Last weeks’ budget did little to move the dial on gender equality. Our friends at the Womens’ Budget Group (WBG) highlighted that the £14bn a year in planned public service cuts will hit women and the poorest hardest. At the same time, the so-called ‘super deduction’ to capital allowances will give business the ‘biggest tax cut in modern history’.
Importantly the Treasury failed to publish a comprehensive Equality Impact Assessment of the budget. This makes it impossible to judge whether they have met their obligation under the Public Sector Equality Duty to have ‘due regard’ to equality. This is particularly concerning given that Covid-19 has worsened the situation for many women in terms of health, employment and unpaid work, resulting in increased levels of poverty, debt and mental health deterioration.
We know that the financial impact of the Covid-19 pandemic has not been even. Wealthy people have increased their wealth by saving while poorer people are more likely to have borrowed money in order to get through this crisis. This potentially makes a bad situation worse.
Even before the pandemic wealth in the UK was deeply unevenly distributed. As our Executive Director, Robert Palmer, wrote on openDemocracy, this is a feminist issue, as women typically own fewer assets than men. Gendered wealth inequality has real world consequences, including shorter lives, poorer health and a more precarious existence. This problem is exacerbated by the tax system, which treats wealth much more generously than consumption or income from work. Addressing wealth inequality, and in particular ensuring that women have better access to resources, should be a government priority.
Our submission to the Commision for a Gender Equal Economy set out evidence illustrating how wealth inequalities disproportionately affect women. For example, once women have children, they are much more likely to have little, or nothing, in the way of savings. This means that ownership of wealth is fairly even between men and women until people reach their 30s, when men start to pull away. Overall women have only 40% of the UK’s stock of personal wealth.
There are particularly stark differences in wealth when it comes to the ownership of financial assets, which are often lightly taxed. For example, women are less likely to have private pension pots, and if they do, the size tends to be much smaller. By the time a woman is in her early 60s, her average pension pot is a fifth the size of that of a man her age. Women also receive significantly less income from property, interest, dividends and investments than men.
So what can politicians do about this?
The government could invest in the care-led recovery WBG and many others are calling for. Investing in care would create 2.7 times as many jobs as the same investment in construction. 50% more can be recouped by the Treasury in direct and indirect tax revenue from investment in care than in construction. And investment in care is greener than in construction, producing 30% less greenhouse gas emissions.
One thing the government is considering and might decide to do is to tax income from wealth at the same level as income from work. The current approach, where capital gains are taxed at a lower rate than income tax, is regressive. It also favours men, since they are much more likely to receive income from capital gains. Increasing the tax rates on capital gains to the same level as income tax could raise up to £14bn a year according to government estimates. Our own research found that 74% of people want the wealthy to pay more tax.
Other options include curbing the very generous tax reliefs on pension savings. Higher earners receive the bulk of pension tax relief, despite making up a small proportion of the working population. The Resolution Foundation suggests a flat rate of relief at 28%, which would be revenue neutral.
While neither of these were in the budget, we expect to hear more announcements from the government on tax on 23 March and a further budget is due to take place in the autumn.
We will be discussing gender justice and tax justice in more detail together with the Women’s Budget Group on Friday, 19 March. Please join us here for this free event.
The event is part of the global days of action to make taxes work for women by the Global Alliance for Tax Justice.
You can watch the event on gender and tax here.