New Wealth Taxes

Debate between John McDonnell and Edward Leigh

Tuesday 14th June 2022 Westminster Hall

[John McDonnell (Hayes and Harlington) (Lab)]

I congratulate my hon. Friend the Member for Leeds East (Richard Burgon) on introducing this debate. It is extremely timely and is given justification what our communities are experiencing.

I want briefly to run through a statistical portrait of our country. I have looked at some hard facts about the situation in our country. My hon. Friend has emphasised the importance of redistribution in tackling some of the real problems that many working people face. I have looked before at issues relating to poverty and I will reiterate some of the stats. There are 14.5 million people living in poverty and 4.3 million children growing up in poverty. According to the Institute for Fiscal Studies, there are 700,000 more children in poverty than there were a decade ago. The people who seem to be hit the hardest are families with children, and households with someone who has a disability. Interestingly, two thirds of children growing up in poverty are in households where someone is in work. What does that say about wages overall?

I have also looked at the issue as it relates to pensioners. Despite improvements—which I have welcomed, particularly that with regard to the triple lock, even though it was deflected this year—there are still 2.1 million pensioners living in poverty. There is no need for me to mention the massive increase in the use of food banks. A recent survey and report about children demonstrated that even children are skipping meals because their family cannot afford to feed them on a daily basis. An estimated 2.6 million are skipping meals in some form, and going hungry.

On fuel poverty, National Energy Action estimated that price rises would result in the number of households in fuel poverty increasing by more than 50% in April. The language has changed—we have not experienced until recent years—from a discussion about poverty into one about destitution. There are 2.4 million people who have experienced destitution, including 550,000 children. Destitution is the inability to provide the basics in life: a warm coat, shoes, heating and, of course, eating. That is what they are experiencing at the moment.

The housing figures are startling. On rough sleeping, 64,890 households are assessed as being homeless or facing the threat of being homeless. There are now 1 million on housing waiting lists. The figures on health inequality and poverty are staggering. The gap in life expectancy between our poorest and richest areas is 27 years.

As my hon. Friend said, the increase in the number of millionaires and billionaires is staggering. I looked at The Sunday Times rich list. Britain’s super-wealthy have grown their combined fortunes by a record £710 billion in just the past 12 months. As my hon. Friend said, there has been a nearly 30% increase in City bonuses. In March alone, £6 billion was paid out in bonuses.

Wages are facing the longest squeeze in modern history since Napoleonic times. The research published this morning demonstrates that wages are falling behind again, because of the high rate of inflation. One of the key elements of all of this is the insecurity that that engenders. We now have 1 million people on zero-hours contracts. That is not a society that any of us should be living in or should want to live in.

Somehow, we have to find a mechanism to address the grotesque levels of inequality that our community is now facing. Unless we shape up to that challenge, we will potentially have a change in the nature of our politics, as people get angrier and angrier. We know who exploits that anger: usually it is the far right more than anyone else. In addition to that, we will be ashamed of ourselves for not acting urgently on this matter.

Therefore, how do we ensure urgent action? Of course, I agree with all the policies to ensure that there is a long-term investment plan to get people into jobs that are high-skilled, highly productive and so on, but the link between people having a job and lifting themselves out of poverty has unfortunately been broken, particularly because of low wages. We have also seen the degeneration of our public services because of austerity over the last 12 years, and those public services are therefore no longer available to many people who once depended on them.

We have to introduce an emergency programme of measures to lift people out of poverty and secure long-term investment in our public services, and the redistributive element of a one-off wealth tax, which my hon. Friend the Member for Leeds East has put forward, is one component of the emergency programme that we desperately need. That way, we would be able to use resources directly to lift people out of poverty, to restore some of the cuts that have taken place with universal credit, and to make sure that people get properly funded, particularly if they are providing the public services that we desperately need at the moment. They must have decent wages.

