My 10-Point Plan for Fairness

Attached to Danny Alexander’s interview with Matt Chorley in today’s Independent on Sunday (scroll down) is “Taxing ideas: Ten ways to make Britain a fairer place”, which has my name on it.

I should perhaps point out that, as a Blairite, I don’t advocate these measures (except nos 3, 6, 7, 8 and 10). But I do feel uneasy about the Polly Toynbee Principle. Toynbee (right) pointed out on BBC1 Question Time last week that as a well-off person, earning less than £150,000 a year whose children had left home, the Spending Review had left her “untouched”. Actually, I think she has lost out on the state pension age and has overlooked the 1 per cent National Insurance rise coming in next year. But she has a point.

Anyway, the editor wanted to know what could be done to take more from the better off, so I provided a list of what I thought was realistic. The interesting point is that few measures raise significant amounts of money, but in the age of austerity they might have symbolic value. Here they are:

1. Wealth tax

Either a one-off or an annual levy. The French “solidarity” tax, levied on assets over €790,000 (£700,000), raises €4.5bn (£4bn) a year. The case against is partly that the burden would tend to fall on the middling rich, as the best-advised move assets abroad and use trust law. Variants include a mansion tax on homes worth more than £2m, as proposed by Vince Cable and David Miliband, or charging capital gains tax on the sale of the main home, raising huge sums.

2. 60p top rate of income tax

Our ComRes poll last week found 54 per cent support for raising the top rate of income tax, on earnings above £150,000 a year, from 50p in the pound to 60p. It wouldn’t raise much. The sainted Institute for Fiscal Studies says “there is little scope for more revenue to be raised by increasing this rate” as the rich defer income or convert it into capital gain. Maybe, but the scope for sending a powerful signal about the highest paid, including the recipients of large cash bonuses, being “in this together” is considerable.

3. Abolish non-dom status

America doesn’t tolerate it: if you are a US citizen or work there, you pay tax there. Labour brought in a flat £30,000 annual fee payable by the 120,000 non-doms, but why do we need this curious status at all? The highly mobile international elite seems to quite like living in New York, Paris and elsewhere. Again, not much net revenue would be raised, because some would probably move.

4. The Sir Philip Green device

Sir Philip, boss of Topshop and government adviser on waste, holds almost all his assets in his wife’s name. She is resident in Monaco and pays no UK taxes. Would it be possible or desirable to reverse the independent taxation of married couples and to renegotiate the tax treaty with Monaco? Has anyone even tried? Again, the net benefit to the Exchequer is small, but the index once proposed by David Cameron of National Well-Being would rise.

5. Robin Hood tax on banks

The coalition is imposing a bank levy next year that will raise £2.5bn a year. To raise more would preferably mean negotiating a global agreement so that all countries did it. Tricky. But Alan Johnson, the Shadow Chancellor, last week argued that another £3.5bn could easily be raised from the banks without driving them out of the country.

6. Raise tax on betting

If financial transactions were taxed, it is argued, speculators will simply move into the betting markets. The betting tax has been replaced by a tax on bookmakers, but is not collected from internet bookies based overseas. This is a loophole that could be closed. It would raise millions – chicken feed in deficit terms but important in blocking off another form of tax avoidance.

7. Tax universal benefits

Free eye tests, free prescription charges, free bus passes, free TV licences for the over-75s and winter fuel payments for pensioners could all be subject to income tax, although that would mean breaking Mr Cameron’s election promises. Taxing these benefits would raise less than £1bn, but would again be a symbol of fairness.

8. Tackle tax havens

Large companies continue to minimise their tax bills by basing operations in holiday resorts. Can it really be so difficult to make that harder for them?

9. VAT at 25 per cent on luxury goods

From 1975 to 1979 there was a 25 per cent rate of VAT on “luxuries”, including white goods, jewellery and furs. Now, 25 per cent happens to be the maximum allowed under EU rules. It could apply to yachts, fur, patio heaters, 4×4s and football clubs. If a 10th by value of all currently VAT-chargeable goods and services were classified as luxuries, it would raise £2.5bn a year.

10. Abolish pension contribution relief at higher rates

This old Liberal Democrat policy is being partially enacted by the coalition – limiting the benefit to £50,000 a year from next year and to a pension fund total of £1.5m from 2012. But the relief could be restricted to the basic rate of income tax for all. This would hit the well-off but not the richest, between the 40p tax threshold at £44,000 a year and the 50p rate at £150,000 a year. This would raise about £1.5bn a year.

Recent Posts on Eagle Eye

• Poll alert
• Was An Alien Space Fish Just Filmed Outside The Space Station?
• Economic History Lesson
• A Triumph for David Cameron
• The Myth of the Sainted Attlee

• zumbruk

  It is not the purpose of legislation to “send a message”. If a tax change raises no revenue, then it should not be enacted.

• bobbellinhell

  Did you not claim, Mr Rentoul, that the figure of 60,000 civilian murders by UK and US troops in Iraq was a ‘fiction’? And yet now the leaked US army documents show that that figure was actually a 10% underestimate. Would it not be appropriate for you to acknowledge this.

• http://twitter.com/trishaabel Trish Abelson

  Rentoul is worth a look

• JohnJustice

  Er I think the figures that JR has been contesting were the Lancet one of 600,000 civilian deaths and other estimates of up to 1 million. Would it not be appropriate for you to acknowledge these overestimations?

• Epiphron

  You really are a bit of a fool aren’t you Rentoul? I’ll be kind and put it down to too many years in Blair’s ambit. Not only do your vacuous suggestions not raise very much, it’s probable they’d cost more to collect than they deliver. Par for the course for someone who thought Brown’s labyrnthine taxes were sensible. 3 out 10: must try harder.

• http://twitter.com/JohnRentoul John Rentoul

  That is, as John Justice points out, a Question to Which the Answer is No.

• Epiphron

  Very good point zumbruk but you mustn’t forget that Rentoul is a Blairite, and that for them the message,however vacuous, is what matters

• Epiphron

  You are right the young are being hit hard, particularly the young paying taxes. They can thank Labour for consigning them to years of grinding poverty and relentless work so the feckless old (and scroungers of course) can be kept in the manner to which they’d like to become accustomed. Not very fair is it?

  Rest assured about one thing though, Alan Sugar and the “rich” over 60s are not very likely to take up the bus pass, let alone actually use it.