A year on from her economy-crashing 44-day premiership, Liz Truss and her faction in the Conservative Party are making a comeback. 

These tax-cutting, small state libertarians want to see lower taxes to benefit the rich and reduced public services to the detriment of the rest of us. 

​They’ve been all over the media, focusing their efforts on attacking one tax in particular. They are lobbying the Prime Minister to abolish it. The tax in question? Inheritance tax.

Inheritance tax is described as one of the most unpopular taxes in the UK – the most unpopular tax by some accounts. 

However, I’m going to try to convince you that inheritance tax, although flawed, is worth defending against the tax cutters.

Because there’s a greater issue at stake here: inheritance tax raises significant revenue for our public services. At a time when our NHS, schools and other services are stretched to their capacity, it would be reckless to cut their funding.

Will you have to pay inheritance tax?

Let’s start with some facts about inheritance tax. Firstly, hardly anyone pays it. More than 96% of estates never pay inheritance tax. Although one in three people think they will have to pay it. This gap between perception and reality may partly explain the tax’s unpopularity. 

In reality, because of tax free thresholds and allowances, the vast majority of people can pass on up to £1 million to their children and grandchildren without paying any tax. Read the facts about inheritance tax on our blog.

Secondly, abolishing inheritance tax would only benefit a small number of wealthy people: let’s not mince our words, it would be a tax cut for the rich.

This week the Institute for Fiscal Studies estimated that if inheritance tax was scrapped, half the benefit would go to the top 1% of wealth holders, who would get an average of £1 million each in tax savings. 

Inheritance tax funds our public services

My final point is this: inheritance tax raises important revenue for our public services. Currently it brings in about £7 billion a year. Forecasts estimate this will rise to £15 billion in ten years.

Large numbers can sometimes seem vague or even meaningless, so let me put these into context. £15 billion a year is half of the UK’s day-to-day defence budget; it is nearly 20% of the UK’s education budget. That’s a massive amount of money when schools are crumbling and you can wait weeks for a GP appointment. 

Inheritance tax raises significant revenue for our public services. If it is abolished, it’s very likely that the money will have to be found from elsewhere (likely from higher taxes on working people), or that public services will have to be cut. I think you’ll agree that most people would support neither option. 

We’re pushing back against the tax cutters

I understand that people have strongly held views on inheritance tax, especially as it is paid at a particularly difficult time for people as they’ve just lost a loved one. I do hope I have explained clearly why we at Tax Justice UK support it. We need to reform inheritance tax, not scrap it. 

Our Executive Director has been on TV in recent days defending inheritance tax, and pushing back against the tax cutters. I was on TalkTV with Julia Hartley Brewer on Monday, you can watch the interview in full:

There’s a shorter version of the interview here on Twitter. We’d appreciate it if you could retweet it if you agree.

Our Head of Advocacy and Policy, Rachael Henry, was also on LBC with Iain Dale pushing back against abolishing inheritance tax. You can listen here.

Our campaign to tax the most polluting companies and super rich individuals – and invest that money in renewables and the green transition – is growing.

This week Oxfam came out in favour of taxing the UK’s biggest polluters, citing our research.

They want to see fossil fuel companies and the super rich  pay much higher taxes. The charity estimates this could raise £23 billion a year. We fully back their call.

This money could be invested directly into the green transition: in renewable energy and public transport infrastructure, creating high quality jobs in the process. 

A tax on emissions would ensure the wealthiest and biggest polluters pay the most for tackling climate change. It’s so important to avoid the bulk of the cost of dealing with the climate crisis falling on ordinary people. 

As the catastrophic effects of environmental and climate breakdown become clearer, it’s never been more urgent that we bring more and more partners onboard with our campaign. 

A huge civil society group like Oxfam coming out in favour of taxes to help deal with climate change is a big step in the right direction. 

We also joined together with 400 businesses and civil society groups yesterday to push back against Rishi Sunak’s plans to water down the UK’s net zero policies. You can read the letter here.

We have the ear of MPs

Not only are we building coalitions with big partners, we’re also making inroads with MPs.

We regularly meet with senior politicians to make the case for a fair approach to tax and climate.

Our Executive Director Robert Palmer is also on TV and radio, promoting our message – and pushing back against those defending fossil fuel giants. 

If you didn’t see it, Robert was on GB News last week debating Jacob Rees-Mogg on why a windfall tax on highly profitable North Sea oil and gas companies is a good idea.

This is the work we’re doing week-in, week-out: building movements and partnerships – and spreading the message about progressive tax reform in the media, with politicians and the wider public.