Now is the time to consider all these options. I have always thought that the best mechanics for taxation in this country have been Tory Chancellors. If you look back on the decision to level up capital gains tax with income tax under Nigel Lawson, I think that was the right thing to do then, and it is the right thing to do now. It could give us anything between £17 billion and £24 billion, which would be more than was included in the national insurance increase. It could have covered the social care and health costs for which we need an injection of funds.

Rab Butler introduced an excessive profits tax in this country during the Korea war. It was not just a windfall tax on one sector; it was across the economy for anyone who was profiteering, and the money was put back into funding our public services and helping people out of poverty. All those measures are available to us.

In addition, we need to look at the City of London, because it is obscene the bonuses that are being paid out. Therefore, we need either a tax on those bonuses or a financial transaction tax, so that we have a regular income and the City pays its way. Because of the appalling levels of inequality, the drift towards higher levels of poverty, and the implications that it has for so many within our community, the argument for a one-off wealth tax on that scale—affecting 1% of our population but supporting 99%—is unarguable at the moment. Therefore, there needs be a proper consideration of it.

This is a Westminster Hall debate, but I hope that it extends beyond this debating Chamber and into the main Chamber, and that it becomes a feature of some of the demands in the run-up to the November Budget—the emergency Budget that we now need to tackle the real suffering that our community is experiencing at the moment.

[Sir Edward Leigh (in the Chair)]

I remind Members, please, to keep under six minutes; otherwise, not everybody will get in.

Economy and Jobs

Debate between John McDonnell and Edward Leigh

Monday 20th January 2020 Commons Chamber

[John McDonnell]

I suppose we will have a longer debate at some stage about the outcome of the last general election. I will be straight with the hon. Gentleman: I think the overriding issue was Brexit and that the overriding message was the one the Conservative party put out of “Get Brexit Done”. I ascribe the victory of the Conservative party to that. I cannot be straighter with him than that.

In the last three months in this Chamber, we have had debates on the spending review and the last Queen’s Speech in which hon. Members have highlighted report after report from independent agencies exposing the impact of a decade of austerity. I want to seize on one group as an example—a group dear to all our hearts. If we are to lay any claim to being a compassionate or even a civilised society, surely the most effective test is how we care for our children, and on that count the Government fail appallingly. Surely no Government could ignore organisations such as the Children’s Society and the Child Poverty Action Group, which have reported that more than 4 million of our children are still living in poverty. That means that one child in three is living in poverty in our country in the 21st century. Some 125,000 of those children are homeless and living in temporary accommodation.

The effects on our children of living in poverty are well documented by the Children’s Society. Those children are more likely to be in poor health, to experience mental health problems, and to have a low sense of wellbeing. They underachieve at school, and experience stigma and bullying. The shocking statistic, though, is that 70% of children living in poverty are in households in which someone is in work. The Children’s Society describes that experience as being hit by a perfect storm of low wages, insecure jobs and benefit cuts. The result is remarkable: this Government have achieved the historic distinction of being the first modern Government to break the link between securing work and being lifted out of poverty.

The Chancellor boasted recently that wage rises were at record levels compared with those of the last 10 years. That is a bizarre boast. Wage rises are at a 10-year record high because his Government have kept wage growth so low for the last decade. Average real wages are still lower than they were before the financial crisis. [Interruption.] The Chancellor, from a sedentary position, has again used the slogan “Labour’s crisis”. Let me try to find a quotation for him. George Osborne said:

“did Gordon Brown cause the sub-prime crisis in America? No.”

He went on to say that “broadly speaking”, the Labour Government

“did what was necessary in a very difficult situation.”

The Chancellor, again from a sedentary position, refers to the deficit. Let me quote again. In 2007, George Osborne said:

“Today, I can confirm for the first time that a Conservative Government will adopt these spending totals.”

He was referring to the spending totals of a Labour Government, by implication. Let me caution the Chancellor, because we might want to examine his role at Deutsche Bank, where he was selling collateralised debt obligations, described by others as the weapon of mass destruction that caused the crisis.

