It was astonishing to hear the Prime Minister, Rishi Sunak, announcing with pride during his set-to with Labour Leader Keir Starmer at Wednesday’s Prime Minister Questions that “Two million more people have risen from poverty in the years of the Conservative governments.”
Poverty is normally measured relative to near contemporary median income. This is the most commonly used measure. For example the latest figures are for 2020/21 and 13.4 million are in relative poverty, after housing costs (as reported by the Joseph Rowntree Foundation), where relative poverty is 60% of median income. Rishi Sunak is using absolute low income which is based on 60% of the median income back in 2010/11, uprated by inflation. This is not a good way to measure poverty as the base year seems arbitrary. In 2010/11 there were 13.1 million people living in poverty using both measurements.
There was a decline in the number living in relative poverty in 2020/21 because of Covid. Down from 14.5 million and 22% in 2019/20. This was because median income fell due to the work furlough scheme, where the Government paid 80% of the salary of those on furlough because of Covid, and those on Universal Credit and Working Tax Credit received an extra £20 a week.
Poverty in Britain has in fact remained stubbornly high at around 20% of the population during the past decade. When housing costs are taken into account, the estimated number of people in relatively low income households dropped from 13.5 million (22%) to 13.4 million (20%) between 2009/10 and 2020/21.
The Joseph Rowntree Foundation in 2017 expressed fears for the ‘Just about managing’ stating that a third of the UK population lived on inadequate incomes. In February 2020 they reported that the fraction of people in poverty who are in a working family had risen to 56% in 2018, up from 39% in 1998. The JRF did concede in the same report that poverty in children had gone down by about a third, 34%, to 27%. However, the Institute for Fiscal Studies predicts that children living in poverty in this country will be found to have reached 5.2 million in 2023, as government welfare cuts take effect. This they say is “More than reversing the progress over the previous 20 years.”
Rishi Sunak mentioned on Wednesday that “Nobody in Britain should have to go to a Food Bank”, without acknowledging the enormous increase in food parcels the Trussell Trust and other charities have had to provide in the past year of galloping inflation.
There are different ways of measuring poverty. According to JRF 14% of people in the UK were living in deep poverty in 2020/21 (having an income less than 50% of median income: see the JRF 2023 Poverty Report). What the country needs are the radical solutions that Liberal Democrats have now proposed, passing the Fairer Society paper and motion at our Spring Conference proposing to end deep poverty in the UK within a decade. The Labour Opposition should be made aware of our proposals, if poverty in Britain is to be truly tackled in the next non-Conservative government.
* Michael Berwick-Gooding is a Liberal Democrat member in Basingstoke and has held various party positions at local, regional and English Party level. Katharine Pindar is a long-standing member of the Cumberland Lib Dems.
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57 Comments
At the time of the coronation of Queen Elizabeth II there was virtually no poverty. At the time of the coronation of Charles III it is widespread. Why?
@Steve Trvethan
“At the time of the coronation of Queen Elizabeth II there was virtually no poverty.”
If I recall correctly (a bit small then – and the whole thing was a total bore) some rationing was still going on. There was less for people to spend on.
Mind you – it might be wrong to imply the wealthy didn’t do their own thing during the war – petrol wangling etc. for leisure purposes. Not first hand evidence 0 just what I’ve read….
@ Steve Trevethan. “At the time of the Coronation of Queen Elizabeth 11 there was virtually no poverty”.
Oh dear, you’ve clearly not read Townsend and Abel-Smith, Mr Trevethan. They recorded the level of poverty in the UK as 4 million (about 10%) at the time. As an eyewitness I can still recall kids hanging round Newcastle station in bare feet then, still huge bomb damage from the war in London when my parents took me to see the Festival of Britain in 1951, and of course terrible tenements in the Gorbals and Govan in Glasgow…….. Later stats also show it got worse as the fifties went on.
Rationing by price is always with us, sometimes unrecognised as such.
Might current neo-liberal socio-economics, with its profound policy of wealth polarisation, result in your society as a whole needing some rationing by need?
The current definition of poverty (relative to median income) means that poverty can only be reduced if income inequality in the country is reduced. Doubling every person’s income would not reduced poverty rates because the median income would also double.
Mel, I’d settle for that prospect of a prosperous UK – but only if the Liberal Democrats were able to reform the taxation system (including taxing wealth as well as income, as we have a policy to do) and bring in the necessary increases to the welfare system, plus the Guaranteed Basic Income we agreed to at York. Tell them on the doorsteps – our party is demanding a Fairer Society for all.
