Jim Shannon
Main Page: Jim Shannon (Democratic Unionist Party - Strangford)Department Debates - View all Jim Shannon's debates with the HM Treasury
(10 months, 1 week ago)
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It is a pleasure to serve under your chairship, Sir Robert. I first thank the hon. Member for Hemsworth (Jon Trickett) for securing this debate and giving us all the chance to participate. It is no secret that my politics are left of centre, and I very much have a social conscience about these things, but I have to say honestly to Opposition Members that perhaps it is time we disagree. Hopefully, they can appreciate my point of view, which I will explain. The hon. Member for Darlington (Peter Gibson) made it very clear in his contribution where he stands, and that is where I also stand. Opposition Members always have been and always will be good friends of mine, but I am on a different page to theirs on this one.
I welcome the opportunity today to make a strong case for why inheritance tax should be abolished in the United Kingdom of Great Britain and Northern Ireland. Inheritance tax is a levy imposed on the estates of people when they die, and I believe it is one of the most unfair taxes in existence. That is my opinion, and I hope others will respect it. Inheritance tax punishes a lifetime of hard work, discourages saving and creates inequality. It goes against the very principles of meritocracy, aspiration and family, and I believe it needs to go.
I will tell a story, and it is not because I want to boast in any way. My dad will be dead nine years this March, and when my mummy and daddy got married, he started with £5. My dad was very talented; he was very good with his hands and he could turn them to anything. He fixed a cartwheel and sold it for £5, and that £5 got mum and dad married—my mum is 92, by the way, so this was a long time ago. My point is that dad then progressed, through four or five shops, from western Tyrone right through to Ballywalter, Millisle, Newtownards and back down to where we now have farm. I can tell hon. Members that mum and dad got that farm through hard work, through the sweat of their brow, and through their efforts to try and do something, starting with £5. That story is gospel truth, and perhaps it illustrates where I come from. I think it is about working hard and having a hard-working ethic.
I say this with great respect to Opposition Members, because I know that they have a work ethic as well—it is not about that. I just want to explain that my dad did what he did, and got to where he was, through those efforts. My father is now dead and gone, but that effort has been replicated by hundreds of thousands of people across this great United Kingdom of Great Britain and Northern Ireland. I believe we must address the fundamental principles that underpin our economic system. The accumulation of personal wealth through hard work, dedication and innovation is the basis of a thriving economy. In its current form, inheritance tax undermines that very principle by placing a significant burden on individuals who wish to pass on their accumulated assets to their loved ones.
I am not sure when I will pass away—it may be soon or it may be some time away, but whenever it is, I am ready to go, and I know where I am going—but I will wish to pass on what I have to my three boys. My will has already been made and that decision is done, because that is what I have worked hard for over all these years. Abolishing inheritance tax would allow families to retain the fruits of their hard labour, enabling the transfer of their hard-earned property from one generation to the next without any undue interference from the state.
I come from a farming background. I live in the farmhouse on my farm, and I will quote the old saying, “A father farms for his sons” or his daughters. A father does so in order to pass to the next generation a work ethic and whatever has rightly been earned from that work. If there is one reason to work hard and save wisely, surely it is doing so for one’s own family. I believe that inheritance tax punishes people, and many hundreds of thousands of others have the same opinion.
Inheritance tax is ineffective and inefficient. It raises a small amount of revenue for the Government but imposes a high administrative and compliance burden on taxpayers and their families. According to the Institute for Fiscal Studies, inheritance tax currently raises £7 billion per annum and will reach some £15 billion by 2032-33. However, that is only 0.5% of GDP, and it comes at the cost of complex rules, loopholes and avoidance schemes.
My mum and dad had a clear work ethic. I remember my mum taking me down to Northern Bank with £10 when I was 16, so that I could open a bank account. I am still with the bank, having received a £10 contribution from my mum to get me started. She instilled in me and my family a willingness to save for what we want and for what we need to get for our houses on so on.
Inheritance tax distorts economic behaviour, as it discourages people from saving and investing. Instead, it encourages them to spend or give away their possessions before they die, which I think is not entirely correct. Critics argue that abolishing inheritance tax may increase wealth inequality, but I do not believe that. It is essential to recognise that the tax affects not only the wealthy but many middle-class families, who may be asset rich but cash poor. That is the way I see it. In the area where I live, most families are middle class, and they express the same concerns that I am expressing today on their behalf.
Forcing families to liquidate assets to pay inheritance tax can result in the sale of family businesses or properties, leading to economic instability and job losses. Abolishing the tax would protect family-owned enterprises and allow for the preservation of businesses that contribute to local communities. Inheritance tax is unfair and inequitable. It hits people with different levels of wealth and different types of assets in different ways. The very wealthy effectively pay a lower rate of tax than the moderately wealthy, as they can use trusts, gifts and other legal devices to reduce their liability. I understand that and, to be fair, the hon. Member for Hemsworth referred to it earlier. I cannot say that people are abusing the system because, by its very nature, the system lets people find loopholes.