As I was saying, average real wages are still lower than they were before the financial crisis. The Resolution Foundation has described the last decade as the worst for wage growth since Napoleonic times. The recent increase in the minimum wage. announced with such a fanfare by the Government, reneges on their minimal commitment that it would be £9 an hour by this year. It certainly is not. The UK is the only major developed country in which wages fell at the same time as the economy grew after the financial crisis.

The Government seem to believe that the answer to low pay is raising national insurance and tax thresholds. When tax thresholds are raised, the highest gainers are largely the highest earners, and raising them and national insurance contributions is the least effective way of tackling poverty. According to the IFS, only 3% of the gains from raising the national insurance threshold would go to the poorest 20% in our society. A £3 billion cut in the national insurance contributions of employees and self-employed people—which, at one stage, was promised by the Prime Minister—would raise the incomes of that group by 0.1%, which pales into insignificance in comparison with the losses endured from benefit and tax credit cuts since 2010. It is also worth bearing it in mind that, while the heaviest burden of austerity has been forced on the poorest in our society, this Government have given away £70 billion of tax cuts to the corporations and the rich.

We have also heard Ministers refer to the so-called jobs miracle. Of course we all welcome increased employment, but when we look behind the global figures we find nearly 4 million people in insecure work with no guaranteed hours and 900,000 people on zero-hours contracts. Britain has one of the highest levels of income inequality in the developed world. A FTSE 100 chief executive will be paid more in three days than the average worker’s annual wage. Surely no Member of this House can think that that is right, can they? The gender pay gap is 17.3% and there is now an inter-generational pay gap of over 20%. There is an 8% pay gap for black workers, and if you are disabled the pay gap is 15%. There is nothing in the Queen’s Speech that will address any of this. There is nothing that will address the grotesque levels of inequality in our society and at work, certainly on the scale that is needed.

[Sir Edward Leigh (Gainsborough) (Con)]

And 30% of all tax receipts come from the top 1% of earners.

[John McDonnell]

That is just income tax. It is interesting that the lowest earners pay 40% of their income in tax while the highest earners pay 34%. We know who is paying more in comparison with what they earn.

There is nothing in this Queen’s Speech that will address the grotesque levels of inequality. Actually, the reverse is true because the Government are now launching another assault on trade union rights and, in particular, the human right of the ability to withdraw one’s labour. The Chancellor has also rejected future dynamic alignment with EU employment rights and standards, and there is a real fear—let us express it now—that this prefaces the fulfilment of ambitions of Conservative Members to undermine workers’ rights and conditions. Maybe that is what some of their campaigning for Brexit was all about. Wage levels are low, in part because this Government have produced a productivity crisis. Over the past decade, productivity grew at its slowest level in 60 years. A German or French worker produces in four days what a British worker produces in five, not because the UK worker is any less industrious; far from it. It is because investment in the UK has been broadly weaker than in the rest of the G7 countries, especially since 2016, and investment is currently stagnating.

This has been exacerbated by the lack of investment not just in capital but in human capital—in training and skills. In his interview at the weekend in the Financial Times, the Chancellor highlighted the role of further education colleges, and I agree with him. He talked about the role they could play in raising productivity by promoting lifelong learning and skills training. As someone who benefited from further education while I was on the shop floor, I fully agree, but the reality is that this Government have brought FE to its knees, with the IFS suggesting that at least £1.16 billion is needed just to reverse the cuts that the Government have imposed on further education. We have seen a decade of a Government denying opportunities to the very people whose skills have been desperately needed, not just to fire up our economy but also to lift their families of poverty.

Alongside skills, a vibrant economy needs to invest in the future if we are to compete in the fourth industrial revolution, but on investment in research and development, the UK is now 11th in the EU. We await the Government’s detailed proposals on investment in R and D, and if they are of a scale we will support them, but it will take a lot to make up for the lost decade in this field. A lack of investment in infrastructure and R&D has resulted in productivity going backwards in many regions of the UK. The 2017 Kerslake report identified a £40 billion productivity gap in the three northern regions compared with the south, which has produced some of the worst regional inequality in all of Europe.