It was Denis Healey who famously promised to ‘tax the rich until the pips squeak’. Nowadays taxation is commonly the negative narrative of the right – organisations such as the Taxpayers Alliance and their ilk. Progressive, redistributive taxation has become virtually a taboo for New Labour. As a result we face the shameful situation where it is public sector spending, public sector workers and the public in general, not the bankers, who are being penalised to pay for the deficit. And the consequence of this could be a slide into deeper recession.
It is time for a radical rethink that challenges economic orthodoxy and puts forward progressive taxation as an income generator and a route out of of recession. A good example that is gaining momentum outside the bubble of mainstream electoral politics is the Robin Hood Tax campaign, which is calling for a tax on financial speculation.
This involves imposing a financial transactions tax of 0.05 per cent on the speculative activities of banks. The idea has the obvious advantage of attracting very high revenues (about £100 billion), to be paid by the bailed-out banks that are responsible for the global economic crisis. It is just one example of the kind of progressive tax we need.
Not only does it make economic sense but it’s popular too. The Robin Hood Tax campaign quickly achieved top Twitter status and at the time of writing had attracted over 130,000 Facebook fans. While it may be a bit surreal to hear actor Bill Nighy being interviewed on the BBC business programme supporting the Robin Hood Tax, the campaign has struck a chord, particularly with young people.
Why is progressive tax reform so important? The UK is among the world’s most unequal societies as measured by the income gap between the poorest and the richest. Amazingly, those at the bottom end of the income scale pay a higher proportion of their income on tax than top earners. This leaves many poor people having to spend all their income on essentials such as housing, food and heating. A ‘progressive tax’ would impose a heavier burden on those with greater wealth. In other words, tax justice.
The TUC set out this proposal last year in its pre-budget report submission alongside five other suggestions for taxation reform. It estimated that the combined revenue from making all the changes in its submission would be in excess of £74 billion. So while we’re all looking over our shoulder hoping it won’t be our library or nursery that will be cut, it’s worth taking a closer look at the TUC’s advice to the chancellor.
Take the idea for a ‘general anti-avoidance principle’. This may sound technical but it’s a really simple idea. Basically, it would change the law so that tax loopholes were properly plugged. It already exists in Australia and South Africa, so we know it can be done.
Or the idea for a tax relief cap of £100,000, which would restrict total allowances and reliefs for anyone earning over £100,000.
Or consider the one million vacant properties in the UK, many of them owned by offshore tax haven companies registered in the British Virgin Islands, Jersey, Guernsey and Switzerland. The requirement that non-resident landlord companies should register with HM Revenue and Customs (HMRC) is not adequately enforced. This is obviously unacceptable and the TUC suggests this could be put right by an empty property tax.
Job growth in health and education has masked job cuts in government departments, especially among much-maligned ‘backroom’ staff. Effective tax collection is undermined by job cuts in HMRC. The TUC estimates that 25,000 additional staff would recover an extra £20 billion at a cost of just £0.6 billion.
Implementing ideas that tackle tax evasion and avoidance would reduce inequalities in society, a much-needed change of approach. Otherwise, the cost of the economic recession will continue to be borne by those least able to shoulder the burden.
Measures such as these, including eliminating the ‘non-dom’ status that would force Lord Ashcroft to finally pay what he owes and help the country out of recession (as opposed to running a cynical campaign aimed at winning over marginal constituencies to the Tories), would have people dancing in the streets.
So how, then, do we make these changes happen? The Robin Hood Tax campaign shows the importance of making broad alliances, effective communication of progressive ideas and the potential for people power. Mass support for the Robin Hood Tax could pave the way to an unstoppable campaign. The trade union movement is in prime position to seize the moment and take on the challenge of spearheading an even wider campaign for a fairer taxation system. This means thinking ‘out of the box’, looking at new ways of communicating directly with union members and wider society – and above all speaking up for social justice and a more equal society that values our libraries and nurseries and the workers in them.
Gail Cartmail is assistant general secretary, public services, for the Unite union. More about the Robin Hood Tax campaign at www.robinhoodtax.org.uk