New Wealth Taxes

Claire Hanna Excerpts

Tuesday 14th June 2022 Westminster Hall

[Claire Hanna (Belfast South) (SDLP)]

Thank you for calling me, Sir Edward. Thank you, too, to the hon. Member for Leeds East (Richard Burgon) for bringing forward the debate and for his advocacy on the issue.

Tax is a fundamental and necessary tool of the Government and, from my perspective as a social democrat, one that is not being adequately levied by the Government to address the huge and parallel challenges of poverty and wealth inequality. Wealth inequality is one of the most defining issues of our time and, like other seismic challenges, such as climate change, it will only be addressed by concerted, co-ordinated and internationalised action. It is being driven, first, by failures in the tax system to levy tax, and secondly, by evasion and avoidance, which is not just about short-changing the public purse but also has a distorting effect on decent, compliant and locally anchored businesses.

The UK and the world, as hon. Members have outlined, is not short of wealth. There is plenty to go around. The global economy has quintupled over the past three decades. However, due to regressive and outdated forms of taxation, that wealth is accruing in the hands of a tiny number of people at the top, while the wealth of those at the bottom is decreasing. Globally and in the UK, the tax system is essentially rigged for exactly those purposes. We know, too, that inequalities have worsened during the pandemic and, in parallel, that the cost of living has surged, the average salary is nowhere near keeping up and public services—health and education—have deteriorated.

The Government need revenue and they turn to tax—so far, so fair—but who or what they choose to tax reveals a mindset. A state can choose to tax either wealth or income and this Government have chosen to tax income—to tax work, when a wealth tax would garner more resource for the state and, in parallel, help address the issues of income disparity that are driving a lack of cohesion and hampering social solidarity. Taxing income alone will not raise the resource needed to be genuinely transformative in those issues of poverty and climate change or, for example, the challenges within the health service. It will also do nothing to address the widening gap between the richest and the poorest, which, as others have outlined, is part of what is driving populism, fundamentalism and people feeling lost within the political system.

It is welcome that the Government are belatedly pursuing a windfall tax—even if we are not supposed to call it that—to address some of the property bonanzas, but that should not be limited to the energy sectors; the Government should also focus on an individual wealth tax. What do we mean when we speak about the wealthy? Before we even start to discuss at what level a tax is levied, what comes to my mind, when differentiating, is those whose income comes from assets such as rents and dividends, when the rest of society depends on labour and wages. It is wealth that makes money even when somebody is asleep, and often at a faster rate than the one at which many people are able to earn.

The enduring myths about wealth, which we will hear mentioned in this debate, include the idea that wealth taxes would slow down the economy, deter job creation and prompt capital flight. One myth is that, simply by existing, wealthy people create jobs; but we know that in fact it is demand that creates jobs. If we take a billion pounds and give it to one person, about 99% of that wealth will leave circulation. Yet that same billion, distributed among a million people, would continue to circulate around the economy, stimulating demand, and not be locked up in the hands of a small number. So the mega-rich are, in fact, taking capital out of society and spending it on the inflation of existing and essentially non-productive assets, such as land and property. That is what trickles down from the wealthy to the average person who is trying to buy a home to live in or raise their family.

The wealthy and their wealth will not just leave, either, any more than wealth is already leaving the public purse due to our complex and loosely regulated tax systems. A large amount of the wealth in this country is tied up in property; as the hon. Member for Brighton, Pavilion (Caroline Lucas) said, it cannot just up sticks and leave. Tax avoidance is not inevitable; it is a policy choice around where to levy tax and underfund enforcement. Things like the Panama papers and the Paradise papers have given more than enough evidence over the years to show that tax avoidance and evasion are standard practice around the world.

Last week, BBC programme “Spotlight” revealed a niche product called Northern Ireland limited partnerships, which are being exploited on a wide scale for people to avoid taxation and to get up to all sorts of nefarious purposes. One street in my constituency in south Belfast is home to 100 such Northern Ireland limited partnerships, which create not a single job or add a single penny to the Revenue, and which are up to all sorts. However, it was a choice not to close down that loophole.

[Sir Edward Leigh (in the Chair)]

Order. I am afraid you are over time. I call Jon Trickett.