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One of the UK’s most powerful union leaders is piling pressure on Labour to back higher taxes on wealth.

This week Paul Nowak, general secretary of the Trade Union Council’s (TUC), suggested that a “modest tax on the wealthiest 0.3 per cent of individuals” could raise £10bn a year for public services.

Nowak said: “Labour have already set out what they’ll do on clamping down on non-doms… But we think that conversation needs to go further.”

“With living standards plummeting, public services on their knees, and rampant wealth inequality blighting every corner of the country . . . fair taxation must be a key part of a wider set of policies to help reset the economy to work for working people.”

We can convince Labour

The TUC and its constituent unions represent millions of workers, so Labour will not be able to easily ignore Nowak’s comments.

The public supports what Nowak is saying. New polling shows that 61 per cent of people support higher taxes on wealth.

If Keir Starmer and Labour make it into office at the next general election, they will face public services in an existential crisis.

To truly stop the slide, Labour will need to spend more on public services. According to the party’s own rules, this will probably mean higher taxes. Raising income tax, or other taxes on ordinary households, will be politically difficult – and highly unfair during a cost of living crisis.

Wealth taxes on the super rich, those who can afford to pay a bit more, will be one of their only options.

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A crisis is gripping our country’s schools. More than 100 have been told to fully or partially close. There are concerns that school buildings are unsafe because of a construction material that can degrade over time – especially when not maintained properly.

The government was warned several times about the existence in schools of this material; and they scrapped a plan to refurbish all secondary schools when they came into office.

Coming home to roost

The crisis is a part of an endemic problem in the UK. Years of government underinvestment in public services has left us with crumbling schools and record NHS waiting lists, to name just two of the problems we face. 

Insufficient government funding is pushing our society to the brink – and crises caused by underinvestment will only increase in the coming years.

Two weeks ago, the IFS put it bluntly: the UK faces a stark choice, either raise taxes, or face the decline of public services and the end of the welfare state as we know it.

At Tax Justice UK we campaign for the first option. We want to see new wealth taxes levied on the super rich (those with net assets over £10m) – and existing taxes like Capital Gains updated so the super rich pay the same tax rate as working people.

Wealth taxes gaining support

We're making big strides towards these goals.

This week over 300 millionaires, business people and celebrities demanded G20 countries intervene to stop the ballooning wealth of the super rich. 

A full list of the signatories – including businessman Ian Gregg, film producer Richard Curtis and musician Brian Eno – can be found here.

And in a series about the future of government and state spending this week, the Financial Times said higher taxes on wealth look to be increasingly likely.

Not only do we need wealth taxes to support long-term investment in public services, we also need them to help struggling households through the immediate cost of living crisis. 

New research we helped produce shows the public think neither the Conservatives or Labour are promising enough to tackle the cost of living crisis. And the next election will be swung by whichever party can propose the best solutions to it.

​This blog is reproduced from the New Economy Digest. Sign up to receive the weekly newsletter here. 
 
The cost of living crisis will swing the next general election. As the summer ends, political parties are gearing up for an impending general election. We may not know exactly when it will happen, but the issues it will be fought on are becoming clearer. The Bottom Line: How Bold Action on the Cost of Living is Key to the Next Election, a new report from the steering group of Stop the Squeeze (a coalition of 50 civil society organisations, including Tax Justice UK, campaigning for structural solutions to the cost of living crisis), sheds new light on a crucial one. The report sets out to discover what voters, and especially key swing voters, are hearing from the parties, how they are responding, and the kinds of messages and policies on the cost of living crisis that might sway them in 2024.

• Policies to tackle the cost of living crisis are critical to swing voters. The cost of living crisis will be the second-biggest factor in voters' decisions at the next election, just behind the NHS. This is especially true for voters in the vital swing voter demographic which is sometimes called ‘Stevenage Woman’. Here, the cost of living, the NHS, and the economy are the only issues that gain any sort of traction - no more than 17% of people identified any  other issues as important.
• …but voters aren’t confident in either major party on the issue. While the cost of living is a priority for most voters (50%), far fewer (<25%) think the same is true of either of the main parties. For swing voters, this is even lower (<20%). Both parties need to do much more to reassure voters that they really care about the cost of living, and have a clear plan to bring it down. (This supports previous findings by The New Britain Project and More in Common on the lack of trust in politicians to solve the crisis.)
• The Conservatives are losing voters on the cost of living, but Labour could do much more to win them. Labour may be slightly ahead in being seen as the party with a better plan to tackle the crisis, but a Labour majority is certainly not in the bag. Only one in ten (11%) Conservative 2019 voters rate Labour higher on the cost of living, with more than three times as many (37%) not choosing either party. Three quarters of voters don’t have a clear idea of what Labour would do to solve the crisis, implying that Labour has yet to land the message that it has a real plan to improve people's living standards. Overall only 15% of voters have a good idea of what either party would do to address the crisis, indicating that the public have noticed the absence of proactive policies. Lots of voters are still in play, and a stronger policy offer from the Conservatives or Liberal Democrats could have a huge impact on the result. For Labour, the issue is less that the public think the party is focused on the wrong things, and more that they are not sure what its priorities are at all. 

