[Sir Edward Leigh in the Chair]
I beg to move,
That this House has considered the potential merits of introducing new wealth taxes.
It is a real pleasure to serve under your chairship, Sir Edward. This debate could not come at a more important time. People face the biggest single-year fall in incomes in 70 years. We in this House often hear shocking statistics, including about the 2 million food bank parcels that are handed out and the 5 million people who have to choose between heating or eating. Behind each of those statistics, however, is a real person who is struggling, be they a mother who is refusing certain foods at a food bank because she cannot afford to cook them, a pensioner riding the bus to keep warm, or a parent missing yet another meal so that their children have just enough to eat to get through the school day. For some, however, this is not a crisis; it is a boom time.
I thank my hon. Friend for securing this extremely importantly debate. As always, he is making a powerful speech. Britain has in recent years gained a record number of billionaires. Between them, they own £653 billion, which is about triple the annual operating budget of the NHS. During the pandemic, their wealth increased by more than a fifth. Does he agree that such wealth is obscene—especially in the midst of a cost of living crisis—and that we should do everything we can to redistribute it away from the super-rich, who have profited from the pandemic and rocketing prices, towards the workers who kept society running throughout and now face poverty and destitution?
As always, my hon. Friend makes a crucial point, and she is absolutely right: that is a moral imperative.
In the past few weeks alone, we have learned that the number of billionaires in Britain has risen to 177, and their wealth is now at record levels. Britain’s billionaires have increased their wealth by a staggering £220 million per day over the past two years. On top of that, we have learned that bankers’ bonuses are up 28% over the past year and are rising at six times the rate of wages. We have also learned that the bosses of Britain’s top 100 companies have seen their annual pay increase to an average of £3.6 million. We have food banks for nurses in hospitals, but at the top of Britain’s finance sector, the champagne corks are well and truly popping.
That phenomenon is not confined to Britain; it is global. The total wealth of the world’s billionaires is now equivalent to 14% of global GDP—up threefold since 2000. The global wealth of billionaires has risen more in the past two years than in the previous 23 years combined. If we are to tackle inequality and hardship, we need to address our rigged economic model.
The hon. Gentleman is making interesting points. I accept that there has to be a limit to the amount of wealth that can be accumulated by a small number of individuals; I do not think anybody would argue that equity is not important to some degree. He mentions the global situation. Many countries have actually stepped back from wealth taxes, which they found did not work because they are bureaucratic and administratively difficult, and they ultimately did not raise the money expected. Austria, Denmark, Finland, Germany, Iceland, Ireland, Italy, the Netherlands, Luxembourg and Sweden have all tried wealth taxes and decided that they did not work. Why does he think that is the case?
It is not about someone getting more money for doing their job; it is about the obscenity of people getting large amounts of money when others are getting smaller amounts of money. People get six-figure dividends when others live on £10 an hour. That obscene disparity is the issue.
I could not agree more. We are talking about multibillion-pound enterprises with people at the top hoovering up the wealth, while others do not receive anything. Only yesterday, I and colleagues visited a picket line in Wakefield, where bus drivers are on strike; they are calling for £13.40 an hour. Many people will be surprised that they are not already on at least that sum.
To address our rigged economic model, we must first acknowledge that trickle-down economics has been a lie. Wealth is not trickling down; it is being funnelled up into fewer and fewer hands. That is a consequence of 40 years of deregulation, privatisation, outsourcing, driving down working conditions, the weakening of trade unions and lower taxes on the rich. Contrary to what is said by the spin doctors of the right, decades of keeping taxes low for the very rich has not boosted economic growth. In fact, research by the London School of Economics and King’s College London looking at tax cuts over the past 50 years shows that lower taxes on the rich has led to higher income inequality because the top 1% has captured almost all of the gains, while there has been almost no effect on boosting economic growth.
Inequality and hardship are not just at the heart of our system—it is how our system is designed and how it functions. Poverty and inequality are structural and institutionalised. That is why we need a debate on wealth taxes. A wealth tax is an idea whose time has come.
Last year, the Secretary-General of the United Nations called on Governments to consider a wealth tax on those who had profited during the pandemic, to reduce extreme inequalities. The OECD has argued that there is a strong case for addressing wealth inequality through the tax system. The group Patriotic Millionaires has called on the Chancellor to introduce a wealth tax, saying:
“We know where you can find that money—tax wealth holders like us.”
Oxfam has also called for a wealth tax to rein in extreme wealth and monopoly power.
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.
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.
I am grateful to the hon. Member for giving way, and I apologise for my voice. This debate is very important. People sometimes say that a wealth tax would not work because wealthy people would just up sticks and leave. Does the hon. Member agree that, actually, it is a matter of political will? If we chose to, we could levy an exit tax on vacating wealthy individuals, as they do in the United States. That would be a big discouragement for people to do that. Put simply, what is lacking here is political will—that is what is preventing us from attacking this obscene level of inequality, both here and around the world.