Thanks to Mr. Raw for yet more from his terrific treasury of facts and information!
However, Wikipedia [Poverty in the U. K.] quotes a 1951 study which showed that in 1950 only 1.5% of the survey population lived in poverty compared with 18% in a survey of1936.
At the time of the then coronation, this writer can remember no begging, no doorway sleeping, no “Big Issue” sellers and no food banks.
Why do we have these indicators of poverty now?
Thomas Piketty’s Capital gives a sweeping historical background to inequality. Piketty shows, human societies have moved fitfully toward a more just distribution of income and assets, a reduction of racial and gender inequalities, and greater access to health care, education, and the rights of citizenship. “Our rough march forward is political and ideological, an endless fight against injustice”. To keep moving, Piketty argues, we need to learn and commit to what works, to institutional, legal, social, fiscal, and educational systems that can make equality a lasting reality. At the same time, we need to resist historical amnesia and the temptations of cultural separatism and intellectual compartmentalization.
The post-war years in Britain were no bed of roses and standards of living have improved greatly since the 1950s, not least as a result of slum clearance, development of social housing and social welfare reforms.
Much of that improvement is being eroded today particularly as regards housing. The average rent for London has surpassed £2500 per month. “That’s about £1,300 more than the average asking rent for homes outside of the capital, which also hit a record high of £1,190 Rightmove
Beveridge’s ‘Problem of rents’ is not going away
Steve Trevethan,
The Wikipedia article https://en.wikipedia.org/wiki/Poverty_in_the_United_Kingdom does refer to Townsend and Abel-Smith at the end of the section on the 1950s and 60s – “In their 1965 study on poverty, “The Poor and the Poorest,” Professors Peter Townsend and Brian Abel-Smith decided to measure poverty on the basis of the National Assistance levels of living and estimated that some 14% (around 7.5 million) of Britons lived in poverty.[7] Townsend and Abel-Smith also estimated that since the mid-1950s the percentage of the population living in poverty had risen from 8% to 14%.[10]”
According to the Joseph Rowntree Foundation (https://www.jrf.org.uk/report/poverty-and-wealth-across-britain-1968-2005) , “The proportions of households that were core poor and breadline poor declined during the 1970s, but then increased again during the 1980s. The 1990s saw the two poverty measures diverge, with the breadline poor continuing to rise, and the core poor falling to around 11 per cent of households. In 2000, more than a quarter of households were breadline poor.” They use these definitions, “’Core poor’ – people who are income poor, materially deprived and subjectively poor; ‘Breadline poor’ – people living below a relative poverty line, and, as such, excluded from participating in the norms of society;”
When the government was trying to achieve full employment poverty reduced, when it stopped doing so poverty increased,except for the first ten years of the 1997 Labour Government. (See the graph in the Wikipedia article that shows that relative poverty fell from 25% in 1996/97 to 20% in 2006/07.)
From the viewpoint of ordinary people in our society, the standard of living is known to have sunk in the last few months and the poor are getting poorer. How can it be otherwise when inflation has hit worst on the prices of basic foodstuffs such as bread, milk and cheese? Obviously a higher proportion of the income of the poorest goes on the basics, food, drink and energy costs, and while the price of energy has begun to fall the prices of foodstuffs remain at more than 10 per cent higher than a year ago. The rise in the minimum wage only touches the problem. We surely have to stand with the unions in demanding higher incomes for the service workers, and give a commitment to fight to lessen the gross inequalities of our society today.
Well said Katharine Pindar!
“The test of good governance is not whether we have organised for more for those who have much, but whether we have organised for the provision of enough for those who have too little.”
(From F. D. Roosevelt)
@Katharine Pindar “Tell them on the doorsteps – our party is demanding a Fairer Society for all.”
The Telegraph (https://www.telegraph.co.uk/politics/2023/04/30/liberal-democrat-attack-ads-tories-stealth-taxes/) seems supportive of the Lib Dem campaign against Tory “stealth taxes” (not that freezing tax thresholds seems very stealthy!), but if the Lib Dems are opposed to increasing the tax of the higher-paid “blue wall” target voters, drawing attention to how their income tax has increased by more pounds than someone living in Blackpool, what is the party’s commitment to such a fairer society, and how does it intend to bring one about?