How to win over swing voters on the cost of living. The voter group dubbed 'Stevenage Woman’ (or ‘Disillusioned Suburbans’) by the think tank Labour Together will be particularly important in the next election. Representing 21.8% of the electorate in England and Wales, these voters are particularly well represented in the East of England, in London’s suburbs, and in the North East and West. They are young, economically insecure, worried about their finances, and unlikely to own their own homes. They are not highly politicised, but are generally socially conservative while leaning left on the economy. How this group votes will decide which party wins the next general election. As Labour Together say: “A working majority depends on Labour’s ability to convert their current support amongst Disillusioned Suburbans into votes at an election.” So how can political parties win over these crucial voters?

• The public support bolder messaging and more ambitious policies. Stevenage Woman wants to be shown practical policy solutions that will make her own personal finances more secure. The Stop the Squeeze report demonstrates that clear, concrete policies to deal with the rising cost of living, such as increasing the minimum wage and social security payments, and raising taxes on the super rich, would help Labour win over this crucial target group. While putting policies like these on the table might be unpopular with some voters, the report argues that having a political argument around these policies could reinforce the message that Labour does have a plan on the cost of living, strengthening resolve among key voters and increasing the chances of those voters actually turning out on polling day. Conversely, if the Conservatives were to make a renewed offer on the cost of living at the election, this could chip into some soft Labour support and leave the party vulnerable.
• What policies do swing voters want? Voters prefer government support for energy bills, which continue to be a major source of pain for many families. Help with mortgage and rent payments also performed very strongly in the polling. Increasing the minimum wage ranks second highest for swing voters, and performs well across all demographics. It is more popular than cutting taxes on wages for everyone, except among right-leaning demographics.
• Tax cuts are a red herring. Political debates have focused heavily on the level of taxation over recent years, but there is no real evidence that the public see tax cuts as the answer to the cost of living crisis. Cutting taxes on wages came sixth out of a list of possible priorities for action, only performing strongly among core Conservative supporters. Cutting taxes on goods and services (i.e. VAT) was slightly more popular overall. Overall a party could get significantly more mileage from policies to reduce the impact of escalating energy and housing costs than from offering tax cuts. Voters also overwhelmingly think that cost of living support should be funded by taxing the richest in society, although they remain divided on the question of whether or not additional spending on this would be inflationary.

The political opportunity for all parties. The report suggests that a party that is willing to make a bigger offer on the cost of living, focused on areas the public care about such as energy bills and housing costs, and funded by taxation of wealth, could reap the rewards with voters who are desperate for government action that could really improve their lives.

• In summary: Voters think the cost of living is one of the most important issues for the next election - if not the most important. They think neither party cares about it as much as they do. And while they lean towards Labour on the issue, they don’t have a clear idea of what either party proposes to do to address the crisis. This creates a significant opportunity for both parties. This matters both because it indicates that a Conservative comeback is still possible, but also because the lack of policy solutions on offer is highly likely to lead to voter apathy and low turnout.
• The road to a Labour majority? If Labour were to put forward bolder policy solutions on the cost of living, this could help them win over key swing voters like ‘Stevenage Woman’ in the run up to the next election. This supports an argument made by Alistair Campbell, who says that Labour needs to develop “a positive policy agenda that would persuade the country that Labour was a credible and compelling alternative" in order to turn possible into probable, or move the prospects of a hung Parliament into a good Labour majority”.

Five years ago we asked politicians, academics, campaigners and journalists what was the biggest thing that needed fixing with the UK’s tax system.

Almost without fail they responded that the UK doesn't tax wealth enough. They complained that the issue wasn’t even discussed outside expert circles.

At the time there was almost no debate in the media or in politics about taxing wealth more. 

In five years things have changed dramatically – and we helped do that.

We’ve moved the dial

Celebrities now go on TV and radio to promote paying more tax, while politicians and journalists openly discuss wealth taxation.