I could not agree more; it is a matter of political will. We often hear politicians using the phrase “tough choices”, but when they say that, they usually mean the easy choice of giving real-terms cuts on wages, benefits and pensions. The real tough choice—the real, morally correct choice—is to make those with the broadest shoulders pay their fair share at long last. It is important to note that more than half of all gains from capital gains go to just 5,000 people.
Before those on the Conservative Benches moan that such reforms are part of some kind of socialist plot, I remind them that Nigel Lawson raised capital gains tax rates to match income tax rates, and that it was a top recommendation by the current Chancellor’s own advisers, the Office of Tax Simplification, in 2020. Other tax reforms that touch on aspects of wealth, such as the regressive council tax system, could also be reformed and replaced with a proportional property tax, as my hon. Friend the Member for Easington (Grahame Morris) has so passionately argued.
Beyond making taxes that apply to certain aspects of wealth fairer, it is time for a new one-off tax on the very wealthy. That was recommended in 2020 by the UK Wealth Tax Commission, which was packed with leading tax experts. It was the first such report undertaken in 50 years, and it is recommended—in fact, essential—reading for every Member of this House, in my humble opinion. It concludes that a one-off wealth tax would be fair, as those with the most wealth have the broadest shoulders to afford an additional contribution to society in times of crisis. It would also be efficient. A one-off wealth tax would not discourage economic activity, and the administrative cost would be a small proportion of the revenue raised. It would also be very difficult to avoid by emigrating or moving money offshore. It could raise vast sums to tackle the ills of economic hardship and inequality.
In fact, the commission says that without a one-off wealth tax, we will not tackle inequality because, while we are one of the most unequal countries in Europe on income distribution, inequality is even worse when it comes to wealth. Almost one quarter of all household wealth in the UK is held by the richest 1% of the population—people whose wealth is above £3.6 million. That is why, today, in this debate, I am calling for a one-off 10% tax on any wealth above £10 million. That could raise £86 billion, according to the Wealth Tax Commission.
Such a tax would hit far less than 1% of the population, but it could create a huge social emergency fund to help get people through this crisis and help rebuild the communities hit by a decade of austerity and the slowest pay growth in 200 years. I am sure that the Minister will reply with all sorts of obstacles, such as “Some people are cash poor but wealth rich, so how would they pay?” Well, the payment can be spread annually, or even deferred until assets are sold.
In conclusion, in the end it is not technical problems that we face but a lack of political will. Just imagine, Sir Edward, if the Government went after the tax of the wealthy as much as they piled taxes on working people. It is a political choice—a moral choice—of where to get the money from, how much, and when. Instead of letting the wealthiest off the hook while hiking taxes on millions of workers who face a cost of living emergency, it is time for a wealth tax on the very richest in our society.
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.
It is a pleasure to serve under your chairmanship, Sir Edward. I thank my hon. Friend Member for Leeds East (Richard Burgon) for securing this important debate.
I shall start by reading an excerpt from a letter to Klaus Schwab, the Executive Chairman of the World Economic Forum. It reads:
“The scandalous rise in the cost of living across the globe is not an unfortunate accident. It is the result of dogged commitment, from governments all over the world, to preserving the power and wealth of a tiny minority over the needs of their voting publics. It is a stunning commitment to failure and a constant suppressant on our economic and social prosperity…We must face it. People do not trust democracy because the prevailing global oligarchy is rendering it pointless. No matter how many people vote, if governments continue to listen to wealth over sense, the votes and voices of everyday people are not heard.
If you want to defend democracy you have to face facts. The divide between the very rich and the rest must close. The rich must be taxed.”
People might think that those are the words of a social justice movement or a left-wing political activist, but nothing could be further from the truth. The letter was actually written by millionaires themselves—specifically, a non-party political network of millionaires advocating action on economic inequality and higher taxes on themselves. They include groups such as Patriotic Millionaires, the “Tax me now” initiative, Millionaires for Humanity and 99%-Initiative, who recognise that hard work and entrepreneurship should be celebrated, rewarded and encouraged, but that we cannot do that effectively in a broken economic system that fails to address the gross divide between those with extreme wealth and the majority of everyday people.
Those millionaires and, I suspect, many more decent people like them recognise that something skewed has been happening in our economy over recent years, and they are right. “Taxing Extreme Wealth”, a recent report by Oxfam, Patriotic Millionaires, the Institute for Policy Studies and Fight Inequality, found that in the UK alone,
“Between 2016 and 2021, the number of individuals with wealth over $50 million increased from 4,375 to 5,330”.
The report also found that there were 56 billionaires in the UK, with wealth totalling $204.9 billion, and that throughout the pandemic, while many people struggled, the wealth of British billionaires actually increased by $41.06 billion. Indeed, the five richest billionaires have the same amount of wealth as the bottom 40% of British society.
