New Wealth Taxes

Peter Grant Excerpts

Tuesday 14th June 2022 Westminster Hall

[Richard Burgon]

I thank the hon. Gentleman for his illustrative intervention, but I would paraphrase a former Labour Prime Minister, Clement Attlee: charity as a substitution for taxation can be a cold, heartless model. We should not be depending on the voluntary generosity of those at the very top to fund our public services. That creates a scenario that is almost servant and master—blessed is the giver and blessed is the receiver.

The UK does not have a wealth tax. Ministers have previously responded to me by saying that in practice we do, through taxes such as capital gains tax, but, while those earning wages are taxed on every penny of their income above permitted allowances, the same does not apply to the accumulation of wealth. For example, capital gains tax does not apply to all wealth but only to increases in the value of particular items of wealth. Structurally, we tax income much more rigorously than we do wealth. Of course, that favours the wealthy, as it is designed to do. I am afraid it is simply not good enough to pretend that even that system is working.

[Peter Grant (Glenrothes) (SNP)]

Does the hon. Member agree that the deliberate decision to increase national insurance contributions rather than other forms of income tax was a deliberate attempt to tax the poor rather than the wealthy for failings in the NHS?

[Richard Burgon]

That is absolutely right. The increase in national insurance contributions was iniquitous, regressive and absolutely outrageous, but from this Conservative Government, it was no surprise.

We currently have the scandal where income derived from wealth is taxed below income derived from work. For example, someone living off share dividend payouts would pay less in tax than someone who earns the same amount by getting up each and every day and going out to work. How on earth can that be justified? Likewise, capital gains tax, paid on profits when selling assets such as a second home, is paid below income tax rates.

There is huge scope for increasing tax revenues by ending the significant tax discounts afforded to income from wealth over income from work. Simply ending the lower rates paid on capital gains and share dividends, and removing the related exemptions on those taxes, would raise around £22 billion per year. That is a lot more than was raised by the national insurance tax hike on working people that we have just discussed.

--- Later in debate ---

[Sir Christopher Chope (Christchurch) (Con)]

It is a pleasure to serve under your chairmanship, Sir Edward. It is important to put the other side of the argument in this debate, albeit very briefly. It is fascinating to hear Members on the left of the Labour party campaign for even higher taxes when we already have the highest taxes this country has experienced during my lifetime. Like most Conservatives, I am in support of lower taxes, which is why I voted against the increases in national insurance. I agree with those who say that it was the wrong solution.

I want to encourage an entrepreneurial society. I want to have the wealth contributors active in our society. I have just come back from a parliamentary visit to California, where there is an enormous amount of wealth. California had a surplus last year of $100 billion, which was largely on the basis of taxing the very high earners and the wealthiest people in California. However, we heard a cautionary tale. There is a worry that California’s whole network of public services is now highly dependent on the income of such a small group of people and that, with the recession—when those people may lose a lot of their wealth—the income of California will drop dramatically.

I want to mention a couple of examples of wealth taxes that are already in operation. One is in the context of stamp duty. The consequence of arbitrary levels of stamp duty is people being deterred from selling their houses—they choose not to incur the tax and stay in the house they are in. We need supply-side reform there to eliminate the problems caused by high levels of stamp duty. It is very easy to campaign and say, “That is a really expensive house. When you buy that house, you should pay a substantial amount of tax on it,” but the consequences are—the unintended consequences, as so often arise with such measures—that we have actually succeeded in suppressing the housing market and individual choice.

The other issue, which is a big one in my constituency, is the proxy wealth tax, otherwise known as council tax, which is higher for those people who have more valuable properties. There will be some people who argue that it should be even higher for those with even more valuable properties. In my constituency, I have a large number of people who are, for want of a better expression, in council tax poverty. They face council tax imposed by Dorset Council in the order of, say, £4,000 a year, which is a heck of a lot more than 10% of their annual disposable income. It is a real pressure point at the moment.

Council tax is not a fair tax, because the taxes are not related to the use that individuals make of public services—it is a proxy wealth tax—but it sounded like a good idea at the time, as a reaction to the problems over the community charge. It is the law of unintended consequences that in Dorset, large numbers of my constituents are paying disproportionate amounts of money in council tax because of the system that is in place. Because their house happens to be worth more than a house somewhere in the north of England, they are deemed to be in a position to be able to pay more tax to the local exchequer than somebody in the north of England who might be very much better off.

