In October of 1986, I was heading off to university to begin my degree in English Literature. Part of the soundtrack to that period in my life was Billy Bragg’s just-released album Talking to the Taxman about Poetry.
I could never have imagined that, 37 years later, I’d find myself talking to the ‘Poets of the Trade Union movement’ about Taxation. But that’s what I was doing at the TUC Congress in early September of this year when I moved one of the two motions that the EIS proposed to the conference.
Back in 1986 the UK Corporate Tax rate was 35%. Just three years earlier, in other words exactly 40 years ago today, Corporation Tax under Thatcher was 50%. An astonishing fact. But in three short years, her government slashed it by 15% and the downward spiral continued until it got as low as 19% in 2017 where it remained…until of course April of this year, when it was raised by Jeremy Hunt to 25%, reversing the madness of Trussonomics which had been going to keep it at 19%.
Even with that rise to 25%, the UK tax on companies’ profits is lower than the average rates of the G7, the G20 and the OECD. This is at a time when corporate profit margins are at their highest in 70 years, when CEO pay is up 23 per cent in the last year, and bankers’ bonuses are at a record high since the financial crash.
Meanwhile, working people are facing unprecedented pressure on their household incomes as wages continue to lag behind inflation. As Congress heard in speech after speech, in motion after motion, 40 years of governments valuing corporate greed over human wellbeing, profits over people, have been utterly devastating for working people across the UK. In short – wealth is being rewarded, work is not.
What is worse, under our flawed system this expanding wealth is not being taxed fairly. The UK is taking proportionately less tax than our neighbouring countries and our public services are falling behind as a result. The latest figures show that the UK’s total tax-to-GDP (of 33%) is lower than the OECD average (34%), well below the EU14 average (39%) and significantly less than that in Scandinavia (41%).
Furthermore, whilst individuals’ taxes are comparable with the OECD average, they are lower than other Western European countries. Who pays tax, and how much they contribute, are political choices. They have direct impacts for our essential public services and our wider infrastructure. These choices impact directly on fairness and the cost-of-living of working people too.
The money we make from working hard shouldn’t be taxed at a higher rate than the money shareholders and property investors generate from their existing wealth. Equalising capital gains tax and income tax would generate an extra £10bn into the Treasury, to fund public services and public sector pay.
There are other options to explore as well, including applying a wealth tax, ending inheritance tax loopholes that benefit the already wealthy and implementing a tax on share buybacks.
Meanwhile, as the Public Accounts Committee said in January 2023, the UK is missing out on £42bn of unpaid tax because HMRC does not have enough resources including staff. Whatever shape the tax system takes it can only be delivered through a properly resourced and funded HMRC.
Our motion referenced the STUC report “Options for increasing taxes in Scotland to fund investment in public services”. EIS members may remember that this report, published in December 2022, helped us in our arguments during the Pay Attention Campaign because it revealed that the Scottish Government could raise an extra £3.3 billion pounds per year used to fund a real-terms increase in public sector pay as well as substantial investment in Scotland’s public services. Suggestions in the report include –
- £867 million from a series of income tax reforms;
- £69 million from increases to Council Tax for properties in bands F, G and H;
- £240 million from increases to Land and Buildings Transactions Tax;
- £112 million from increasing the Additional Dwellings Supplement;
- £35 million from increasing Scottish landfill tax;
- £1,426 million from a wealth tax;
- £450 million by replacing Council Tax with a Proportional Property Tax;
- £70 million by reforming the Small Business Bonus Scheme;
- £100 million from the introduction of a Land Value Tax for commercial land;
- £15 million from a carbon emissions land tax;
- £18 million from increasing the Scottish Aggregates Levy.
£3.3bn is not to be sniffed at but it is small when compared to the dozens of billions that could be raised and spent on public services at UK level, and then of course shared with devolved administrations through resulting increases in block grants, if similar progressive taxes were brought in at Westminster.
Thanks to our motion, the TUC will now investigate and report what those reforms might be and will develop proposals to enable the General Council to lead a debate next year on reform of our tax system in the UK to deliver fairer outcomes for working people, public services and public sector pay. The TUC will also lobby the Government and the Labour Party to introduce a fairer system of taxation.
That commitment to lobby both parties is very important because, as Oxfam reported in January of this year, two-thirds of the new post-pandemic surge in wealth has gone to the top 1% – and it is clear that the Tory Government is the political wing of that 1%.
But sadly, Labour is proving to be little better. Labour seems to be missing in action when it comes to radical tax reform and their latest refusal to commit to a wealth tax if elected is incomprehensible, given the appalling levels of inequality in the UK and given the chorus of different voices clamouring for it.
As we know well, and as Billy Bragg sang, there is power in a union, and if our major parties continue to behave like butlers to the billionaires, then it falls to us in the trade union movement to pile the pressure on them, to demand change and genuine tax justice.
By Allan Crosbie, EIS Vice President