That phenomenon has not happened overnight. The global free market race for the most competitive national tax rate has seen the top rates of personal income tax and capital income tax rates decline since the 1980s in leading industrial nations, and the income share of the top 1% has significantly increased. On top of all that, the tax system in the UK is littered with loopholes that allow tax avoidance, and there is little resource for Her Majesty’s Revenue and Customs to clamp down on tax avoidance or evasion. There are a number of inherent structural flaws, such as the absurdity that income from wealth is taxed at a lower rate than income from salary.
As we have heard today, the sad fact is that it does not need to be like this. We can take steps to reform our broken taxation system, and a wealth tax is one option to try to create such economic balance. Of course, there are many permutations as to how a wealth tax could be constructed: it could be an annual tax in tandem with wider, much-needed reform of our taxation system to address existing loopholes and structural flaws; alternatively, it could be a one-off tax in response to the covid pandemic and the cost of living crisis. Such detail requires deeper discussion than time will allow today, but I hope that it will be the next step after today’s debate.
Even millionaires are warning us against the injustices that they plainly see in our economic system. Further, they are warning us to take seriously the threat that rising inequality poses to democracy. It is up to all of us, whatever our political stripes, to embrace tax changes that would limit inequality and give our constituents the quality of life they deserve.
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.
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.
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.
Thank you for calling me, Sir Edward. Thank you, too, to the hon. Member for Leeds East (Richard Burgon) for bringing forward the debate and for his advocacy on the issue.
Tax is a fundamental and necessary tool of the Government and, from my perspective as a social democrat, one that is not being adequately levied by the Government to address the huge and parallel challenges of poverty and wealth inequality. Wealth inequality is one of the most defining issues of our time and, like other seismic challenges, such as climate change, it will only be addressed by concerted, co-ordinated and internationalised action. It is being driven, first, by failures in the tax system to levy tax, and secondly, by evasion and avoidance, which is not just about short-changing the public purse but also has a distorting effect on decent, compliant and locally anchored businesses.
The UK and the world, as hon. Members have outlined, is not short of wealth. There is plenty to go around. The global economy has quintupled over the past three decades. However, due to regressive and outdated forms of taxation, that wealth is accruing in the hands of a tiny number of people at the top, while the wealth of those at the bottom is decreasing. Globally and in the UK, the tax system is essentially rigged for exactly those purposes. We know, too, that inequalities have worsened during the pandemic and, in parallel, that the cost of living has surged, the average salary is nowhere near keeping up and public services—health and education—have deteriorated.
The Government need revenue and they turn to tax—so far, so fair—but who or what they choose to tax reveals a mindset. A state can choose to tax either wealth or income and this Government have chosen to tax income—to tax work, when a wealth tax would garner more resource for the state and, in parallel, help address the issues of income disparity that are driving a lack of cohesion and hampering social solidarity. Taxing income alone will not raise the resource needed to be genuinely transformative in those issues of poverty and climate change or, for example, the challenges within the health service. It will also do nothing to address the widening gap between the richest and the poorest, which, as others have outlined, is part of what is driving populism, fundamentalism and people feeling lost within the political system.
It is welcome that the Government are belatedly pursuing a windfall tax—even if we are not supposed to call it that—to address some of the property bonanzas, but that should not be limited to the energy sectors; the Government should also focus on an individual wealth tax. What do we mean when we speak about the wealthy? Before we even start to discuss at what level a tax is levied, what comes to my mind, when differentiating, is those whose income comes from assets such as rents and dividends, when the rest of society depends on labour and wages. It is wealth that makes money even when somebody is asleep, and often at a faster rate than the one at which many people are able to earn.
The enduring myths about wealth, which we will hear mentioned in this debate, include the idea that wealth taxes would slow down the economy, deter job creation and prompt capital flight. One myth is that, simply by existing, wealthy people create jobs; but we know that in fact it is demand that creates jobs. If we take a billion pounds and give it to one person, about 99% of that wealth will leave circulation. Yet that same billion, distributed among a million people, would continue to circulate around the economy, stimulating demand, and not be locked up in the hands of a small number. So the mega-rich are, in fact, taking capital out of society and spending it on the inflation of existing and essentially non-productive assets, such as land and property. That is what trickles down from the wealthy to the average person who is trying to buy a home to live in or raise their family.
The wealthy and their wealth will not just leave, either, any more than wealth is already leaving the public purse due to our complex and loosely regulated tax systems. A large amount of the wealth in this country is tied up in property; as the hon. Member for Brighton, Pavilion (Caroline Lucas) said, it cannot just up sticks and leave. Tax avoidance is not inevitable; it is a policy choice around where to levy tax and underfund enforcement. Things like the Panama papers and the Paradise papers have given more than enough evidence over the years to show that tax avoidance and evasion are standard practice around the world.
Last week, BBC programme “Spotlight” revealed a niche product called Northern Ireland limited partnerships, which are being exploited on a wide scale for people to avoid taxation and to get up to all sorts of nefarious purposes. One street in my constituency in south Belfast is home to 100 such Northern Ireland limited partnerships, which create not a single job or add a single penny to the Revenue, and which are up to all sorts. However, it was a choice not to close down that loophole.
