Grahame Morris
Main Page: Grahame Morris (Labour - Easington)Department Debates - View all Grahame Morris's debates with the HM Treasury
(7 months, 1 week ago)
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It is a pleasure to serve under your chairmanship, Sir Robert. I congratulate my hon. Friend the Member for Hemsworth (Jon Trickett) on securing the debate, which is an opportunity for us as Members of Parliament to think about the sort of society that we wish to create. It is interesting that Conservative Members intervened on my hon. Friend to talk about raising thresholds, fairness and so on. I say to any of my constituents who have tuned into the debate: let us not lose sight of the fact that currently only 5% of people pay inheritance tax. That means that 95% do not pay it. If we are talking about fairness and the type of society that we want to create, we should look at the implications of either abolishing or providing further concessions to those currently liable for inheritance tax.
I know that this debate is narrowly defined. On previous occasions, I have asked whether we are serious about providing additional support for ordinary working people—not the 5%, but the 95%. Why are we not considering a proportional property tax to replace council tax? That would boost the income of every household in Easington on average by more than £750 per year, not 5%. There are levers that can be pulled, and that one would be revenue neutral. It would not involve levying any additional taxes; it would be a simple matter of applying a proportional property tax at a fixed percentage of the value of a property.
I am grateful to the hon. Gentleman, who I consider a friend, for giving way. I am interested in his points on a proportional property tax. We know from research that northern constituencies like ours would benefit significantly from that. Does Labour propose to include it in its manifesto?
Regrettably, at this point, no. As the hon. Gentleman is well aware, I am not a Front-Bench spokesperson for the Opposition. Irrespective of which political party grasps this nettle, it will bring enormous electoral dividends. There have been academic studies about the benefits of a proportional property tax. My constituency, the hon. Gentleman’s constituency of Darlington and virtually every constituency in the north and the midlands would be better off. [Interruption.] I apologise, Sir Robert: we are talking about inheritance tax. I was tempted off the subject—it was my own fault, and I am sorry.
The fundamental question is: are we going to champion equality, fairness and social justice, or are we going to perpetuate wealth inequality? Are we a democracy or a plutocracy? The current system is already generous. As my hon. Friend the Member for Hemsworth said, it allows £325,000 to be passed on tax free, and where a child or grandchild inherits an estate including a home, the threshold is £500,000. Above those thresholds, a 40% tax rate is applied, which means that a £1 million estate would pass on £800,000 to the beneficiaries.
As my hon. Friend indicated, there is chronic tax avoidance. In 2016, the Duke of Westminster inherited a huge estate that estimates suggest was worth about £9 billion. Reasonably, the Exchequer would anticipate a tax liability of about £3.5 billion at 40%, but sadly, by employing tax avoidance, using very clever lawyers and getting the best advice on trust laws, the aristocracy and the richest in our society regularly avoid paying their fair share of tax. We should be outraged at that. I suspect that in other countries there would be riots and demonstrations, but that is not our way.
Part of the problem is that the issues are not aired objectively through the mainstream media. This abuse of privilege not only entrenches economic inequality but places a larger tax burden on the vast majority—the 95% who do not inherit large family assets and are struggling in this cost of living crisis with stagnating wages and the highest tax burden in modern history. Tory plans to cut inheritance tax will not help my constituents. Instead of funding tax cuts for the richest on the backs of the poor, the Government should be looking to close the inheritance tax loopholes exploited by the wealthiest.
The sixth Duke of Westminster, Gerald Grosvenor, who passed away in 2016, outlined his advice to entrepreneurs on how to be successful. He was speaking at some sort of conference or event, and he suggested that the best way was to have an ancestor who was good friends with William the Conqueror. As with many tongue-in-cheek comments, there is a grain of truth in that advice.