Peter, thank you for your enquiry. The Liberal Democrats believe in fairer taxation for everyone, although particular policies may be emphasised during an election campaign. Our last Manifesto promised, “Our plan for the future will see big businesses paying their fair share, support small and medium-sized enterprises and ensure that income earned from wealth is not privileged when compared to income from employment – making sure the tax system is fair to all.” The Manifesto continued with separate proposals including taxing income from capital more fairly compared to income from work, replacing business rates in England with a Commercial Landowner Levy based solely on the land value of commercial sites, and taking action against corporate tax evasion and avoidance. It is fair to say that we are equally committed to protecting workers, planning a Worker Protection Enforcement Authority for those in precarious work and a ‘dependent contractor’ employment status among other moves, as to supporting entrepreneurs and small businesses and promoting responsible capitalism which also protects the environment. Our plans for a Fairer Society are well in hand through policies passed at each of our Federal Conferences both before and since 2019.
(Steve T., thank you for your comment and the excellent F.D. Roosevelt quote!)
@Katharine
With regards to the 2019 manifesto, I seem to recall it also included a 1% rise in income tax which seems at odds with these “attack ads” about so-called stealth taxes on those with the highest incomes.
I think it’s great to see Lib Dems like you, Michael BG and others acting as a social conscience for the party and reminding those of us that read LDV of Lib Dem compassion. But sadly, away from this site, the party’s leadership and publicity machine often gives the impression that it prioritises relatively affluent blue wall target voters over those in poverty elsewhere (like Blackpool!), with messages that appeal to the Telegraph and the Mail.
Peter Watson,
Also in our 2010 manifesto our four top priorities included increasing the Income Tax Personal Allowance to £10,000. This removed millions of low earners from paying income tax. Therefore increasing the Income Tax Personal Allowance in line with inflation is a policy included in our party’s commitment a fairer society.
@ Katharine,
” We surely have to stand with the unions in demanding higher incomes for the service workers, and give a commitment to fight to lessen the gross inequalities of our society today.”
It’s good to see that the Lib Dems also have their socialist wing!
“At the time of the Coronation of Queen Elizabeth 11 there was virtually no poverty”.
This is clearly untrue.
However, we were, at the time recovering from damage caused by a major war. The GDP per person was a tiny fraction of its current level. So whereas there might have been some excuse then there isn’t the same excuse now.
The argument from the political right has always been that an increased GDP alone is the answer to most of our problems. This hasn’t been borne out by experience. It’s fine to have a bigger cake but the way it is cut and shared out matter too!
https://www.ukpublicspending.co.uk/spending_chart_1950_2010UKb_17c1li011lcn__UK_Gross_Domestic_Product
Peter Watson. Hi, Peter, I can see your point, and have passed it on to our President, Mark Pack, who communicates with all of us on email every day, so he is likely to reply. Personally I wish we would communicate with the public nationally about our opposition to the Illegal Migration Bill (for example), rather than so much on popular topics, but thousands of our colleagues out on the doorsteps (as I may be this afternoon myself) in election time will be talking to the voters about what we can offer which they will be interested to hear. So I think you must allow us to be popular – so long as we don’t depart from our principles or agreed policies – at Election time!
Peter Martin. You will like to know, Peter, that our Fairer Society policy paper, passed at our Spring Federal Conference at York in March, includes in lines 94 to 102, the following:
‘4. Propose a new Workers Charter, with modern protections for a modern workforce including fairer flexible working rights, including
a) Establishing a new streamlined Worker Protection Enforcement Authority which would both enforce rights more effectively and give employers a simplified institutional contact.
b) Changing the law so that flexible working is open to all from day one in the job, with employers required to advertise jobs accordingly, unless there are significant business reasons why that is not possible.’
Does the Labour Party conference discuss and agree on policies designed to help workers in the way that the Liberal Democrats do?
@ Katharine,
That’s a good question and a fair point to make. We used to do that at one time but not, at least in any seriousness, under the current management of the party. We’re “the party of business” now! 🙂
Some of us think that business should have their own party and leave the Labour Party to be the party that it was set up to be. The clue is in the name.
I’m not able to defend the party line any longer. I’ve managed to force myself to deliver a few election leaflets and I’ll have to force myself to vote Labour when the time comes!
Peter (M) – the conclusion of your last comment makes no sense as a follow-up to the rest of it! Break the habit of a lifetime, and, logically, vote Liberal Democrat now. Can we let you know what your local branch is? we’ll be happy to have you on board.