It is a pleasure to serve under your chairmanship, Sir Edward. I congratulate my hon. Friend the Member for Leeds East (Richard Burgon) on securing this important debate.
I will not reproduce figures already mentioned, but there has been an explosion of wealth, certainly since the banking crash, and before that, alongside a growth in poverty. The two things are interconnected, because the growth in wealth is a function of the increase in poverty. It reminds me of Victor Hugo’s statement:
“The paradise of the rich is made out of the hell of the poor.”
That is the truth of the matter, but it is not simply about poverty. It is also about remuneration for middle and upper-income earners as well as lower-income earners. The truth is that there is a long-term secular decline in the proportion of GDP that goes into wages and salaries. That is the central problem with which we need to wrestle, if we intend to tackle the fiscal crisis that state services are now facing. There are four sources of tax. There is income tax, which is more or less half of all tax raised. There is tax on consumption, which is VAT. There is tax on household property, the council tax. There is tax on capital. The tax on capital is one twelfth of the amount raised from income taxes, and is imbalanced as a consequence.
It is even worse than that. If the amount of money going into the salaries and wages of the 33 million working people in our country is correct—it is, because a graph shows it clearly—the capacity of income tax, which is the largest amount of tax we raise, will be limited and in long-term secular decline. We must do something about that, if we want to continue with public services and tackle inequality. Where is the money going to come from? I do not think for one second that we want to increase VAT in any event, but particularly given the cost of living crisis. Nor do I propose an increase in council tax.
Income tax is in long-term decline for the reasons I have given. Therefore, there is only one other place to go, which is to tax wealth. Two of my hon. Friends talked of a one-off tax on wealth. I am not convinced that that is the right way to do it. First, a very large amount of money, a proportion of individual wealth, would have to be raised on a one-off basis to make a significant contribution. In any event, there is a long-term fiscal crisis, for the reasons I have described. Therefore, we need a regular tax on capital.
I have a further point to make on that, and it has already been made. For some reason, we tax income from work much more than income from wealth. That is wrong, imbalanced, asymmetric and should end. There is scope to do that. I published a paper about a year ago, which is now in the Library, about wealth and a wealth tax. We looked at several different ways of taxing wealth, and there are many. We worked out the median of a reasonably balanced wealth tax, taking account of behavioural changes, because wealthy people will change how they behave. We thought we could raise about £100 billion a year. The document is in the Library for people to look at. That is the central argument that needs to be made. Of course, there is an ethical argument about whether one human can be worth millions of pounds more than another. There is also an argument about inequality, tackling poverty and all those issues, but the central question is how to deal with the long-term fiscal crisis.
I will make one final point before I sit down. The Conservative party will not resolve this. Why do I say that? Tory donors who are among the top 250 richest people in our country have donated to that party £57 million. We all know that whoever pays the piper calls the tune. The Tories are not going to resolve the problem; they are part of the issue. There has to be a debate about these long-term problems, and a wealth tax is part of the solution.
Thank you for calling me to speak, Sir Edward.
People say times are hard. We have all said it. There is not one person in this Chamber who has not said it, and I am sure the Minister has said it as well—and meant it. Today, times are harder than ever. That is the situation we are living in today. I want to give an example of one person in my constituency to illustrate why we need to consider new means of raising funds through taxation. I support the thrust of what the hon. Member for Leeds East (Richard Burgon) has referred to, which is important.
A healthcare assistant in my constituency works three long days plus whatever overtime is needed on her ward at the Ulster Hospital. She is now paying £400 a month out of her wages for fuel. Her parking at the hospital, which she has to pay for, is £60 a month. Her rent is £750 a month, which is not exorbitant—that is the normal going rate for rental accommodation. Her food bill, while trying to eat healthily, is £500 a month. Her gas went up to £180 a month and her electric is £100 a month. That comes to a princely total of £1,990 just to be warm, eat and get to work, with none of the luxuries that she would probably like to have.
There is no subway for my constituent to get to work and no bus timetable that fits with her shift work. The list goes on. She said to me, “Jim, I want to have a child, but can you tell me how I can afford childcare, afford to dress and feed another person, and live a life?” Can anybody here tell me how to do that? I could not tell the lady. I am sure nobody else could. I have no answer for this lovely young lady. We in this place need to come up with the answer and put it into operation. That is what this debate is about today.
I understand that people have different qualities, experiences and abilities. Those who get a big sum of money, such as a brain surgeon, get a lot more money than the person who drives, with respect, a bin lorry. I understand that. Different jobs pay different moneys. What I object to is the obscene amounts of money that people get for bonuses. I am not saying that they should not, but if somebody gets a six-figure sum or a seven-figure bonus, I despair when I think of the people in my constituency who cannot get it.
The hon. Member for Belfast South (Claire Hanna) said we should tax such people at a level that does not screw them but ultimately means they make a significant contribution to the tax system. We could then put that money into the NHS and into education. All of us in this House would see that as a benefit and a way forward.
