Governments use taxes to discourage certain activities and behaviours – while encouraging others.
Cigarettes are a good example. The government tries to discourage people from smoking with high taxes on tobacco. They raise significant revenues in the process (£10.4 billion was raised from tobacco duty in 2024). Similarly, road tax on more polluting cars is generally higher – in order to encourage people to buy less polluting vehicles. Tax is a way to incentivise people to make healthier choices, or live less polluting lives, while raising useful revenues in the process. These revenues can be used to tackle the effects of the activity being taxed. Money from tobacco duty can be used by the NHS to treat lung disease, for example; or money from road tax can be used to tackle pollution caused by combustion engines. Jetting away with it It doesn’t always work this way, however. Especially when big business is involved. The UK aviation industry makes significant carbon dioxide emissions every year, contributing to climate change. You might think, by the logic set out above, the government would use tax to discourage flying; or at least make a revenue from it, in order to mitigate the polluting effects. And yet, broadly, the opposite is true. UK airlines benefit from extremely generous tax breaks from the UK government. They pay no tax at all on aviation fuel, for example. For too long the government has under-taxed the aviation industry. But I have some good news. Increase tax on private jets and premium tickets Taxes on wealthier flyers were increased by the chancellor in the recent Budget. Air Passenger Duty (APD) is a tax paid by airlines for every passenger who flies from the UK. It raises £3 billion a year. APD is a progressive tax. Passengers taking longer flights, traveling in business or first class, or by private jet pay more. The good news is the chancellor announced that he will increase air passenger duty from this year for passengers in premium economy, business and first class. We fully support APD and think the chancellor should go further – and raise the rates on business, first class and private jets much more. It’s the direction we must go in to avert climate catastrophe. Those with the broadest shoulders To make real headway in decarbonising and making the green transition, the government will have to raise and spend significantly more. This cost must fall firmly on those with the broadest shoulders. It must be a just transition. Airline Passenger Duty is a great example of this: it takes the lion’s share of its revenue from richer people – and discourages polluting activity. We could also introduce a frequent flyer levy. This would be a tax that increases the more flights you take each year. So those who fly more would pay more. Our friends at the New Economics Foundation set out how a frequent flyer levy could work. The rich pollute the most Research from Oxfam shows that richer people on average produce far more emissions than the less well off. The top 1% cause the same amount of planet-heating emissions as the bottom two-thirds of humanity, according to Oxfam’s research. We were proud last year to team up with Oxfam when they came out in favour of taxing the richest – and biggest polluters – more.
On 6 March Jeremy Hunt delivered his Spring Budget. The Chancellor stood up in the House of Commons and said that those with the broadest shoulders should pay their fare share. Yet he delivered a cut and run budget, knowing his government is trailing in the polls with an election likely to take place later this year. The tax cuts delivered at the budget will spell more agony for public services in the coming years. This is the opposite of what our country needs.
One thing that came through really clearly is that despite the continued cost of living crisis, Jeremy Hunt didn’t offer up a serious plan to help people that need it most. Britain needs sensible and well thought out investment, yet what it got was limited pledges that don’t meet the challenges of our time. While it was good to hear that the NHS will get capital funding to update IT systems, it was a drop in the ocean compared to the scale of the challenge the NHS faces. The Chancellor’s tax cuts were an obvious attempt to try to entice voters with an election looming. Jeremy Hunt cut a further 2p from National Insurance on top of cuts announced last year. But these measures are poorly targeted and won’t provide enough help to those that need it most. The average worker will only benefit by £8 per week, a paltry figure compared to the drastic rise in energy bills, food and essentials in the last couple of years. The last time national insurance was cut, polling shows only 7% felt like it made a difference to their own finances. The wealthiest households will benefit disproportionately from these cuts. In our reaction to the Budget on TalkTV, Rachael made it clear that for an average of £8 extra a week today, the country will be served up public spending cuts in years to come. What this looks like right now isn’t exactly clear, but we do have some ideas. We know that some government departments have protected budgets like the NHS and education. However, other parts of government will likely have their spending slashed. This means less money for councils, stripped back fire and rescue services, and eroded access to legal aid and justice through the courts. Simply put, further cuts will make the UK less safe and less fair. The Chancellor did make a few positive announcements. He scrapped the non-dom tax break that allows some of the super-rich to pay very low levels of tax. This has been one of Tax Justice UK’s top policy recommendations. This move shows that fairer taxes on the rich are politically possible. It also shows that outside of taxes on the richest, the options are very limited - taxes on wealth are where any government is going to have to look to find urgent revenues. Extending the windfall tax on oil and gas excess profits was another positive step. Giving HMRC more resources to tackle tax dodging is a no-brainer. Recent research by TaxWatch shows that for every £1 invested in compliance returns £14. But these measures are a drop in the ocean compared to what our country needs and as Robert pointed out on GB News, people aren’t buying it. Both the government and opposition have decried the state of public finances. Making tax fairer so the super-rich and wealthiest companies pay more is a smart solution to raise revenue - and it is wildly popular. Tens of billions of pounds can be raised every single year with just a small number of changes that adjust the balance of tax paid by those with excess wealth. The government could go even further by closing down or reforming deeply unfair tax loopholes, and raise more revenue, creating a fairer tax system in the process. This could also go some way to building trust, resetting the balance so that those that get their income from work are on an equal footing to those that derive their income from wealth. As the Chancellor said, those with the broadest shoulders should pay their fair share. If they did, we can avoid deep public spending cuts, and could see this country working properly again. |
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