@ Katharine,
I’d be perfectly happy to be in the same party as yourself, Michael BG and possibly a couple of others on LDV. However, I think you’d have to agree you’re in a minority so I’m not sure the Lib Dems is the party for me! Thanks for the invitation, though!
I’m not sure Katherine is in a minority.
Whilst poverty alleviation iself might not be a paricular interest of a majority of LD members, there is widespread agreement in the party that society is horribly unequal and this creates all sorts of knock on issues.
Unlike Katherine, I don’t favour UBI, because it’s less redistributive than more targeted redistribution. But that is a policy detail. I strongly agree with better protection and rights for workers, for example.
At the other end of the scale, executives are, on the whole, grossly over-paid. There are company procedural changes that could mitigate this serious problem, which impacts on overall inequality.
Chris, thank you for your helpful and reassuring comment. I’m sure you are right, that our party does note with dismay the way inequality is helped also with the excessive pay of executives. Just one small correction – I have never (even when spelled with the usual ‘a’ in the middle of my first name!) personally supported UBI. You are perhaps referring to the policy which I do support, and which the party voted to support in place of UBI at York – GBI, Guaranteed Basic Income, to be provided for the people who don’t have enough, not universally. I am hoping that the Labour party in power will come to support that principle too. Meantime, as you say, we do support better protection for and the rights of all workers. There is plenty to be proud of and tell on the doorsteps!
Katharine,
When you say “.,,,,,,our party does note with dismay the way inequality is helped also with the excessive pay of executives..” do you mean your Parliamentary party or the members of your party”
Certainly there is a huge gulf between the members and the PLP (Labour MPs) and I suspect that it’s a similar story in the Lib Dems too. For example, it has been widely reported that 75% of all voters would favour a wealth tax on all those with net assets of £5 milion or more. That would be 95% + for Labour party members. Yet, there is next to no support in the PLP. Certainly we don’t expect Rachel Reeves to ever support the idea. Its the same story with high levels of executive pay. The members support curbs, The leadership doesn’t. It doesn’t look be any different in the Lib Dems.
So my frustration, bordering on disillusion, isn’t with the views of the majority of the Labour membership. It’s the leadership who are the problem.
https://www.prospectmagazine.co.uk/ideas/economics/60465/wealth-taxes-work.-just-look-at-argentina
Peter Watson,
Indeed our 2019 manifesto did include increasing income tax by 1%. Hopefully, when the general election comes we will be clear that we will increase taxation. As Katharine has pointed out we want to tax wealth at the same level as income.
Peter Martin,
There is no socialist wing in the Liberal Democrats, but there are lots of Social Liberals like Katharine and myself. And as Chris Moore states most party members would like to decrease inequalities including economic inequalities.
With the huge increase in GDP UK governments should have been able to reduce the percentage of people living in relative poverty.
I can’t see any conference motions in the last five years which call for a wealth tax. I haven’t checked defeated amendments. The idea of a 2% wealth tax on net assets of over £5 million, so someone with £10 million of assets would pay an extra £100,000 in tax each year is growing on me.
The gap between voters support for wealth taxes and their MPs lack of it is largely explained by a perception that while good in principle, they are almost impossible to implement. This may or not be true but it is certainly much easier to implement proxies. Taxing income (including capital gains) from wealth is not only easier but actually more progressive because income from large lumps of wealth is a higher proportion of the capital than that from small lumps of cash. Taxing inherited wealth at the point of inheritance is also easier and seen by many as fairer.
Katharine, my sincere apologies for spelling your name wrong AND associating you wrongly with UBI!
As for excessive executive pay, I think this can be dealt with better through reforming the company procedures for determining pay levels for executives.
Very high levels of tax lead to all sorts of unwanted consequences.
My bet is that LD MPs
…..would support such measures.
PS I am strongly in favour of a wealth tax.
Chris Moore. What unwanted consequences? When, in my youth, the basic rate of income tax was 33% and the top rate of tax was 98%, all that happened was that a few very rich pop stars emigrated. I lost no sleep about that. There was much greater equality and income was redistributed.