This is about how we can raise revenue to benefit families on the poverty line today without their grandchildren paying it off. Those who use tax avoidance legally withhold what they should morally pay. The right hon. Member for Central Devon (Mel Stride), who is not in his seat, named companies that should pay their taxes. If they paid their taxes, the Minister would be in a position to use that money for the benefit of everyone in the United Kingdom.
I read an article last summer that highlighted the fact that eight large tech companies in the UK made an estimated £9.6 billion in profit from sales to UK customers in 2019; yet by moving that money out of the UK those companies ended up declaring a fraction of their profits in the accounts of their UK subsidiaries, radically reducing their tax liability. That is how they can make more money. If they paid their tax, the Government could do more with it. The companies were Amazon, eBay, Adobe, Google, Cisco, Facebook, Microsoft and Apple. They faced UK corporation tax liabilities of £297 million in 2019. That puts the total amount of tax avoided by companies in the UK at an estimated £1.5 billion in 2019, pre-covid and pre the difficulties and the changes that covid brought to businesses. There were £45.4 billion in revenues, £9.6 billion in profits, £296 million in tax paid, and £1.5 billion in tax avoided. Those are the companies that we should go for.
Have the Government estimated the cost of cutting fuel duty, for example, which lowers production and transport costs, saving businesses and consumers money that they can put back into the local economy? This is an issue that we must consider. We must do more to encourage these billion-pound businesses to do the right thing by the consumers from whom they make their money. If ever there was a time to ask and then legislatively demand of businesses that they live up to their obligations, it is now. I ask the Minister, who I believe is a compassionate lady who understands the issues, to put together a team designed to do that. We should not borrow more money for our grandchildren to be paying off over all their lifetime. The time for action is now. Let us change the legislation, make these big companies pay, and use that money for the benefit of everybody.
It is a pleasure to serve under your chairmanship, Sir Edward. Congratulations to my hon. Friend the Member for Leeds East (Richard Burgon) on bringing this very timely debate to the Chamber.
I am possibly naive, but I really believe that there is good in everybody—I really believe that. But I see the inequalities and disparities in the way in which this very, very wealthy nation distributes its finance, and it is having an impact on me. I am worried. And I am thinking about how politically naive I actually am, because I honestly believe that most people in the House of Commons, most elected representatives, want to do what is right for the people in this country, but that is not happening.
The economic model is rigged—it is grotesque. The inequalities, the disparities, are there to be seen. We did not need reports; we do not need professors’ reports or experts’ reports. MPs can see this in their constituencies. They can see it on their streets. They can see it in the housing stock. Why are bankers’ bonuses 28% higher and rising six times faster than the wages of an average worker? As my right hon. Friend the Member for Hayes and Harlington (John McDonnell) said, £6 billion was paid out in March. This is at a time when we have people—just go outside the doors of the Commons to see this—lying on the streets. They cannot afford food and are struggling merely to exist. It is grotesque. I resent anybody who would support such a system. Why do we have such imbalance? Why do we have these billionaires who could never spend the money that they have amassed if they lived for four or five centuries? At the same time, we have children in poverty. We have 2.6 million children skipping meals; we have their parents skipping meals, because the family income is not enough. Yet the number of billionaires increase—they increase and increase—at the same time as people cannot switch the electricity on in their homes. What needs to be expressed in such simple terms that it cannot be misunderstood by people in this House? While the rich get obscenely richer—this is not rhetoric; it is fact—we are seeing people at the lower end of the income scale suffering so much.
We live in a very proud nation. I am very patriotic, but being patriotic does not mean to say that we wave the Union Jack flag and sing the national anthem. I think that being patriotic means looking after the people in our country and ensuring that they have the basic human rights in life—that they can keep themselves clean, have a roof over their heads, have enough to eat, and have a decent income to have a decent lifestyle. That definitely is not the case now. That cannot be argued against here. It cannot be argued against, because the facts and figures have been put before us in this debate by the speakers. We still have 2 million people using food banks. We still have families claiming benefits. We have families having to use food banks and people in work claiming benefits and using food banks. It is totally unacceptable in a democracy—in a nation such as the one we are very proud to represent—that these grotesque inequalities continue to occur. They cannot continue; let us show some humanity.
I congratulate my hon. Friend the Member for Leeds East (Richard Burgon) on securing this debate, and other colleagues, including my hon. Friend the Member for Hemsworth (Jon Trickett), who have campaigned tirelessly for a wealth tax. The debate is vital and timely, particularly during this cost of living crisis. As others have said, we are one of the richest nations on the planet, yet we have some of the most shocking inequalities. On the one hand, we have City financiers cashing in on above-inflation income rises through bonuses and multinational corporations spending billions paying dividends to shareholders. On the other, the Government are holding down incomes from public sector pay, pensions and social security, and the use of food banks at the moment is astronomical. Over the past decade, public services have been stripped to the bone because the Government claim they cannot afford to pay them.