Last week for example, filmmaker Richard Curtis told BBC R4’s PM programme that he, as a wealthy person, was in favour of paying more tax to fund the NHS and public services. 

While the presenter of the BBC’s flagship political show Politics Live, Jo Coburn, said wealth taxes were “raised all the time” on the show.

A week of wealth tax calls

And Jo Coburn was right: wealth taxes were called for on Politics Live no less than three times last week.

On Monday Christina McAnea of the union UNISON made the case for taxing wealth more to fund our public services.

Then on Tuesday, Caroline Lucas MP asked “why don’t we have a debate on a wealth tax?”

On Wednesday it was Paul Nowak from the TUC’s turn to make the case that the super rich should pay more tax. He set out his thoughts in a piece in the New Statesman co-authored with Patriotic Millionaire Julian Richer.

On the same episode of Politics Live, presenter Jo Coburn pushed Labour shadow health secretary, Wes Streeting, asking: “is Labour really going to look at wealth taxes to pay for further investment in health?”

This sort of debate would be unimaginable just a few years ago. And we’ve made that happen.

Our research and appearances on TV and radio have moved the dial on wealth taxes – making them acceptable for politicians to countenance, and journalists to discuss with seriousness.

Tax can help us build a fairer future

We’ve come a long way in five years. But there’s still a lot to do, and we need to keep up the pressure.

Our public services are at breaking point – the NHS is struggling to keep up with demand and needs serious investment to meet the needs of the future. 

While inequality grows every year, most people are becoming poorer through the cost of living crisis – while the rich sit back and watch their wealth balloon.

At the same time we face a climate emergency – which will disproportionately affect the world’s poorest.

All three of these challenges must be addressed through serious investment. 

If we are to be a fair and just country, that money must come from those with the broadest shoulders. It must come from taxes on the super rich.

We’ve made huge strides over the last five years, making wealth taxes a possibility, openly discussed by politicians and journalists. 

We’re going to keep pushing, fuelling the media debate and convincing politicians to get behind wealth taxes.

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Fairer taxes can help us build a brighter future. 

A future where inequality is in retreat; where we’re tackling environmental breakdown; where our public services are properly funded to serve us well and our democracy is thriving. I’ve written more on our vision for a fairer tax system and why it matters here.

But other changes – beyond reforming our tax system – are needed too.

That’s why we work with other organisations who are campaigning in their own areas for a better future. 

More democracy, less inequality

We have teamed up with Compass, an organisation which campaigns for democractic reform. We are supporting their call for a fairer and more democratic voting system in the UK.

Our existing voting system tends to amplify the voices of a relatively small number of people. At the same time many millions on the margins of our society are ignored by the big parties.

We believe this contributes to the great economic inequality we see up and down the UK.

Compass’s report Winner Takes All: Why Economic Justice Now Rests on Democratic Justice sets out how our flawed voting system is contributing to high levels of inequality.  

Why? Our existing voting system tends to amplify the voices of a relatively small number of people, while many millions on the margins of our society are ignored by the big parties.

This contributes to the great economic inequality we see up and down the UK, where certain areas and certain groups who politicians listen to do very well, while others flounder.

That’s why we’re sponsoring a petition with Compass, along with the Equality Trust and The 99%. We’re asking the government and MPs to change the voting system to help tackle poverty and inequality.

If you agree, you can sign the petition here.

If we had a system where each vote carried the same importance – regardless of where it was cast – our democracy would be refreshed, and our politicians would serve us all better.

A flourishing democracy goes hand in hand with an economy that works for everyone.

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The official gap between the amount tax owed and what the government collects, has grown to £36 billion, new HMRC figures show.

The “Tax Gap” difference between the amount of tax that should be collected and the amount actually collected, grew from £30.8 billion in 2020/21 to 35.8bn in 2021/22.

At the same time £1.5 billion went uncollected from wealthy people subject to self-assessment.

Tax Justice UK Head of Advocacy and Policy, Rachael Henry, said: “The tax gap remains large and it’s worrying to see the amount of money uncollected from wealthy people continue to rise.

“At a time when public services are on their knees it’s vital we are collecting all the tax revenue we can. HMRC inspectors are worth their weight in gold and the government needs to give HMRC the resources it needs to collect these outstanding tax revenues.” 

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Inheritance tax is a tricky subject that stirs up a range of emotions. In part this is because it is paid by families who have just lost a loved one. 

It also whips up feelings that get to the heart of what wealth and work mean to people. Successive governments have told families that they must be self-reliant and look to their own resources, not the state’s.