Then along came Laffer and his fallacious curve and everyone started to think that high rates of tax were a bad idea. Truth be told, the very rich started saying that and used their ownership of the media to propagate the idea and persuade everyone else that that was the case. The Thatcher government, with Lawson at the Treasury cut tax for the rich in the throughly mistaken belief that wealth would then trickle down. [Actually, they only said wealth would trickle down, they knew it wouldn’t]
The result of effectively ending redistribution has been to create far greater poverty and far greater inequality and neither the Tories nor Labour will do anything about it. Someone has to start saying that the high tax argument is a myth and say they will reintroduce the much higher rates of tax. I hope it will be the Lib Dems, but if I’m honest, I’m not holding my breath. Far too radical for the leadership.
It does sound as if we need a new policy on taxing wealth to be debated at Conference, since ‘Taxing capital from wealth more fairly compared with income from work’ – the last Manifesto commitment – will need detailed proposals. (Joe Bourke, can you perhaps flesh this out?) As to whether the leadership would then insist on the policy passed, I have hope that they would. It seems that our democratic system, of expecting the leaders to follow the policy decisions of Conference, is not followed by the Labour or Conservative parties, and it was severely tested for us in the Coalition years, but it should now be made to hold. We shall see! Have faith and keep working, Mick!
We already have tax rates over 50% for people on UC, People with children on £50-60k and anyone between £100k and £125k so the point at which people stop trying to earn more must be above that. The point at which people stop trying to maximise their investment income must be close to 100%. They will however switch between different types of investment on a relatively small differential tax rate which is why eliminating tax breaks should be the first choice. Emigration of course would be down to total rather than marginal tax take.
All this talk about taxing wealth ignores the elephant in the room, the existence of trusts which pay a mere 6% of their value every 10 years to HMRC. Is the Party prepared to be sufficiently bold as to end the biggest tax loophole there is? The Duke of Westminster’s massive wealth, estimated at £10 billion in 2022, pays the equivalent of just £60 million per annum (equivalent to everyone in the UK paying an extra £1) and there is no inheritance tax on trusts which can be passed down from generation to generation without limit. Rather going for the small fry who may own a home worth an odd £1 million, why isn’t the Party going after the really big fish?
According to the IFS, the UK has comparable levels of income taxation with European social democracies and quite progressive levels as regards income taxes on higher incomes. Where the tax yields fall short of comparable European economies (with higher levels of social security protection) is in Employers National Insurance How do UK tax revenues compare internationally?
“The average tax rate (incorporating income tax and SSCs) on median full-time earnings in the UK was 28% in 2016–17 (the year for which this analysis was undertaken). This is much lower than it would have been under the tax systems of the other countries shown in the chart, for which the average was 44%. Some of this difference is accounted for by income tax, but most of it reflects lower SSCs paid by employers on their employees’ salaries; there was very little difference in the SSCs paid directly by employees”
Wealth taxes have largely been withdrawn where they have been levied in the past. However, Martin Wolf published an article in the FT earlier this year writing “I have long been a supporter of taxing land value. Such a tax would be economically efficient and morally just. But it has been politically impossible: the landowning interest, which now includes a large part of the population as owner-occupiers, has been too strong. This is a tragedy. Now that western politicians are struggling with low growth, stressed public finances, high inequality, intergenerational tensions and an unstable financial system, they need to consider such a fundamental change in what is taxed.”
Katherine and Michael are not in a minority. Peter Martin may wish to look at the IFS analysis of the main parties proposals on welfare in 2017 and 2019 which found that the Lib Dems manifesto would have redistributed to the bottom 10% more than Labour’s manifesto would have done.
Joe, thank you for the tables and the note on Martin Wolf’s article. I don’t claim further knowledge, but I thought Land Value Taxation was meant to proceed with the safe exception of individual household dwellings, with which however Council Tax banding should be reassessed. As to employer National Insurance contributions, I suppose we cannot suggest increases to compare with other European rates without incurring deep unpopularity! But certainly our party’s commitment to finding funds for Guaranteed Basic Income, and continuing to intend assaulting poverty levels, does I suppose require us to think of higher tax revenues in future. Perhaps Laurence Cox is right, that we should consider greater taxation of huge trusts? (Including the Royal Family’s even, I wonder!)_And what about tackling offshore trusts, and wealth hoarded there out of reach of HMRC? Let us pool our knowledge and suggested solutions.
Peter Davies,
If a wealth tax was on net assets of over £5 million it would not be on small lumps of cash. I am not convinced that taxing wealth is seen as unfair. Of course if people had to pay 25% of all their wealth each year it would be seen as unfair.
