New Wealth Taxes

Jim Shannon Excerpts

Tuesday 14th June 2022 Westminster Hall

[Richard Burgon]

I encourage the right hon. Gentleman to read the report I have here. It is by some top academics and makes a compelling case for a wealth tax in the UK. I will return to that point in greater detail later in my remarks.

[Jim Shannon (Strangford) (DUP)]

It is not about someone getting more money for doing their job; it is about the obscenity of people getting large amounts of money when others are getting smaller amounts of money. People get six-figure dividends when others live on £10 an hour. That obscene disparity is the issue.

[Richard Burgon]

I could not agree more. We are talking about multibillion-pound enterprises with people at the top hoovering up the wealth, while others do not receive anything. Only yesterday, I and colleagues visited a picket line in Wakefield, where bus drivers are on strike; they are calling for £13.40 an hour. Many people will be surprised that they are not already on at least that sum.

To address our rigged economic model, we must first acknowledge that trickle-down economics has been a lie. Wealth is not trickling down; it is being funnelled up into fewer and fewer hands. That is a consequence of 40 years of deregulation, privatisation, outsourcing, driving down working conditions, the weakening of trade unions and lower taxes on the rich. Contrary to what is said by the spin doctors of the right, decades of keeping taxes low for the very rich has not boosted economic growth. In fact, research by the London School of Economics and King’s College London looking at tax cuts over the past 50 years shows that lower taxes on the rich has led to higher income inequality because the top 1% has captured almost all of the gains, while there has been almost no effect on boosting economic growth.

Inequality and hardship are not just at the heart of our system—it is how our system is designed and how it functions. Poverty and inequality are structural and institutionalised. That is why we need a debate on wealth taxes. A wealth tax is an idea whose time has come.

Last year, the Secretary-General of the United Nations called on Governments to consider a wealth tax on those who had profited during the pandemic, to reduce extreme inequalities. The OECD has argued that there is a strong case for addressing wealth inequality through the tax system. The group Patriotic Millionaires has called on the Chancellor to introduce a wealth tax, saying:

“We know where you can find that money—tax wealth holders like us.”

Oxfam has also called for a wealth tax to rein in extreme wealth and monopoly power.

--- Later in debate ---

[Jim Shannon (Strangford) (DUP)]

Thank you for calling me to speak, Sir Edward.

People say times are hard. We have all said it. There is not one person in this Chamber who has not said it, and I am sure the Minister has said it as well—and meant it. Today, times are harder than ever. That is the situation we are living in today. I want to give an example of one person in my constituency to illustrate why we need to consider new means of raising funds through taxation. I support the thrust of what the hon. Member for Leeds East (Richard Burgon) has referred to, which is important.

A healthcare assistant in my constituency works three long days plus whatever overtime is needed on her ward at the Ulster Hospital. She is now paying £400 a month out of her wages for fuel. Her parking at the hospital, which she has to pay for, is £60 a month. Her rent is £750 a month, which is not exorbitant—that is the normal going rate for rental accommodation. Her food bill, while trying to eat healthily, is £500 a month. Her gas went up to £180 a month and her electric is £100 a month. That comes to a princely total of £1,990 just to be warm, eat and get to work, with none of the luxuries that she would probably like to have.

There is no subway for my constituent to get to work and no bus timetable that fits with her shift work. The list goes on. She said to me, “Jim, I want to have a child, but can you tell me how I can afford childcare, afford to dress and feed another person, and live a life?” Can anybody here tell me how to do that? I could not tell the lady. I am sure nobody else could. I have no answer for this lovely young lady. We in this place need to come up with the answer and put it into operation. That is what this debate is about today.

I understand that people have different qualities, experiences and abilities. Those who get a big sum of money, such as a brain surgeon, get a lot more money than the person who drives, with respect, a bin lorry. I understand that. Different jobs pay different moneys. What I object to is the obscene amounts of money that people get for bonuses. I am not saying that they should not, but if somebody gets a six-figure sum or a seven-figure bonus, I despair when I think of the people in my constituency who cannot get it.

The hon. Member for Belfast South (Claire Hanna) said we should tax such people at a level that does not screw them but ultimately means they make a significant contribution to the tax system. We could then put that money into the NHS and into education. All of us in this House would see that as a benefit and a way forward.

This is about how we can raise revenue to benefit families on the poverty line today without their grandchildren paying it off. Those who use tax avoidance legally withhold what they should morally pay. The right hon. Member for Central Devon (Mel Stride), who is not in his seat, named companies that should pay their taxes. If they paid their taxes, the Minister would be in a position to use that money for the benefit of everyone in the United Kingdom.