I have just completed a cost of living survey in my constituency of Cynon Valley. We had a huge response: over 650 people responded, and their stories were harrowing. The levels of anxiety, despair and misery are unbelievable. Some 90% of people said that they felt worse off than they did 12 months ago; 40% said that they would not put the heating on; and 50% said that they would be cutting down on essentials such as food. We have allowed poverty to become normalised, at a time when banks, energy companies and multinationals have more money than they know what to do with.
The reality is that more often than not, those with the capacity to pay a greater amount of tax pay proportionately less than those who are less able. Recent statistics published by the Office for National Statistics show that the top 10% of individuals hold almost 50% of all wealth in the country. Inequality is also geographical: the figures on individual total wealth by region in this country demonstrate an enormous disparity between the wealth in London and the south-east of England, and the levels of poverty in areas such as mine in the country of Wales and in the north of England. In my constituency, before the pandemic, the median weekly wage of a full-time worker was £80 less than that of the typical British worker. Wage rates are such that in 2020, more than a quarter of local residents were estimated to be earning less than the real living wage. These are not people who we can tax more to fund public services, which is why it is unacceptable that income from wealth is taxed less than income from work.
Others have already given examples of respected think-tanks and colleagues in the House who have identified the mass of wealth that could be subject to greater taxation. For example, in 2019, the Institute for Public Policy Research proposed that income from dividends and capital gains be incorporated into the income tax schedule, estimating that those changes could raise up to £120 billion of additional revenue over five years. The report of the Wealth Tax Commission found that a one-off 1% wealth tax on the richest could raise £260 billion in the UK over the next five years.
The Welsh Government have made it clear in their programme for government that they are committed to growing their tax base and developing further effective tax measures to ensure that the interests of local people are protected. They have begun that process by increasing taxation thresholds on second homes in Wales, and are making the case for tax devolution in Wales. This has to include ensuring that the profits from the Crown Estate in Wales go directly to Welsh governments—currently, that is UK tax in Wales, but the Welsh Government should have access to it.
I will finish with a quote from a constituent who responded to the cost of living survey. Behind all the statistics, as we often say on this side of the House, there are real people:
“Life genuinely doesn’t feel like living any more. I feel guilty for bringing my children into this awful mess of the world.”
Is that a society that any of us want to be living in? I do not think so. Shame on us as a society. Shame on this Government. We need to introduce a wealth tax now.
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.
I congratulate my hon. Friend the Member for Leeds East (Richard Burgon) on securing the debate, and I thank all hon. Members for their contributions.
Taxation is high on the political agenda right now for a number of reasons, but particularly in the United Kingdom because we are the only country in the G7 to be putting up taxes on incomes in the middle of the cost of living crisis that we are going through. We often hear about the global factors behind some of what we are experiencing—for example, the opening up of the global economy after covid, or Russia’s invasion of Ukraine. Of course those factors are contributing to inflationary pressures in many countries, but specific factors in the UK have also made our situation more difficult, such as the Government’s decision to allow the closure of our biggest gas storage facility, our exposure to short-term energy spot markets and, as well as the national insurance increase, the decision to freeze personal allowances for five years, which creates more taxes on incomes as inflation rises. The combination of price rises and tax rises was specifically cited by the OECD last week in its forecast, which projected UK growth next year to be the lowest in the G20 with the sole exception of Russia.
The Government’s incoherence on tax has been highlighted in this House in one fiscal statement after another over the past couple of years. First, the tax rise was announced, then a change in thresholds, then a cut promised in two years’ time. Then there was a debate within the Conservative party about whether that cut should be brought forward from two years’ time. I thought the hokey-cokey was a dance, not a description of Government tax policy, but that is how it has felt over the past 18 months.
All that chopping and changing has served only to undermine whatever coherence there might have been in policy, and whatever credentials Ministers tell themselves that they have for sound management of the economy. In fact, the electorate could be forgiven for feeling that they have been asked to be unwilling participants in the Chancellor’s conversation with himself about whether or not he is a tax cutter. In his corporation tax announcement he declared the death of the Laffer curve in the explicit rejection of his predecessor’s justification for cutting corporation tax.
No amount of disclaimers at the end of Budget statements can change the reality of the Government’s decisions or their effects. With inflation at its highest in 40 years, the cost of living crisis is causing immense hardship, as we have heard from many colleagues. The Office for Budget Responsibility expects the fall in living standards this year to be the largest in living memory.
Another most basic thing to say about the Government’s tax changes is that they are a clear breach of their 2019 manifesto, which said,
“our plan is to cut taxes for the lowest paid through cutting national insurance.”
National insurance has gone up—it has not been cut. The Prime Minister might assume that no one takes him at his word. After all, why would they? But this rise is the opposite of what he said he would do. Now we know that the Government have also frozen the personal allowance for five years, too.
