Tax in the UK

 It is a feeling that must surely be familiar to many in Britain now: the tax burden has never felt heavier, yet the public services they are meant to fund have rarely been worse.

At its heart, the tax system relies on public consent for a social contract: each of us pools our resources in exchange for the benefit of collective goods, from roads to hospitals, with those who have the most contributing more.

It is not hard to see why that contract has come unstuck in recent years. Ministers waste millions of pounds of taxpayers' money on doomed asylum schemes and unusable PPE, while public services and the poorest communities are starved of cash.

At the same time, a wealthy minority of people - who are able, notably to buy their way out of a crumbling public health system and schools - have been permitted to hoard an increasing amount of resources for themselves. While workers have been hit by a decade of low wages and the highest tax burden in 70 years, all during a cost of living crisis, the wealth of millionaires and billionaires - and the number of them - has boomed, and with next to no attempt by the political class to redistribute it.

The Withered Tree
William Collins (1788- 1847)
Photo Credit: Nottingham City Museums & Galleries [CC BY_NC]

Far from those with the biggest shoulders taking the biggest burden, there seems to be a cross-party consensus that their wealth should largely undisturbed...

Even the income tax cuts aimed at middle earners which Rishi Sunak trailed at the weekend, would be paid for by curbing public spending and benefits for the poorest people in society.

Labour, meanwhile, appears to be working to be as unthreatening as possible to the super-wealthy. Just last month, the party invited city bankers to chip in with ideas for its election manifesto...

This is a country in which both food bank queues and Porsche sales are at a record high...

It's not that people necessarily want to pay less tax - polling shows that more than half the public actually support higher taxes in order to improve services - but that they want to feel the system is useful and fair...Introducing one-off wealth tax on households with more than £1m... would generate an estimated £260bn. That's more than enough to cover a year's funding of the NHS and social care spending...

Britain needs rebuilding. And it is not just a teacher who should bankroll that project, but a FTSE 100 boss too.

(Frances Ryan, The Guardian, 2024)

The majority of those receiving benefits are already working - what does that say about the wage system in the UK?

Duty Paid
Ralph Hedley (1848-1913)
Photo Credit: Sunderland Museum & Winter Gardens. [CC BY-NC]

UK plutocrats rank proudly fifth in the world for mega-wealth, but our poor have 20% less than the poor of Slovenia.

Britain has got a lot poorer, partly due to economic own goals such as Brexit. There is less of everything following "the most dramatic period of spending cuts in modern history", so taxes must rise unless voters are ready to see public services disintegrate further. That's the choice - and the sharp message from Paul Johnson, Institute for Fiscal Studies director, in his new book, Follow the Money. He has killer facts: no politician dare challenge IFS figures. His analysis of our warped tax system, riddled with reliefs for rich people and penalties for the rest, offers irrefutably fairer options.

"Government's dirty secret is that it chooses not to do the right thing," he writes. That's through fear of voters (he has the advantage of not needing to woo them or confront the Daily Mail.) Vastly more money could be raised by squeezing rich people and ending their tax reliefs - but he warns that truly economy-changing sums to invest in long-term growth and public services mean asking everyone to pay more...

How much more should we pay in tax? That's up to us, because "there is nothing in economics that says we can't have a bigger state," Johnson writes. Look how similar countries that raise far more tax to buy far better services, while investing in growth, succeed better than us: France, Germany, Sweden and the Netherlands all raise and spend more, pulling away from us at a faster pace as we sink down the G7 league in growth. Incomes in France grew in a decade by 34% and in Germany by 27%, while typical UK income dropped by 2%, according to the Resolution Foundation.

In no particular order, look at our erratic tax system. Take council tax, now almost as outrageous as the poll tax it replaced: with its cap on top rates it defies every rule of tax justice, so zillionaire mansions pay just three times more than the humblest bedsit...

(Polly Toynbee, The Guardian, 2023)

If the country wants better services it has to pay for them. For the common good, the more you earn the more tax you should pay. There should be no tax relief or tax avoidance schemes for those who earn vast sums of money and council tax should be reformed so that people with large houses pay much more than people with more modest homes.

... The question I ponder is why the universal egalitarian principle of the NHS, held in such esteem by so many, rarely spills over into the other good things the state can provide for everyone. Why aren't we more Scandanavian in our willingness to pay the taxes that would give us a public realm with better education, arts, leisure centres, parks, preserved heritage; with great transport, fine public housing, a decent social security net and Sure Start centres for all families?

The mundane answer may be that everyone, of all ages and incomes, fears they might need an ambulance to A&E if they fall off a ladder or keel over with a heart attack, whereas only a certain number of people at any one time appreciate other public services. But Labour could tap into that Scandanavian sentiment, as it becomes ever clearer that the current plight of the NHS is due to profound social failures beyond its doors. The NHS is the last resort, the repository for the effects of neglect in everything else - from dirty air, to children in mould-ridden homes, to inadequate food. As life expectancy falls, research by Michael Marmot, professor of epidemiology at University College London, shows that healing the NHS requires healing the worst inequalities...

(Polly Toynbee, The Guardian, 2023)