[Peter Grant]

Will the hon. Gentleman give way?

[Sir Christopher Chope]

I know that Scotland was where we pioneered the community charge, so I would be happy to give way to the hon. Gentleman.

[Peter Grant]

I take issue with the hon. Gentleman’s assumption that the council tax is a wealth tax. A lot of my constituents who do not own anything—who do not own the house they live in—still have to pay council tax. It is not a tax on ownership; it is a tax on occupancy.

[Sir Christopher Chope]

It is a tax related to the wealth of the property in which someone lives. If there is only one person living in that property, there is a 25% discount, but there is no discount otherwise. It is solely related to the capital value of the property, and that is why, in a sense, it is a wealth tax. I know that this is an inconvenient argument for those who are campaigning for a wealth tax, but let us be under no illusions: the council tax system is essentially an embryonic wealth tax, although the levels are much lower than the hon. Member for Leeds East (Richard Burgon) referred to in his introduction to the debate.

I do not know anybody who would be subject to the tax that the hon. Member for Leeds East suggests. He mentioned people who say they would love to be able to pay more tax. As I said in my intervention, there is nothing to stop all those socialist millionaires who have a bit of a conscience and who are arguing that everybody else other than themselves should pay more tax making their own contribution. There is nothing to stop the hon. Gentleman setting up a trust fund into which they could pay, so they could then contribute more than they are able to contribute at the moment. Why not do that?

If people want to pay more towards the costs of the state and are in a position so to do, there is a voluntary system out there. I am sure the Financial Secretary to the Treasury, my right hon. and learned Friend the Member for South East Cambridgeshire (Lucy Frazer), will draw our attention to the fact that the number of voluntary contributions made to Her Majesty’s Revenue and Customs is rather modest compared with what it could be on the basis of what those supposed billionaires want to do.

Let us keep the wealth creators in our country. Let us praise the work they do, the jobs they create and the contribution they make to our overall wealth as a nation. Let us not deter them and drive them away elsewhere. I am very much against a wealth tax and I hope the Minister will make it clear that it is in no way on the Government’s agenda.

--- Later in debate ---

[Peter Grant (Glenrothes) (SNP)]

I am pleased to begin the summing-up for this debate. I congratulate the hon. Member for Leeds East (Richard Burgon) on securing the debate and for the well-informed and passionate way in which he introduced it. That goes for all the speakers. I had issues with some comments from the hon. Member for Christchurch (Sir Christopher Chope), who has not been able to stay to the end, but he put his points across with a great deal of vigour, as always.

I think what we are looking at here is a fundamental difference of opinion on who the wealth is for. Who is the world’s wealth for? Who should have first claim on the natural resources of any country? Historically, Britain has taken the view that it does not belong to the people in that country. That is what the colonies were about. That is what the slave trade was about. There is an assumption that is still deep in the British psyche that somehow Britain is better than everybody else, that, “We’ve got a right to impose on them; they don’t have a right to impose on us.” We see the same attitude in arguments about who has the right to enjoy the benefits of the resources of this or any other country.

I see that locally, in my own constituency of Glenrothes in the centre of Fife and throughout west and southern Fife, with the legacy of the coal mining industry. For the few, it generated massive fortunes. For the many, all it generated was memorials and early graves. Many of my constituents are still, to this day, permanently disabled by diseases they caught while working down the coal mines.

Then there is the legacy of North sea oil and gas—I say the legacy, although that is not fully known yet, because there is still plenty there to be used should we decide to do so. Norway discovered gas at about the same time as we did. The Norwegian sovereign wealth fund is today worth $1.2 trillion dollars. Norway does not have a national debt, it has a national fortune that it almost literally struggles to find places to invest, equivalent to £184,000 for every man, woman and child in Norway. Scotland’s equivalent sovereign wealth fund from our North sea oil riches is nil, as it is for other parts of the United Kingdom. The entire fortune was frittered away almost entirely on tax breaks for people who already had more money than they knew what to do with.