Let us turn to some of the other taxation options in front of people. The Government have followed our plan to introduce a windfall tax on oil and gas producers’ profits, although they cannot bring themselves to call it that—it is the policy that dare not speak its name. Beyond that, there is more that the Government could do to make the system fairer. The Chancellor, for example, could address some of the tax loopholes that deprive the public finances of much-needed funding that could be paid by some of those most able to pay. I take one example that we have announced: the way that private equity bonuses, otherwise known as carried interest, are treated. These substantial sums are given as bonuses to private equity partners and are taxed at the lower rate.
Sitting suspended for a Division in the House.
Just before the Division bell went, I mentioned our proposals for changing the tax treatment of private equity bonuses. Let us also look at the use of non-dom status to avoid paying UK tax on worldwide earnings. The principle that we adopt on this issue is very simple: if someone makes the United Kingdom their home, they should pay their tax here. Our constituents do not have the luxury of engaging in international tax arbitrage to pay tax in the jurisdiction of their choice. They cannot pay a fee to exercise that choice. That is why we say that non-dom status should be abolished. It simply is not right that those at the top can benefit from an outdated, 200-year-old tax break while most people are struggling with tax rises and the cost of living crisis. The changes we have proposed would bring us into line with other major economies, such as Germany, Canada and France, and create a system that takes into account people who are genuinely here to work for a few years on a temporary basis.
As the economy has changed, the tax system should change too. In business taxation, when it comes to domestic and international companies and the balance between physical and digital companies, the old system of assuming that every business is a physical business based in one country has become out of date. We see tax arbitrage in this world too, with companies shifting profits around to the jurisdiction of their convenience. We see high street businesses and British companies that pay their fair share struggling as large multinationals avoid paying their taxes through the shifting of profits around the world. That is one reason we support the international minimum corporation tax and want the agreement reached on that to be ratified and put into practice. It is also why we want the current system of business rates in the UK to be replaced with a new system of business taxation that is fit for the 21st century. That new system would create a more modern balance between the physical and the digital and between local high streets and out-of-town locations.
The overall tax burden is now the highest it has been in 70 years, while our economic growth rate in the last 12 years has been anaemic. Those two things are related. If the country does not generate enough economic growth, that affects our fiscal position and the incomes people can earn. If the country had continued with the rate of growth in the first decade of this century under the Labour Government, earnings would be thousands of pounds a year higher and the country’s fiscal position would be distinctly healthier. I am not the only one who has noticed it—as the former Financial Secretary to the Treasury, the right hon. Member for Hereford and South Herefordshire (Jesse Norman), made clear in his letter ahead of last week’s no-confidence vote, he believes that the Prime Minister has “no long-term plan”, and that view is shared on both sides of the House.
I will finish with a word about wealth creation, which has been mentioned in the debate, and what it is. Any serious party of Government must support wealth creation just as much as fair wealth distribution. But what is wealth creation? It has to be more than simply the ownership of assets. Wealth creation is the combination of great ideas with great effort. When we see a company in our constituency that has a great product or service—we probably all know one—we want that company to provide good work, reward its workers fairly, succeed and make a profit. That is wealth creation. It is not simply the ownership of assets. If we support that wealth creation and create the wealth the country needs, we should match that to fair taxation that can give us the public services that underpin a good society. It is that combination of wealth creation and a good society that we will continue to support.
It is a pleasure to serve under your chairmanship, Sir Edward. I congratulate the hon. Member for Leeds East (Richard Burgon) on securing today’s important debate. I know that he and others feel passionately about it, particularly—as many have mentioned—at a time when households up and down the country are struggling.
I propose to start my response by talking about the tax system and the degree to which wealthier individuals already pay a significant—and proportionately significantly greater—amount in tax. However, before I do, I want to recognise the important contribution that many wealthy individuals make to the UK economy. The Conservative party—this Government—supports entrepreneurship; we support wealth creation and we support ensuring that successful businesses in our constituencies contribute to our local and national economies. However, we also understand the importance of ensuring that wealthy individuals make a fair contribution and pay the tax that is owed.
That is not just our thinking of the moment; it is the way we have dealt with this issue for a number of years. We already have a very progressive income tax system, with the top 5% projected to pay nearly half of all income tax in 2021-22. The hon. Member for Leeds East mentioned the top 1%, and he may know that they will be paying more than 28% of all income tax.
The hon. Member for Hemsworth (Jon Trickett) mentioned other taxes, and the principles I have set out apply well beyond income tax, with several other taxes on wealth across many different economic activities, including the acquisition, holding, transfer and disposal of assets and income derived from assets. Those all generate significant revenue for the public purse. For instance, for this tax year—2022-23—the OBR estimates that there will be inheritance tax revenues of £6.7 billion, capital gains tax revenues of £15 billion and property transactions taxes of £17.1 billion.
The Wealth Tax Commission’s July 2020 report found that, taking the narrowest definition of a tax on wealth—that is, inheritance, estate and gift taxes—UK taxes on wealth were about average compared with other G7 countries. At the same time, Government policy is, and will continue to be, highly redistributive in the round. In 2024-25, on average, households in the lowest income 10% will receive more than £4 in public spending for every £1 they pay in tax.