For many families, this means that wealth and inheritance are synonymous with financial security. Security against having no pension, or the costs of social care.

It’s no surprise that inheritance tax elicits strong feelings. But despite scare stories in the newspapers suggesting that the tax is deeply disliked, the reality is much more mixed. 

That’s the key finding from a fascinating piece of research by our friends at the think tank Demos. They surveyed 2,000 Brits and found that up to three quarters backed some form of inheritance tax. Just 21% of people said all inheritances should be tax free. 

We support inheritance tax

According to the research, there are high levels of support for charging inheritance tax on the super-rich, second homes and financial assets. 

This is good news, especially given that elements of the media and right wing politicians have declared they want to get rid of the tax ahead of the next general election.

We support maintaining inheritance tax for many reasons (though we do accept that it needs reform). Below are 5 facts about inheritance tax that inform our view:

1. Most families don’t have to pay it

Just 3.8% of estates pay any inheritance tax. A generous system of allowances means that no inheritance tax is paid below a certain level of wealth. For example, a married couple can hand over a million pound family home to their children and grandchildren tax free.

2. The super-rich already benefit from inheritance tax loopholes, scrapping the tax would make them richer.

Tax Justice UK research exposed how a small number of multi-millionaire families benefit from tax loopholes to pay lower rates of inheritance tax than families who are less wealthy. Scrapping the tax entirely would make those multimillionaire families even better off.
We think this is wrong. At a time when services like the NHS are on their knees we should be scrapping giveaways to the wealthy, not giving more money away to them.

3. Scrapping inheritance tax would leave a £7 billion gap in our public services. 

When you ask ordinary people if they support tax cuts even if it means cuts to public services, the answer is a clear: “No”. 

Inheritance tax is one of the few taxes on wealth we have that helps pay for things like social care, the NHS and education. When politicians call for IHT to be scrapped, we should be asking them which care homes they’re prepared to close, how many nurses they are prepared to sack and how many schools they are willing to close to fill the £7 billion hole it would create. 

4. Wealth inequality is a ticking time bomb for inequality, scrapping inheritance tax will make it worse

Research by the Institute for Fiscal Studies has highlighted the effect of growing inheritances in deepening the UK’s stubbornly entrenched wealth inequality. The Resolution Foundation argues that we will reach ‘peak inheritance’ by 2046, when the value of inheritances is expected to be more than two-fold that today. This will further entrench inequality within younger generations, between those that have parents who own homes and those that do not.

Birthright should not be the primary arbiter of wealth.

5. We need to fix inheritance tax, not scrap it

Inheritance tax needs fixing. One way of reforming it would be to change the focus so that it is paid by the person receiving a transfer of wealth. The Institute of Public Policy Research think tank has suggested that everyone should be able to receive £125,000 tax free over their lifetime. Only once this level is reached would someone start to pay tax on transfers. A lifetime receipts tax like this would be much fairer than the status quo.

We are clear that inheritance tax should be kept in some form. However, as Demos’ research hints, that will require reasoned, honest dialogue with the public about how the tax works and what it pays for. 

That starts with leadership and a willingness by politicians to stand up for the positive role that tax plays.

The answer may surprise you. Despite making a £222 million profit, Amazon's main UK division paid no corporation tax in 2022. 

Because of government tax breaks, this is the second year in a row that this part of Amazon has paid no corporation tax here.

In fact the UK government actually gave Amazon money last year: £7.7m in tax credits for making investments in infrastructure, which they likely would have made anyway.

This would be an appalling situation at any time – but during a cost of living crisis when our public services are crying out for better funding, it’s an outrage.

That’s why we’re taking action.

We’ve teamed up with 38 Degrees to demand the government scraps tax breaks for Amazon – and other huge corporations.

They must close tax loopholes and stop handing out subsidies to tech giants that don't need them. Sign the petition:

Stop tax breaks for Amazon

Summing up the dire situation, Paul Monaghan chief executive of our ally the Fair Tax Foundation told The Guardian:

“Amazon UK Services is not only not paying tax, but is being handed tax credits for investment that almost certainly would have happened anyway. Tax credits for old rope, if you will. 

Amazon workers strike

At the same time Amazon is resisting giving it's staff proper cost-of-living wage increases.

Amazon workers in Coventry are currently on strike, demanding their wages increase from £11 to £15 an hour. 

Amazon workers in other locations are currently balloting to strike.

Big multinational corporations like Amazon must be made to contribute to the UK through taxes – and paying their workers properly. 

They must not be given a free ride by the UK government.

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