large informaton display.
Rostyslav Savchyn on Unsplash.

I had never been so self-conscious of being British. I had flown into Denver, Colorado and for the first time I realised that I had an accent. I had gone to study and a Canadian instantly knew I was a Brit. The locals were less clear. Some had me down as an Aussie, others guessed a South African.  

But it wasn’t only accents. I quickly learned the differences between us went much deeper. Private health care, guns and the separation of church and state were a whole new cultural landscape. They felt very strange to my British sensibilities that were accustomed to the welfare state, the absence of guns and an established church.  

My exposure to all things American began in the early 1990s. The sociologist James Davison Hunter had just published his prophetic commentary, Culture Wars: the struggle to define America. For those I was beginning to get to know, the campaigns to reverse Roe Vs Wade and ban abortion, along with active attempts to introduce prayer into the public school system highlighted the cultural differences between us. 

Likewise, they found it hard to comprehend that in England Religious Education (RE) in state-funded schools was mandated by Act of Parliament. That I considered this a bad thing mystified them. 

The world we are living in has changed. Issues around religion have become more critical than at any point in my lifetime.

Of course, RE itself had a chequered history. The 1902 Education Act provided state funding for denominational religious instruction, mostly benefiting the Church of England. Nonconformist churches were outraged at the thought of the established church indoctrinating their children. Methodists, Baptists and Congregationalists withheld their taxes and, by 1904, 37,000 summonses had been issued, thousands had their property seized and 80 had gone to prison in protest.   

Thankfully things have moved on. During the twentieth century denominational instruction evolved through several stages to the present world religions curriculum. 

Still, over the years I have consistently felt that our approach in the UK was in danger of proving ‘the inoculation hypothesis’ with regard to faith. That is, providing a small harmless dose of exposure to religion in childhood can effectively prevent the real thing developing in adults. 

Of course, faith-based schools and RE remain hot topics. Only this month the government launched a public consultation on removing ‘… the 50 per cent cap on faith admissions’. Warmly welcomed by providers like the Catholic Schools Service, it was condemned by Humanists UK and others advocating a fully secular provision.  

This line of contention has become a familiar one. On one side sit around a third of mainstream state schools that are church or faith-based, most affiliated with the Church of England. On the other are groups like the National Secular Society who correctly point out that the privileged position of church-sponsored education is not reflective of wider society. 

These positions have become entrenched over the years. Arguments are laced with rhetorical hyperbole and are often either ill-informed or merely raise strawmen arguments to symbolically knock down. We can no longer afford to be so self-indulgent.  

The world we are living in has changed. Issues around religion have become more critical than at any point in my lifetime. It is now more important than ever that we have a handle on it.  

And then there’s the frequent stereotyping of religion in the media. Off-the-peg religious reporting ‘templates’ are easy to use but are ‘lazy’ journalism. 

The invasion of Ukraine by Putin’s Russia is no mere materialist land-grab. To fail to take into account the theological dimension compromises any understanding of what is going on. The history of Eastern Orthodoxy and the Russian Orthodox Church help define the Russian identity that sits behind this conflict. 

In Israel, the bloody atrocity enacted on Israeli citizens by Hamas, and the brutal devastation wrought in Gaza by Netanyahu’s Israeli Defence Force are beyond words. But this conflict is theologically as well as politically fueled. Hamas embraces a militant interpretation of extremist Sunni Islam, while Netanyahu’s religious-nationalist coalition sees his Likud party kept in power by ultra-Orthodox parties and far-right religious factions.  

In India, the world’s biggest democracy, 970 million voters this year participate in an election stretching over six weeks. Yet this formally secular state has been travelling on a different trajectory. Yasmeen Serhan observed in The Atlantic that under Prime Minister Modi the ‘Hinduization of India is nearly complete’. 

And then there’s the frequent stereotyping of religion in the media. Off-the-peg religious reporting ‘templates’ are easy to use but are ‘lazy’ journalism.  

A leading newspaper recently carried instant opposition to the thought of Kate Forbes being a potential First Minister of Scotland because of her ‘traditionalist’ views. Somehow, her commitment in a BBC interview to defend the right to same-sex marriage even though it clashed with her personal views was insufficient. 

Across one of my social media feeds as I was writing this piece came a plea, ‘I’m proud to be British. I’m proud to be a Muslim. I am not a terrorist. Why don’t they get it?’ 

Maybe the American approach to religion goes a long way to explain something of their culture wars. 

But always there is America. And here’s where a penny unexpectedly dropped for me. If you keep religion out of schools, for many young people you deny them the tools, the ideas, and a framework with which to understand the religious dimension of life. This can have catastrophic implications.  

As G.K. Chesterton is reputed to have observed, ‘when people stop believing in God they don't believe in nothing; they believe in anything.’ 

Then, for those living within a practising religious home, the absence of religion in school heightens the possibility that their thinking is siloed purely in their own rarefied tradition. 

Maybe the American approach to religion goes a long way to explain something of their culture wars.  

If it's true that whatever happens in America inevitably makes its home in Britain, we need to sit up and take notice. More than ever, we need our young people to be adept at understanding the religious landscape. With the ubiquity of social media, the unseen influence of echo-chamber algorithms and the nefarious activities of those bent on radicalising the vulnerable, we need them to have the tools and skills to be aware, see and understand. 

This is what has caused me to think again and, surprisingly, change my mind. We need to draw a line in the sand on our historic arguments, disagreements and differences of conviction. The situation is more pressing. We need a reset.  

If democracy is not a zero-sum game where the majority gets to impose its will tyrannically on the rest, this has to be a way forward. 

The encouraging thing is that the groundwork for such a step change is already in place. In 2018 the Commission on Religious Education (CoRE) proposed a reconceiving of the subject as Religion and Worldviews. Their intention was to make it more appropriate and inclusive for the twenty-first century. For them, the ‘complex, diverse and plural’ landscapes of different religions and worldviews deserved both understanding and respect. Yet, students also needed to develop the ‘necessary critical facility to ask questions and challenge assumptions’. 

Such an approach embraces the insights and philosophical commitments of non-religious worldviews too. ‘Everyone has a worldview’, said the report. Nobody stands nowhere was the title of an excellent animated short film on YouTube produced by the Theos think tank. 

The truth is, ‘everyone comes from somewhere’. This is as true for secular humanists as it is for cradle-to-grave Anglicans, majority-world Pentecostalists and British-born Muslims. Helpfully CoRE defines a worldview as: 

… a person’s way of understanding, experiencing and responding to the world. 

The report maintained that it was vitally important that different worldviews were understood as ‘lived experience’. This was not just about abstract beliefs, doctrinal understandings and theoretical convictions. This was about real people, the lives they live and what is important and gives meaning to them. 

If living in a genuine democracy is about learning how to rub along together. If it is about understanding and respecting those who have a different take on life than we do, no matter how ‘odd’ it seems. If democracy is not a zero-sum game where the majority gets to impose its will tyrannically on the rest, this has to be a way forward.  

Given the challenges that face us, it seems to me that not to change our approach to RE would be negligent. Yet to remove all reference to religion from our schools risks our young people falling prey to manipulation, subversion and control by bad actors, misinformed activists and cranks. 

These would be the seeds of our very own culture wars.  

Personally speaking, I’d rather not go there.