Mick Taylor,
Calling for the basic rate of income tax to be increased to 33% would not be a popular policy. I am not sure even having a 98% tax rate would win many votes. We will be calling for a 1 pence increase to the basic rate. I think we should also introduce a new rate for those earning more than £38,000 and increase slightly the higher and additional rates. However I would like to see the higher National Insurance rate increased from 2% to 12% and National Insurance extended to all income not just earnings.
Laurence Cox,
According to the government website some trusts have to pay 45% income tax on their income from other sources than dividends (https://www.gov.uk/trusts-taxes/trusts-and-income-tax). I think what you were writing about is the trust not paying inheritance tax, instead they seem to pay this 6% tax.
Joe Bourke,
Hopefully, our Commercial Landowner Levy will get over the problem of a large part of the population being owner-occupiers. Currently our policy is not to replace Council Tax with a simple percentage-based annual property tax based on up-to-date valuations, it is only to look at it. Perhaps we could try to change this.
Hello Mick, why faff around with 98%? 100% is the least we should be taking.
@MichaelBG
Since the comments in this thread have centred on taxing wealth, perhaps you would like to explain why you think it does not matter that the Duke of Westminster inherited £9 billion in 2016, but paid no Inheritance Tax on it (that’s £3.6 billion lost to the Treasury from one single person) and his wealth (held in the trust) has since increased to an estimated £10 billion in 2022. Capital Gains Tax is only incurred on sales, the rise in value of the properties (e.g. Mayfair) which the trust continues to hold is only taxed by the 6% charge every 10 years and there is no income tax liability if the trust is structured so as not to receive income but to benefit from the rise in value of the assets it holds. The use of trusts to minimise tax is the principal tax avoidance method of the middle and upper classes and while the Duke of Westminster is an outlier, I would not be surprised if more than 10% of the UK population used trusts to minimise their tax liability. Even my solicitor advised me to set up a zero-band will trust before Gordon Brown made it unnecessary by introducing the transfer of IHT allowances between spouses. There is a place for trusts for children and those incapable of managing their own financial affairs, but the spread of trusts goes far beyond this. Without the proper taxation of wealth in trusts a wealth tax would be unfair.
Laurence Cox. In September 2018 at the Brighton Conference, a motion was passed which followed a spokesperson’s paper on ‘Promoting a Fairer Distribution of Wealth’. This called for, firstly, ‘Equalising the tax treatment of income from wealth and income from work’, explaining how this was intended, and, secondly, ‘Streamlining the taxation of intergenerational transfers by: abolishing inheritance tax and instead taxing recipients at income tax rates and bands of £250.001 to £500,000, £500,001 to £1 million, and above £1 million, ensuring that all transfers – not those made at or near the giver’s death – are subject to tax; giving each person a generous £250,000 lifetime tax-free allowance…’. Will you want us to develop that policy further?(The mover of that motion, incidentally, was Lord Newby, who I think will again be active in the Manifesto planning for the next General Election.)
The commercial landowner levy is a policy to reform business rates and assess Landlords directly rather than business tenants. It is largely revenue neutral, although by bringing commercial land into charge it does have the potential to raise additional revenue from this source. But that is not its primary objective.
Gordon Brown brought in a number of tax changes to trusts including a 45% rate for income derived from discretionary trusts and a 6% asset charge every decade. Martin Wolf in his article writes “Natural resources are quite different from the capital stock created out of human effort – the share of non-produced assets in the UK is nearly 60% of total assets”. Land Value Tax does not seek to confiscate assets in the way that inheritance might. It seeks to capture rents and capital appreciation derived from the unimproved value of land for the public benefit.
The Grosvenor estate is reported to have paid £58m in tax on profits of £527M in 2015 Inheritance tax: why the new Duke of Westminster will not pay billions. The vast majority of assets are located in central London. With a 1% Land Value Tax on the market value of land, the estate might expect to pay something in the region of £100 million extra in tax on its rents from Land holdings and a lower level of tax on profits from its buildings or other business activities.
Land Value Tax is not so much about raising additional revenue (although this may be a side benefit) as it is about alleviating poverty by shifting the burden of taxation from wages and entrepreneurial profits to rents derived from natural resources and monopolies.