As has been commented on, the United Kingdom has more billionaires today than ever before and, at the same time, it has more people than ever before genuinely wondering if they will go hungry this weekend. That cannot be right. In five years, the wealthiest 20% of people saw their income increase by 4.7%. The poorest 20% of people saw their income go down by 1.6%. Not only is the wealth and income gap obscenely large, it is getting bigger all the time.

Even during the pandemic when millions of low-paid workers in the public and private sector were going well beyond what they could reasonably be asked to do to keep the economy going, keep us safe and keep public services going, the top earning 1% of employees saw their income increase by 7%. For the bottom earning 10%, it was just over 2%. Seven per cent. of a salary of half a million pounds a year is a heck of a lot more than 2% of £10 per hour.

Oxfam has reported that the fortunes of individual food and energy billionaires has increased by $453 billion in the last two years. One reason why fuel prices are escalating just now is not the requirements of the market, but the naked greed of a small number of individuals and corporations who have decided to take advantage of international crises to increase their own fortunes.

At the same time, this Government choose to employ eight times as many people to chase benefit cheats than they employ to chase tax cheats. Why is that? Because this Government still cling to the philosophy that there is something intrinsically wrong with having to claim benefit and there is something intrinsically wrong with having to pay tax, so we should chase down people who might be fiddling their benefit claim, but, if people are fiddling their tax, unless it is really blatant or unless it becomes impossible to ignore politically, we will not be too worried. We have just over 500 people to deal with large-scale tax fraud against HMRC. We will never get anywhere near full recovery of the money, and the reason can only be that they do not want to.

The rising levels of inequality are not inevitable; it does not have to be like this. They are not an accident, and they are not the natural order of things. It is an artificial situation that has been deliberately created over time by Governments here and elsewhere. Keeping the inequalities and allowing them to get bigger and bigger by the day is a deliberate political choice by the Government of the day. I am not suggesting for a minute—nor, I suspect, is the hon. Member for Leeds East—that a wealth tax on its own will solve all that, because it cannot. No individual measure can solve inequality to the extent that we have it in these four nations, but surely it is time to send out a signal that the purpose of taxation is not to give people who have too much money even more. It is to provide for those who cannot afford to provide for themselves. There is a significant necessity and urgency about that just now.

United Kingdom Government debt, as it stands, is unsustainable and that cannot be allowed to continue. There are three ways to deal with it: we can raise taxes; we can cut public spending, although I cannot think of a single part of the public sector that needs to be cut, and I can think of a lot that desperately need more resources; or we can take steps that will help to grow the economy, which is a longer-term ambition that will not happen overnight. There is an imperative to increase the amount of tax that is raised somehow, but the Government have chosen to do that by punishing people for being low paid. They are punishing people for going out to work, and punishing businesses for taking on additional employees by increasing national insurance. The Government had a choice to increase other taxes, which might have upset the Chancellor’s friends but would have left the vast majority of people in these four nations better off as a result.

There is not a single thing called a wealth tax that is necessarily good or bad. There is a lot of detail that needs to be considered, and it is quite right that nobody has put forward a specific plan as to exactly what should constitute wealth, where the tax should start and what level it should be put at. Those are all things that need to be looked at in detail and, once the wealth taxes are introduced, that will inevitably become part of the Budget considerations for future Chancellors. However, given the level of inequalities that we have just now, and given that there are people resident in these four nations who sometimes try to pretend not to be resident and who literally have more money that they could possibly spend during their lifetime, no matter how hard they try, surely it is only reasonable to ask them to give up a tiny fraction of their massive wealth to protect people who have been through the mill over the last two and a half years, many of whom have made massive sacrifices. Surely it is time to start giving these workers the salaries that they deserve and to start to reinstate the public services that so many citizens urgently require.

--- Later in debate ---

[Peter Grant]

Will the Minister give way?

[Lucy Frazer]

I would love to, but I am coming to the end of my time.

[Lucy Frazer]

I am happy to give way.

[Peter Grant]

Thank you, Sir Edward, for intervening on my behalf. That is the second or third time that the Minister and her colleagues have quoted figures on how much better off certain people will be because of changes to the tax and benefits system. They have not yet been able to answer the question of how much of that additional income has already disappeared because of the increasing cost of the basic essentials of life.

[Lucy Frazer]

I anticipated that point, which is an important one, and we will of course bring forward more statistics for this year in due course.