In search of a fairer system of taxation
Polly Toynbee’s suggestion that higher taxes for all are inevitable (The refusal to raise tax has become our national disease, 6 November) ignores numerous different approaches, changes in priorities and potential savings that could mean we can all enjoy higher levels of investment in public services without raising taxes or increasing borrowing.
In September, AAT published a short report highlighting £27bn of annual savings that could be made without raising taxes or increasing borrowing – by scrapping car tax and fuel duty and replacing it with a pay-as-you-drive system, by simplifying inheritance tax, and removing higher rate tax relief for pension contributions, to name just three of our proposals. Such changes might require politicians to tell some uncomfortable truths but, given that the outcome would be a simpler, fairer alternative to raising revenue, they are truths the electorate would be more likely to accept. Phil Hall Head of public affairs and public policy, Association of Accounting Technicians
It is not the case that the British tax system has gone wrong recently, as the headline on Polly Toynbee’s article proclaims. It has been undermined from the outset. In Adam Smith’s time it was envisaged that the state had the right to levy tax because increases in economic activity resulted from its successes in keeping the peace, suppressing epidemic outbreaks and doing nothing to prevent citizens doing business with each other.
This would have the side-effect of raising land values so that it was, according to Smith, a simple matter of levying a national land value tax to raise the national economic level to beneficent heights. Naturally the landowners’ party was not happy with being cut out of the action and over the years has succeeded in privatising the national land value uplift for the selfish benefit of its members and hangers-on, although they have seldom done anything to raise land values by improvements.
Now round here we have unlovely country villages where young couples attempt to bring up children in a low-wage area while paying £8oo a month in rent to grasping elderly rentiers. These rentiers are diverting national land value uplift into their own pockets while young couples are deprived of basic spending power. David Reed
Agreed that “the refusal to raise tax has become our national disease”, but there’s a far more appropriate source of untapped finance. Wage earners help fund the health service, etc, by paying national insurance, yet older people like myself who typically benefit most from such services are, bizarrely, exempt, however great their income. Of course, the ferocious NI regime imposed on working-age people should not be applied to pensioners, but impoverishment of those with lower incomes could be avoided by setting the threshold for contributions well above the upper limit of state benefits. However, I fear that no party would dare include such a fair and sensible proposal in its manifesto, given that older people are the most likely to vote. How tragic. David William Golding
Associate, Institute for Sustainability
Polly Toynbee calls for taxes to be raised but doesn’t mention the vast fortunes not collected from tax evasion and avoidance. The last figure I saw estimates this at £34bn, which would transform the economy of this country. We haven’t scratched the surface of this illegal and immoral industry and we could start by making it a criminal offence to pay for goods and services into anything other than an accredited business bank account and also to fail to issue a proper VAT or till receipt. Ralph Jones
I agree with Polly Toynbee that we must raise more tax. Here are some options. Impose VAT on UK groceries (estimated to be worth by 2021 £197bn) according to their unhealthiness, not luxury. This would incentivise healthy eating.
A government-run and -regulated cannabis industry (estimated to be worth £7bn pa) would be safer for customers and would save the £361m spent on its policing. The same can be said of other currently illegal narcotics. After all, such drugs are no more dangerous than tobacco and alcohol, which are already regulated and taxed. Prostitution (reckoned to be worth close to £5bn pa) would be safer for women if conducted in government establishments providing correct medical attention and physical safeguards.
The overseas aid budget
(currently £12.2bn) deserves our support. But why not take from it the £1.8bn spent annually by the NHS on foreign visitors? David Hughes
Polly Toynbee raises issues of huge public importance, but I would suggest that the underlying issue is the dystopian first-past-the-post electoral system, in which the two major parties attempt to bribe no more than 250,000 floating voters in marginal constituencies with promises they can’t keep, and, in a tax race to the bottom, refuse to consider reforms to what has become a regressive tax system, for fear of not getting elected. Council tax nonreform is a classic case of this.
A fully proportional system would have the immediate effect of nullifying the need for government to avoid making the right decisions in the national interest, as in the present political gridlock it would almost certainly result in a democratically elected coalition in the near future, with a more consensual style of government. Indeed, there was a strong case for a Tory-Labour coalition Brexit government after the 2017 election. The fact that 42% of all workers currently have incomes too low to be liable to tax speaks volumes about the regressive effects of 40 years of Tory/Labour economic mismanagement and is an indictment of the UK’s low-wage economy. Of even greater concern is the fact that none of this was the obvious result of our membership of the EU and that Brexit will not change anything. Adrian Berridge
With “a fifth of workers earning below the £9 national rate set by the Living Wage Foundation”, Polly Toynbee’s ideas for “most of us” to pay more tax need tweaking. Depending on universal credit should exclude many households from a higher level of income tax, but those with aboveaverage incomes must pay more.
It makes little sense for those earning £49,000 to be paying the same rate as those on £149,000, nor should those earning £500,000 pay the same as those getting £200,000. The Laffer curve was only created to enable Reagan to lower taxes so it needs to be discredited, and draconian measures introduced to ensure that the rich pay their fair share. Let’s start with a 90% tax on incomes over £1m. All tax avoidance should be made a criminal offence, as should giving advice to enable it to take place. And of course, VAT needs to be imposed on private-school fees. Bernie Evans
Polly Toynbee correctly highlights the consequences of low tax rates. I can recall when I first started working 44 years ago that the standard rate of income tax was 33%, so a modest rise of 1% or 2% would be no great hardship for most people. Ian Arnott
A government-regulated cannabis industry – estimated to be worth £7bn a year – would be safer for customers David Hughes