Inheritance tax violates the principle of double taxation, because it taxes people on income or savings on which they have already paid tax during their lifetime. They have already paid tax, and then they have to pay it again. That is not right. Inheritance tax also violates the principle of autonomy, as it restricts a person’s freedom to dispose of their property as they wish—the freedom to give what they own to their children or grandchildren, or to a charity.
I honestly see the tax as wholly un-British because it goes against the values of the British people who have traditionally believed in rewarding hard work, supporting family and achieving social mobility for the next generation. That is what I believe in my heart. We should always work to make the next generation better off than the previous one. That is why I have a social conscience. I am not saying that nobody else has a social conscience, but that is why my politics lie left of centre. I will always fight for the wee man and the wee woman to make sure that they have rights.
However, I cannot go along with what was proposed in the debate. Inheritance tax is consistently rated as the most hated tax in the country. There is a strong public demand for its abolition. I have no idea what the Minister will say, but if he says that inheritance tax will be abolished, I will cheer and I suspect the hon. Member for Darlington will do likewise. There might be others of the same opinion. It is 330 years since its inception in 1694—a long time to have a tax in place. There have been many changes in how we look at things today and differences in wealth dispersion, not just among those who are very wealthy but among the middle classes. My daddy and mum started off with £5 when they got married.
It is time to re-evaluate the tax. It seems to penalise success and undermine the family. I am a great believer in the family being the core of society. It is time to respect the wishes of the people who have worked hard to earn what they have and let them decide how to use it for the benefit of themselves and their loved ones.
It is, as ever, a great pleasure to serve under your chairmanship, Sir Robert. I thank the hon. Member for Hemsworth (Jon Trickett) for securing the debate, which has been quite informative and good-mannered. I pay tribute to my colleague and comrade, the right hon. Member for North East Hampshire (Mr Jayawardena), who I am sure was here to advocate a 5% inheritance tax.
I also pay tribute to the hon. Members for Darlington (Peter Gibson), for Easington (Grahame Morris), for Wansbeck (Ian Lavery), for Coventry South (Zarah Sultana) and for Strangford (Jim Shannon). It is not often that I disagree with the hon. Member for Strangford. He knows that I hold him in high esteem. But to gently push back on his argument, I suggest that perhaps his parents started with only £5 because of the inequality that exists. Perhaps if inheritance tax was properly in place, his parents might have had more money.
Perhaps I did not make my point in the right way. My mum and dad started with £5. They worked hard, developed all those shops and the farm that they owned through hard work and effort. What I am trying to say—I hope I can convey it in a sensible way—is that with that hard work ethic they made their £5 go far. It is like the story in the Bible of the 10 talents. They got 10 talents and a whole lot more.
I appreciate that. Anyone watching this debate will know that, given how we are debating this, some of which is based on Bible principles, this is just something that we will disagree on. I none the less appreciate how the hon. Member put his point and I respect it.
I have listened with great interest to the points made by Members today. As we approach the spring Budget, I suspect it will not be the last fiscal event of the year if we are heading for an autumn election. As with last year’s autumn statement, I am sure that the issue of inheritance tax—we got to the crux of this with the contributions from the hon. Members for Darlington and for North East Hampshire—or more specifically the issue of scrapping inheritance tax, will feature heavily in the debate leading up to the Chancellor’s announcement this spring.
As we debate this issue it is important to be cautious and take stock of who this debate favours and at what cost. Who are the winners and losers? I appreciate that, in the cosy consensus of Westminster, talking about the royal family is not often appreciated, but there is an elephant in the room here: there is no inheritance tax for the royal family. Indeed, recently, the King, following his mother’s passing away, benefited enormously from inheriting the Duchy of Lancaster, and his son benefited enormously from inheriting the Duchy of Cornwall. Neither of them paid any inheritance tax—we are talking about hundreds of millions of pounds being inherited by the King and the Prince of Wales, and not a single penny of inheritance tax being paid on that. I am at risk of upsetting either the Clerk or you, Sir Robert, so I will not make any more comment on that, but simply leave it on the record that my constituents and I find the situation deeply unacceptable.
Just last week, I stood in this Chamber outlining the dire situation that people currently face as a result of the cost of living crisis—a crisis that shows no real signs of improving any time soon. As I go around my constituency of Glasgow East and people talk, quite rightly, about the impact of the cost of living crisis and the upcoming Budget, not a single constituent who has spoken to me in person, emailed me or come to my surgeries has said, “Do you know what, David? The biggest solution to the cost of living crisis is to abolish inheritance tax.”
