There is a scene in The Simpsons in which Ned Flanders enthuses about the joys of tax. Asked by his son what taxes pay for, he exclaims: “Everything!” – from policemen and trees to sunshine. I have always been a Ned in this regard and have argued that tax is one of the great social goods. But, as I filed my self-assessment return last week, I found myself grumbling. It isn’t so much that the bill was relatively high, but that I could no longer work out what exactly it was paying for. NHS waiting times are soaring. The social security system is leaving families destitute. It is a feeling surely 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 can notably 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 – and number – of millionaires and billionaires has boomed, and with next to no attempt by the political class to redistribute it.
Far from those with the biggest shoulders taking the biggest burden, there seems to be a cross-party consensus that their wealth should go largely undisturbed. In the upcoming spring statement, the Conservatives are said to be lining up a reduction in inheritance tax – in effect a hand-out to the wealthiest 5%. 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. “We have no plans for a wealth tax,” the shadow chancellor, Rachel Reeves, reassured last year.
The party does have plans to scrap non-dom tax status, add VAT to private school fees and crack down on tax avoidance, but has ditched Keir Starmer’s leadership pledge to increase the 45p top rate of income tax. For context, consider that under Margaret Thatcher, that renowned socialist, the top rate of income tax was at least 60% for the first nine years of her government.
Such political choices – and they are choices – don’t just miss vital opportunities to boost the public purse in a time of financial crisis. They eventually build resentment that chips away at support (a vacuum that hard-right anti-tax groups are more than willing to fill). The recent backlash against the news that anyone selling items on secondhand sites such as Vinted will now come under scrutiny from HMRC speaks to the nagging sense of unfairness that increasingly sits at the heart of the tax system and, in many ways, society itself.
This is a country in which both food bank queues and Porsche sales are at a record high. An economic status quo that sees those with extreme wealth as untouchable while frightening a single mum selling old baby clothes online for gas money is – quite understandably – seen by many as broken.
That’s why reports that Reeves is also considering cutting income tax or national insurance if elected show she is misjudging the national mood. It is not that people necessarily want to pay less tax – polling shows that more than half the public actually support higher taxes to improve services – but that they want to feel the system is useful and fair. Or to put it another way: most people don’t want a lower tax bill – they want to be able to book a GP appointment.
We are told on repeat that public services are unaffordable. Really, there are plenty of ways to fund them – it is just that a populist press and most politicians do not deem it legitimate. This is already being challenged outside Westminster: look to Scotland, which last month announced a tax on high earners to protect public services.
Introducing a one-off 1% wealth tax on households with more than £1m would garner fevered Daily Mail headlines but it would also generate an estimated £260bn, more than enough to cover a year’s funding of the NHS and social care spending.
Equalising capital gains tax (paid on profits from assets) with income tax could raise about £14bn – and help fix the bias that sees many workers shell out more than those getting rich from property or assets. As things stand, a doctor pays a bigger share of her income in tax than a City trader does on profits from his investment portfolio. (And that’s before you consider the sky-high marginal tax rate for paying off a medic’s student loan.)
As an election year begins, we are in the bizarre position of the two main parties responding to decaying public services by promising lower taxes. By any metric, that is not sustainable. If Starmer does not wish to disappoint an already bruised electorate in the first months of a probable Labour government, he must make the case now that growth alone is not enough to cure the nation’s ills. Taxes for the richest will need to rise. Spending will have to rapidly grow. And yet with it, expectations can, too.
Our taxes may not be able to guarantee sunshine, but it is not too much to ask that they ensure a hospital bed when we’re sick and a care worker when we’re old. Britain needs rebuilding. It is not just a teacher who should bankroll that project, but a FTSE 100 boss, too.
Frances Ryan is a Guardian columnist
