General election: analysis of tax policies

​Tax Justice UK, the newly launched sister organisation to the Tax Justice Network, releases today its detailed analysis of the general election manifestos of the main political parties, assessing how far they advance, or reverse, an agenda that is compatible with the pursuit of tax justice principles and the public interest. ​It finds that none of the parties will admit that, ten years after the financial crisis, the British economy is being run in the interests of a small financial elite based in the City of London, to the detriment of the rest of the British population and of many other people across the world. ​

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​In November 2008, the Queen visited the London School of Economics and asked why no-one had foreseen the largest financial crisis since the 1920s. In reality the warning lights had been flashing for years, but people in power chose to ignore the signals and failed to represent the public interest. The subsequent breakdown in trust has caused an unprecedented crisis of social cohesion that threatens our democratic institutions.

​In 2016 the Tax Justice Network, a sister organisation to Tax Justice UK, looked back at the financial crisis and argued convincingly that economic growth and equality in the UK are still held back by a ‘finance curse’: “the crash... and growing inequality cast doubt on the idea that finance is a boon to the host economy... beyond a point, a growing financial sector can do more harm than good”. The glib politicians’ assumption that the interests of the British people are aligned with those of the City of London could not be further from the truth.

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​In 2017, the manifestos of the Conservatives, Labour, the Liberal Democrats, the Greens, UKIP and the SNP demonstrate varying levels of commitment to addressing tax avoidance and building a fair and progressive tax system.

We have analysed each manifesto in detail, assessing the extent to which they advance, or reverse, an agenda that is compatible with the pursuit of tax justice principles.

​We have scored their pledges on tax issues based on 10 criteria under four sub-headings:

1. Tax avoidance and transparency
2. The UK’s secrecy network
3. Tax ‘competition’
4. Tax fairness

​And the scores? Labour leads the pack with a score of 77 out of a possible 100, followed by the Greens on 70, the SNP on 48, the Liberal Democrats on 47, UKIP on 22 and the Tories on 21.*

It is striking that Labour, even in its most radical manifesto for decades, holds back from grappling with the choke-like grip that the City of London exerts on UK economic and fiscal policy, which, to quote TJN’s 2016 report, ‘has crowded out manufacturing and non-financial services, leeched government of skilled staff, entrenched regional disparities, fostered large-scale financial rent-seeking, heightened economic dependence, increased inequality, helped disenfranchise the majority and exposed the economy to violent crises’.

* Plaid Cymru have been excluded because only local taxes are devolved to the Welsh Assembly, so their manifesto could not be fairly compared to the others.

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KEY FINDINGS

​RESOURCING HM REVENUE & CUSTOMS

​Only the Greens and Labour have made a significant commitment to increase HMRC’s resourcing and its ability to tackle tax avoidance in a meaningful way, although the Greens come close. A relatively small investment by the next UK government would yield significant financial returns as well generating political capital.​

​CLAMPING DOWN ON SECRECY JURISDICTIONS

Both Labour and the Lib Dems plan to put pressure on ‘tax havens’ as part of their international development strategy, although Labour is specifically focused on the UK’s network. The Greens also plan to act in this area as part of their proposed Tax Dodging Bill. The Conservatives do not make any mention of this, following their failure to cajole or compel Britain’s overseas territories and crown dependencies to embrace transparency in 2016, while UKIP are also silent and the SNP do not present any detailed plans.

​INCREASING CORPORATION TAX 

There is a clear ideological distinction between the parties here, with the Lib Dems and SNP taking a middle-ground position between Labour and the Greens on one side, and the Conservatives and (presumably) UKIP on the other. Reducing business taxes is a form of tax ‘competition’, a policy that is based on flawed economics, and there is no evidence to support the argument that higher business taxes will be passed on to workers and consumers. A corporation tax rate of 26% would still be the lowest in the G7.

​INCREASING WEALTH TAXES

Labour and the Greens plan to actively increase taxes on unearned income; the Lib Dems will simply reverse recent cuts, while the SNP will support limited action across the UK. UKIP will go backwards by increasing inheritance tax thresholds, while the Tories do not plan any changes. Leaving aside the evolving Tory plans to use property wealth to fund in-home social care, the Conservatives have missed an opportunity to tackle inequality of wealth, rather than income. The top 10% own 45% of wealth and the bottom 50% own just 9%. As Phillip Blond recently wrote, “there can be no popular capitalism if people do not have capital”. 

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​Will Snell, Director of Tax Justice UK, commented:

"Ten years after the crash, little progress has been made. Household debt is at record levels. Air pollution levels are hazardous in our cities; climate change is unaddressed. Investment in productive jobs has not materialised. Market power has become concentrated in the hands of multinational companies who extract wealth without paying taxes on their vast profits. The majority of new jobs pay low wages and provide little or no job security. Housing is unaffordable. Wealth and income is unevenly distributed between a tiny minority and vast numbers who are ‘just about managing’. The UK’s financial system remains opaque, unaccountable and rigged to serve the interests of the 1%, not the 99%. The status quo is neither equitable nor sustainable, and it will only get worse if the threats to turn the UK into a ‘Brexit tax haven’ become reality. The next government must take it upon itself to run the country and the economy in the interests of the whole population, not just those at the top of society.”

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FULL REPORT

Download the full 14-page report here.
A PDF version of this press release is here.