Inheritance tax is meant to address widening inequality in society by taxing those with the greatest assets. However, wealth and privilege are entrenched in this country. Elite schools dominate our politics: we have had Prime Ministers from Winchester and Eton. The majority of our leaders went to elite universities. Perhaps I should correct that by saying “a single elite university”, since 13 out of 17 post-war Prime Ministers—more than 75%—attended Oxford University. Given that our leaders are entrenched in wealth and privilege, we should not be surprised that the Conservative party seeks to maintain a status quo that sustains that existence. Our society is dysfunctional when the richest 50 families in the UK have more wealth than half the population. Just think about that: they have more wealth than 33.5 million people. Recent analysis by Ben Tippet and Rafael Wildauer from the University of Greenwich found that if the wealth of the super-rich continues to grow at the current rate, by 2035—not too far away—the wealth of the richest 200 families in the UK will be larger than the whole of the UK’s GDP.
There is immense wealth in our society. Most people do not realise that there is sufficient wealth in society to address the range of economic, social and investment challenges that we face. The accumulation of wealth, concentrated in the hands of a few, is detrimental to a fair society. Those with immense wealth are not using it for the good of society. My constituency—no surprise here, Sir Robert—is devoid of benevolent billionaires; I wish we had a few. I am not a believer in trickle-down economics. However, my constituents look to the Government to create an economy and society that uses the wealth that they have generated to improve the quality of life for all. That is a task that this Government are failing to deliver on, not through neglect but through a deliberate policy that entrenches and expands pre-existing economic inequalities.
My hon. Friend makes an important point. We saw that in the recent autumn statement with the national insurance cuts. Our instinct and wish as Conservatives is to lower taxes, wherever appropriate and possible. We are also responsible with public finances and recognise that every single penny of Government spending is paid for through taxation, either immediately or in the future as deferred taxation—that is, borrowing money. We need to, and do, respect every single penny, because it is the public’s money, not Government money, that we are spending. Taxation is an important issue, and I am glad we are talking about it today. I am confident that it will be a major topic in the run-up to the election.
The Government support wealth creation but also understand the importance of ensuring that wealthy individuals make a fair contribution and pay tax appropriately. We do not have a specific wealth tax, as some other countries do, but if we look at the facts, it is clear that the Government do tax wealth, in a number of ways that generate substantial revenue, while remaining fair. For example, OBR forecasts for 2023-24 indicate that we can expect inheritance tax revenues of about £7.6 billion, capital gains tax revenues of £16.5 billion and stamp duty tax revenues of about £13 billion.
We also have a progressive income tax system, so that the top 5% of income taxpayers pay about half of all income tax. The top 1% is projected to pay about 28% of all income tax. It is also important to stress that in 2010, under the previous Labour Government, the top 5% accounted for 43% of income tax and the top 1% for 25%. Therefore, the system under the Conservatives is more progressive.
The Minister is putting forward an interesting proposition about progressive policies and taxation. Has he had a chance to consider whether council tax is a progressive form of taxation, when a millionaire, living in a £20 million property in Belgravia, very close to this place, pays less in council tax than my mother in a terraced colliery house worth about £50,000 in Murton?
The hon. Member needs to recognise that tax needs to be taken in the round. There is a variety of taxations—on income, wealth and other areas. Taxation is a broad topic, and individual taxes affect people differently. The hon. Member for Glasgow East (David Linden) made the point about inequality as well, but it is important to remember that, on average, households in the lowest income decile receive over four times more in public spending than they pay in tax. Nobody doubts the importance of a progressive tax system; my point was that the Opposition often try to make out that the tax system was more progressive under them, but it was not. The facts make that incredibly clear.
If the hon. Member will give me a moment to proceed, I will allow him to come in later, because I have other points to make in response to some of his comments.
Inheritance tax is a wealth transfer tax and applies to the estate of the deceased. Transfers made in the seven years before death are also taken into account. The estates of all individuals benefit from a £325,000 nil-rate band, and the targeted residence nil-rate band is a further £175,000 available to those passing on a qualifying residence on death to their direct descendants such as children and grandchildren. That means that qualifying estates can pass on up to £500,000, but the qualifying estate of a surviving spouse or civil partner can pass on up to £1 million without an inheritance tax liability. That is because any unused nil-rate band or residence nil-rate band is transferable to a surviving spouse or civil partner.