Tax is about political choices. At the worst possible time, our government just made all the wrong ones.
Kwasi Kwarteng arrives at 10 Downing Street on 15 September 2021 in London, England. (Leon Neal / Getty Images)
And so it has come to pass that after a period in the margins, the hard right libertarians have the keys to Number 10 once again. The Truss administration is stacked with ideologues from the opaque Institute of Economic Affairs and the Taxpayers’ Alliance. They were granted access to Downing Street by a tiny group of Conservative Party members, numbering only 0.2% of the wider British electorate.
It’s hard to overstress just how fringe these ideas are. Yet the free-market faithfuls have wasted no time in prescribing a course of action for the British economy, which is showing symptoms of recession after a decade of under-investment, the shock of divorce from our largest trading partner, inflationary pressures, and post-pandemic strain. Their proposed medicine? The largest single transfer of wealth from the many to the few in half a century.
The package of measures announced by the new Chancellor Kwasi Kwarteng today includes a cut to taxes for companies making more than a quarter of a million in profits each year, a cut to taxes on property, most of which will benefit wealthy homeowners, a cut to national insurance, which will overwhelmingly benefit the highest earners, and abolition of the top rate of income tax, which IPPR estimate will line the pockets of the richest 2%. To top this all off, Kwarteng scrapped a cap on bankers’ bonuses.
Analysis by the Women’s Budget Group shows around 80% of those who benefit from slashing the 45% tax rate will be men. Meanwhile, three quarters of workers who earn too little to pay income tax are women, and so will gain nothing from the nearly £5.3 billion a year spent cutting the basic rate of income tax. It’s hard to think of a more deliberately divisive budget by a British government ever.
It appears that none of these announcements are funded from existing pots. Instead we’ll be borrowing billions to boost the incomes of the super rich through the tax system. This means the costs could either be met by future taxpayers—most of whom have benefitted little from this bankers’ budget—or through the continued, grinding erosion of the public services that we all rely on (and contribute towards). Truss’ government is robbing the pauper to pay the prince.
An inequality budget of this scale would be a shocking move under any circumstances. But it is a particularly appalling act in a moment defined by crises on all fronts: a cost of living crisis which will push hundreds of thousands into destitution, a climate crisis that is already affecting millions across the planet, and which we must act now to restrain, and a crisis in our public services, symbolised by the seven million people currently waiting for a hospital appointment. Under these circumstances, handing billions of pounds to a few people that don’t need it is near criminal.
With shock tactics like these it is easy to forget recent history. Like the nearly £40 billion that our research showed business had been handed by Johnson and Sunak over the pandemic, the largest handout of any group. Or the fact that the wealth gap has grown over the last few years, as quantitative easing pumped up the value of the assets held by the wealthy. Today’s budget accelerates these existing trends towards making this country more and more unfair and unequal. This cannot be sustainable.
It also makes questions about the democratic basis for this great tax robbery more pressing. None of these extreme measures were put to the country in a general election manifesto, nor were they subject to the scrutiny of the independent Office of Budget Responsibility, as would normally be the case. Polling consistently shows public support for better funding of public services, with only 6% wanting to see tax cuts. The government’s sting on the British public is performed entirely without democratic mandate.
Newly appointed ministers will now repeat over and again that ‘there is no alternative’, but this is not the case. Instead of raiding the public realm to make the rich richer, this government should have used the tax system to generate funds for our public services that could blunt the sharpest edges of the cost of living catastrophe, invest in our housing stock to reduce the impact of energy prices in future and cut carbon emissions, or fix our broken child and social care systems. Tax, after all, is about political choices, and our new government has made all of the wrong ones.Original post