I read an article last summer that highlighted the fact that eight large tech companies in the UK made an estimated £9.6 billion in profit from sales to UK customers in 2019; yet by moving that money out of the UK those companies ended up declaring a fraction of their profits in the accounts of their UK subsidiaries, radically reducing their tax liability. That is how they can make more money. If they paid their tax, the Government could do more with it. The companies were Amazon, eBay, Adobe, Google, Cisco, Facebook, Microsoft and Apple. They faced UK corporation tax liabilities of £297 million in 2019. That puts the total amount of tax avoided by companies in the UK at an estimated £1.5 billion in 2019, pre-covid and pre the difficulties and the changes that covid brought to businesses. There were £45.4 billion in revenues, £9.6 billion in profits, £296 million in tax paid, and £1.5 billion in tax avoided. Those are the companies that we should go for.

Have the Government estimated the cost of cutting fuel duty, for example, which lowers production and transport costs, saving businesses and consumers money that they can put back into the local economy? This is an issue that we must consider. We must do more to encourage these billion-pound businesses to do the right thing by the consumers from whom they make their money. If ever there was a time to ask and then legislatively demand of businesses that they live up to their obligations, it is now. I ask the Minister, who I believe is a compassionate lady who understands the issues, to put together a team designed to do that. We should not borrow more money for our grandchildren to be paying off over all their lifetime. The time for action is now. Let us change the legislation, make these big companies pay, and use that money for the benefit of everybody.

--- Later in debate ---

[Lucy Frazer]

The Government are making changes to the tax system, including through a number of measures to ensure that those on the lowest pay are paying fewer taxes. The Wealth Tax Commission identified that there would be some advantages to a one-off tax, but it acknowledged:

“although one can point to entirely new taxes introduced within the recent past, there are none on this scale.”

This is not a matter of lack of political will, as the hon. Member for Brighton, Pavilion (Caroline Lucas) suggested. This is not a measure that we would bring forward, for a variety of good reasons. Denis Healey, a Labour Chancellor of the Exchequer, came to understand that later in life, when he wrote of his time in office in the 1970s:

“We had committed ourselves to a wealth tax; but in five years I found it impossible to draft one which would yield enough revenue to be worth the administrative cost and political hassle.”

[Jim Shannon]

In my contribution, I referred to eight companies that have purposely avoided tax, without breaking the law, by moving their money overseas. Amazon, Google, Apple and Facebook are four of those eight. Have the Government any intention to put pressure on those companies to ensure that they pay tax? All the people of the United Kingdom could then get the benefit of that through education, health and betterment.

[Lucy Frazer]

The hon. Gentleman makes an important point. This matter needs international action, and he will know that international action is being taken. More than 130 countries signed up to a new international corporate tax framework in October 2021. That will help to ensure that multinational businesses pay their fair share, with the right companies paying the right amount of tax in the right place.

The hon. Member for Leeds East talked about capital gains tax. We recognise the importance of preserving the incentive for individuals to invest in this country and grow the economy, when they can choose to spend money in any jurisdiction. Having said that, we also recognise the importance of ensuring that a fair amount of tax is paid from assets through capital gains tax.

We have made a number of steps to reform both the dividend tax and the CGT regimes. For example, in 2016, the Government reformed the old, complex system of dividend taxation, simplifying it at the same time as increasing effective rates. In 2018, we reduced the tax-free dividend allowance from £5,000 to £2,000 per annum. In 2020, the Chancellor cut the lifetime limit of CGT entrepreneurs’ relief from £10 million to £1 million.

I would like to touch on the context in which this debate is taking place and the cost of living pressure on families, because those issues are important, as was recognised by many Members, including the hon. Member for Leeds East, the right hon. Member for Hayes and Harlington (John McDonnell) and the hon. Members for Strangford (Jim Shannon) and for Cynon Valley (Beth Winter). The hon. Member for Wansbeck (Ian Lavery) made a passionate speech, recognising the need to look after other people. That is exactly what the Government are trying to do, within the constraints and the global economic position we are in.

We are trying to support other people through our recent announcement of a £37 billion support package. We want to ensure that those who cannot work get support. We are taking a number of measures through the restart and kickstart schemes to ensure that people get into work and can support themselves. We are then ensuring that they are paid properly in work, and hon. Members will know about the increase in the national living wage and our measures to cut taxes to ensure that those in the lowest income brackets get sufficient sums when in work. We are also upskilling people so that they can increase their pay.