The hon. Member for Christchurch (Sir Christopher Chope) made some interesting points about the downside of higher taxes. That is why we are committed to ensuring that we are a low-tax economy.
The hon. Member for Leeds East mentioned the Wealth Tax Commission’s report. That was an important piece of work, which set out a significant amount of detail. The hon. Member for Salford and Eccles (Rebecca Long Bailey) suggested an annual wealth tax, but she may be aware that the commission rejected the idea of an ongoing wealth tax, charged on an annual basis, for a range of reasons. It is true that it saw some potential merit in a one-off wealth tax, as the hon. Member for Leeds East said, but that does not provide long-term revenues for the future.
Is the Minister aware that the report did discount an annual wealth tax, and looked at exploring the possibility of an annual wealth tax if it was done in tandem with overall reform of our taxation system? Does she agree that our taxation system is long overdue an overhaul?
The Government are making changes to the tax system, including through a number of measures to ensure that those on the lowest pay are paying fewer taxes. The Wealth Tax Commission identified that there would be some advantages to a one-off tax, but it acknowledged:
“although one can point to entirely new taxes introduced within the recent past, there are none on this scale.”
This is not a matter of lack of political will, as the hon. Member for Brighton, Pavilion (Caroline Lucas) suggested. This is not a measure that we would bring forward, for a variety of good reasons. Denis Healey, a Labour Chancellor of the Exchequer, came to understand that later in life, when he wrote of his time in office in the 1970s:
“We had committed ourselves to a wealth tax; but in five years I found it impossible to draft one which would yield enough revenue to be worth the administrative cost and political hassle.”
In my contribution, I referred to eight companies that have purposely avoided tax, without breaking the law, by moving their money overseas. Amazon, Google, Apple and Facebook are four of those eight. Have the Government any intention to put pressure on those companies to ensure that they pay tax? All the people of the United Kingdom could then get the benefit of that through education, health and betterment.
The hon. Gentleman makes an important point. This matter needs international action, and he will know that international action is being taken. More than 130 countries signed up to a new international corporate tax framework in October 2021. That will help to ensure that multinational businesses pay their fair share, with the right companies paying the right amount of tax in the right place.
The hon. Member for Leeds East talked about capital gains tax. We recognise the importance of preserving the incentive for individuals to invest in this country and grow the economy, when they can choose to spend money in any jurisdiction. Having said that, we also recognise the importance of ensuring that a fair amount of tax is paid from assets through capital gains tax.
We have made a number of steps to reform both the dividend tax and the CGT regimes. For example, in 2016, the Government reformed the old, complex system of dividend taxation, simplifying it at the same time as increasing effective rates. In 2018, we reduced the tax-free dividend allowance from £5,000 to £2,000 per annum. In 2020, the Chancellor cut the lifetime limit of CGT entrepreneurs’ relief from £10 million to £1 million.
I would like to touch on the context in which this debate is taking place and the cost of living pressure on families, because those issues are important, as was recognised by many Members, including the hon. Member for Leeds East, the right hon. Member for Hayes and Harlington (John McDonnell) and the hon. Members for Strangford (Jim Shannon) and for Cynon Valley (Beth Winter). The hon. Member for Wansbeck (Ian Lavery) made a passionate speech, recognising the need to look after other people. That is exactly what the Government are trying to do, within the constraints and the global economic position we are in.
We are trying to support other people through our recent announcement of a £37 billion support package. We want to ensure that those who cannot work get support. We are taking a number of measures through the restart and kickstart schemes to ensure that people get into work and can support themselves. We are then ensuring that they are paid properly in work, and hon. Members will know about the increase in the national living wage and our measures to cut taxes to ensure that those in the lowest income brackets get sufficient sums when in work. We are also upskilling people so that they can increase their pay.
My hon. Friend the Member for Christchurch was right to identify that that option is available, if people choose to take it. The Government have set out our tax regime, and that option is available to those who wish to pay more tax.
I was touching on the cost of living, which is important. As many Members have said, this is not just about statistics; it is about people. To give an example, a single mother with two children who works full time on the national living wage will receive £2,500 a year in additional support because of the measures we have taken. On the subject of statistics, the right hon. Member for Hayes and Harlington did mention some, but our latest statistics show that in 2020-21 1.2 million fewer people were in absolute poverty than 10 years earlier, in 2009-10.
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.
Thank you, Sir Edward. It has been a fantastic debate, and I thank everybody who has attended it and contributed. I want to pick up on two quick points. First, my hon. Friend the Member for Hemsworth (Jon Trickett) raised the issue of how annual wealth taxes could work, and those are an important part of the debate too.
Secondly, they often say that the Back Bench speaks what the Front Bench thinks. That is not always true, but in the case of the hon. Member for Christchurch (Sir Christopher Chope), I think it is. However, he is wrong. He has said, “Let’s keep the wealth creators in this country. Let’s not drive them away.” But those who create the wealth in our society are the 99%. Let us be on their side.
Question put and agreed to.
That this House has considered potential merits of introducing new wealth taxes.