I suspect that if we challenge people on the issue of polling and go out there—whether to Westminster tube station, Hemsworth or Worcestershire—abolishing inheritance tax will be so low down in people’s priorities. That is why, in the midst of this cost of living crisis, debating whether to scrap inheritance tax—which less than 5% of people pay, despite bringing in nearly £7 billion to His Majesty’s Revenue and Customs—seems ludicrous. Against the backdrop of a British Government intent on bringing forward draconian measures to force ill and disabled people into work in order to balance the books, it is ludicrous that they are floating the idea of scrapping an inheritance tax that is paid by only the wealthiest households on these islands.
However, the British Government’s commitment to reducing taxes for the most well-off is a timely reminder of just how out of touch they are. As people struggle to turn on the heating this week in -4° conditions, it is simply absurd that the British Government should be even considering getting rid of a tax that goes at least some way, albeit a very small way, to alleviating the entrenched wealth inequality that is so prevalent in our society. The UK has one of the highest levels of income inequality in Europe, so scrapping or even reducing inheritance tax only deepens further the chasm of inequality that no modern or fair society should have.
Fuelling speculation around the scrapping of inheritance tax, the Chancellor has previously stated:
“I think that inheritance tax is a pernicious tax because one of the main reasons people invest is because they want to pass on savings to their children”.
Inheritance is an emotive subject of debate. It makes us consider life after we are no longer here and what that may look like for the generations after us. This is where my friend the hon. Member for Strangford and I entirely agree: we both know where we are going after we have been here, because of our belief in Jesus. I also happen to believe that people should not have a removal van or a bank van following them to their grave, but that is a separate issue.
As a parent myself, I understand the logic of wanting to be able to provide for our children, even from beyond the grave, but here is why I take that statement and the Chancellor’s line of argument with a degree of incredulity. I recently—in fact, only yesterday—spoke with Daniella Jenkins, a senior lecturer at the University of Bristol, who made an important point about recognising the existing inequality of intergenerational wealth. Like the hon. Member for Darlington, the Chancellor made a sweeping statement without giving any consideration to what I would argue are the huge disparities in intergenerational wealth that exist across these islands.
Pre-existing parental wealth is often overlooked in this debate. It is worth noting that while some children are set to inherit from their parents, some stand to inherit absolutely nothing, either because they do not have any parents or because their parents themselves face dire levels of income inequality, meaning that they will have little to leave behind. Sadly, that issue is probably more the case in constituencies such as mine, Glasgow East; I respectfully suggest that perhaps that is why I bring to the debate a different view from that of my friends on the Conservative Benches.
Although the Chancellor frames his argument around the desire to transfer wealth to children, we cannot escape the fact that the national trends across the population show that parental wealth is very, very unequally distributed. We should also remember that the value of wealth being passed on has also increased over time. If that cycle continued, it would only further entrench wealth inequality among millennial children and younger children, because—frankly—the difference between having rich parents or poor parents is now shaping what economic resources are available to children. That is why it is so important that the discussion about inheritance is centred on fairness and equality.
In Scotland, the issue of taxation has been under intense scrutiny over the last few months, following the Scottish Government’s latest reforms to their progressive tax framework. Only today the Prime Minister spoke about Scotland being the highest-taxed part of the United Kingdom. I am afraid that is not something that keeps me awake at night. As a higher earner, I am quite happy to pay more tax, because the tax that I pay goes towards the education that my children receive at the local school; the tax that I pay goes towards the salary of my mother, who works in the national health service. As a higher earner, I have no issue whatever with paying more tax, although I know that view is not shared widely in this place.
Although the Scottish Government currently have no ability to introduce measures related to income tax, within their income tax framework they have been able to create a progressive tax system conducive to a fair and more prosperous Scotland. With the limited powers that they have, the Scottish Government have ensured that the tax and social security system is progressive and equitable, so that everybody in Scotland—regardless of their background—has the opportunity to thrive. It is within those guiding principles that progressive policies have resulted in Scottish households, particularly in the lower half of the income distribution bracket, being £400 better off a year than they would be in other parts of the UK.
While we are faced with these elevated levels of income inequality, scrapping or reducing inheritance tax would simply deepen and perpetuate the existing disparity. If the British Government are determined to make an already deeply unfair inheritance tax system more unfair, the only conclusion that I can draw is that they must transfer the necessary powers to legislate on inheritance tax to the Scottish Parliament, either through the means of further devolution or—my desired option—independence. Only then will Scotland be able to build a comprehensive and progressive tax system that puts fairness and equality at the centre, representing the values of a modern and equitable society and not those of a Westminster system that frankly does not have the confidence of the people of Scotland.