Paying for social care. The Government’s plan to raise National Insurance contributions (NICs) to finance social care reform in England has been widely criticised because it would place most of the burden on younger workers, with asset owners and workers over the pension age exempt (unless this is changed). We explained the debate in the Digest in July.
Taxing income from wealth. CGT is an example of the way income derived from wealth is taxed at a lower rate than income from work. The same is true of share dividends. Lower rates of tax on income from wealth benefit people who own assets over the majority who only earn income from work. It also gives the wealthy an incentive to convert their income into capital (such as share options), effectively a form of tax avoidance. IPPR has proposed a simple but comprehensive reform, in which all income would be gathered together and taxed under the same progressive tax schedule. They estimate this could raise over £20bn annually. The Institute of Fiscal Studies (IFS) makes a similar proposal.
Taxing land and property. One of the major forms of wealth is land and property. This is generally under-taxed relative to income. In the UK, council tax is still based on 1991 property values, making homes in London and the South East (where property values have risen the fastest since then) more lightly taxed than those in the rest of the country. The highest band is for homes worth more than £320,000, which means that a £320,000 home is taxed the same as one worth £1 million or more (of which there are many, especially in London). The IFS explains the problems of the system, while IPPR highlights the particular inequities of council tax in London.
Taxing inheritance. One of the principal ways in which wealth is accumulated is inheritance. In the UK inheritances above £320,000 are taxed at 40%. But as Tax Justice UK explains, a series of rules and exemptions allow many of the wealthiest estates to escape tax. The Financial Times has surveyed the range of inheritance tax systems across the world. It notes that only three countries, including the UK, levy taxes on donors; the rest tax recipients (donees).
A wealth tax. Another way of taxing wealth is to levy a unified tax on the value of all the forms of wealth owned by an individual whose wealth exceeds a certain high threshold. Such a wealth tax could be levied annually, as is done in Switzerland. Or it could be levied as a one-off exceptional measure, for example as a way of paying for some of the costs of the Covid pandemic, as recently proposed by the Wealth Tax Commission. The OECD has surveyed the different forms of wealth tax levied in different countries. Stuart Adam and Helen Miller of the IFS review the economics of a wealth tax.
Public opinion. In collaboration with the Sheffield Political Economy Research Institute, Tax Justice UK has conducted extensive research on public attitudes towards the taxation of wealth, using both opinion polling and focus groups. It finds that the way in which the issues of wealth and taxation are talked about makes a big difference to the level of public support (or otherwise) for higher taxation. They have published two reports detailing their findings.
A lopsided recovery. IPPR have released a new report examining the state of employment in the UK. Despite the media’s optimistic commentary about economic recovery and labour shortages, it finds three major problems remain. There is still a huge ‘jobs gap’ – 2 million jobs hit by the pandemic which have not returned (Key chart here.) Pre-pandemic the economy was not at full employment, and is still not on track to achieve this. And the labour market is lopsided: while some well-paid jobs are being created, many mid-pay and low-pay jobs are being lost. Those at the bottom end of the pay spectrum are losing out the most. (Twitter thread.)
Unemployment benefit as a furlough scheme. Presenting the results both of policy modelling and the views of an online citizens’ jury and public survey, the Fabian Society sets out a new system of earnings-related unemployment insurance modelled on the Covid-19 furlough scheme. It argues that non-means-tested benefits for people who are unemployed, sick, disabled or caring should be restored, alongside means-tested top-ups.
Work is changing. In an essay for the US journal Vox, Anna Martin describes “how jobs got bad” and the Covid pandemic has changed many people’s relationships with their work. Workers will need to be given more power and higher earnings if they are to return to full-time, workplace- based jobs.
Landmark ruling on international energy law. The EU Court of Justice has said that EU climate polluters cannot use the arbitration system under the Energy Charter Treaty (ECT) to claim compensation in disputes between member states. The ECT is a highly controversial international treaty with an ‘investor state dispute settlement’ (ISDS) mechanism which in theory allows foreign investors to sue governments for changes in social or environmental laws that impact their business. The ECT was widely considered to threaten EU climate action. In a victory for legal campaign organisation Client Earth, the ECJ has now ruled that out.
Public engagement for net zero. The Institute for Government and Involve have published a report on how governments should involve citizens in their planning and policy making to achieve net zero. They describe a range of available methods including citizens’ Assemblies, citizens’ juries, co-production and crowdsourcing. (Twitter thread.)
Net zero policy making. The government-funded innovation centre the Energy Systems Catapault has proposed seven new policies which can help drive UK emissions reduction, including a carbon regulator, an extension of emissions trading and a new agricultural reward scheme.
‘No recourse to public funds’. In its latest analysis of the workings of the UK’s immigration system, IPPR examines how the condition placed on many immigrants’ entry to the Uk that they can have “no recourse to public funds” denies over a million people access to mainstream welfare benefits. This includes most benefits, tax credits, free school meals and housing assistance provided by the government. As a result, IPPR finds, many people are at a serious risk of becoming destitute. The FT examines the issue.
The ethnic pay gap. An academic paper by researchers at UCL shows that the ethnic wage gap between white workers and workers of colour occurs within the workplace rather than between firms. Along with lower job satisfaction and a higher skills mismatch for minority workers, this suggests workplace discrimination.
The impact of Covid on disabled people. IPPR North has examined the way in which the pandemic has disproportionately affected disabled people. Not only has it amplified existing inequalities; it has also brought to light new challenges on access to services and opportunities.
Has Covid ended the neoliberal era? In a Guardian Long Read based on his new book Shutdown: How Covid Shook the World’s Economy, historian Adam Tooze describes the way in which the pandemic has rocked the orthodox economic and political order. “The monster has arrived,” he writes. “The Anthropocene has shown its fangs – on an as yet modest scale. Covid is far from being the worst of what we should expect – 2020 was not the full alert.”
A new form of Conservatism? Prospect magazine interviews Ben Houchen, the Tory Mayor of Teesside, whose interventionist economic development policies - for example, taking Teesside airport into public ownership - are causing a stir. Does Houchen represent a new form of Conservativism, happy to use the state to reduce inequalities?