Laurence Cox,
I didn’t write that it didn’t matter that the Duke of Westminster inherited £9 billion without the estate paying any inheritance tax. From what Joe Bourke has written it is possible that most of the income of the Duke of Westminster trust is from dividends and on this income it would pay 39.35%. And the income would be much lower because of this; as the companies would keep lots of the profit rather than distribute all of it in dividends. If the Duke of Westminster receives an income from the trust his income is subject to income tax.
The current duke was born in 1991 and if he lives until aged 81 that will be in 2072 and so the estate would pay 6% at least five times, which is not as much as 40%. Therefore the 6% rate is too low. Perhaps 15% would be fairer, so over thirty years the trust would pay 45%, or perhaps 8% every five years.
@Katharine Pindar
You are missing the point. The Duke of Westminster is not the legal owner of the Trust so taxing lifetime gifts doesn’t make any difference to him. Under the present law, Trusts like this are immortal; it will be there for his children when he gets married, and his grandchildren and his great-grandchildren. The only way to end this is to reform Trust Law, which the Party has not committed to.
“The land is held in trust by a distinct legal entity, the Grosvenor Estate, meaning the duke does not control day-to-day operations and also handily avoided what could otherwise have been a multibillion-pound tax bill when he inherited the estate from his father.”
@MichaelBG
£58 million on profits of £527 million is just over 10%, not almost 40%.
Yes a good point about trusts and tax avoidance!
Trusts allow the de facto, rather than the de jure, ownership of wealth and assets to be shielded from the tax authorities. The wealth held by a trust, at least in law, no longer belongs to the original owner so can be easily handed over to heirs and inheritance tax free. Tax dodgers are using the legal status of ownership offered by trusts to hide their ownership of fortunes and expensive assets. In practice they continue to benefit and exercise full control just as they always did.
If we are going to implement a successful wealth tax, the law on trusts has to be amended. On possibility is to apply a wealth tax to all legal entities such as companies and trusts as well as on individuals.
.
@ Michael BG,
You’re saying there are “Social Liberals” but no “Socialist Liberals”. So it’s not possible to be both Socialist and Liberal?
Where would you draw the line?
Not sure why people think I was calling for higher in come tax rates, though there is scope for that. My point was only that tax rates had been much much higher in the past AND under a Tory government. What has happened since is that direct tax rates have been drastically cut and indirect taxes greatly increased. That is regressive and means poorer voters are picking up the tab for rich people’s tax cuts.
There are several reasons why some people pay too little tax.
1. There are too many tax loopholes, including non Dom status. They need to be closed
2. UK citizens who live overseas don’t necessarily pay UK taxes. We could adopt the US tax system, whereby all US citizens are liable for US income taxes on their income, offset only by taxes they can prove they paid abroad
3. Wealth is not taxed and inheritance tax is easily avoided.
We DO need to debate the whole issue of tax and decide what stance to take on it. Far too much tax and tax laws are obfuscated and not understood.
@ Katharine,
” We surely have to stand with the unions in demanding higher incomes for the service workers, and give a commitment to fight to lessen the gross inequalities of our society today.”
But also separate to the unions.
One of the problems is that the unions have tended to want an equally good wage settlement so as to preserve differentiates and thus as Mel Borthwaite noted does nothing to improve poverty.
Hence one of the reasons the unions opposed the BT 2022 pay increase because it gave £1500 regardless of grade and thus was a higher percentage rise for the lower paid members than the higher paid members.
Another reason to stand separately is to recognise that technology and working practices changes will tend to result in fewer people being needed, hence we should not be forcing employers to maintain over staffing. This obviously requires a culture change so that it becomes normal (and less financially disruptive to people’s lives) to leave an employer, retrain and join a different employer.
Laurence Cox,
From the Guardian article it seems that the Grosvenor Estate is not the trust but is one of three businesses owned by the trust. That is why it makes profits and has to pay corporation tax on those profits. Just like any other business there are rules that apply to the amount of tax they pay on their profits. We are not opposed to all of the allowances a company can apply to their profits and their corporation tax. Trusts are not immortal but as I said we need to reform the rate of the ten-year inheritance tax.
Peter Martin,
Our commercial landowner levy would be applied to all businesses including trusts if they own the land directly. If we had a wealth tax then it would need to be applied to trusts as well as individuals.
I am not aware of anyone in the party who identifies themselves as a Socialist Liberal. As I have said there are lots of Social Liberals. There are also some who identify themselves as Social Democrats. It is possible that Social Democrats might also see themselves as Socialists.
Mick Taylor,
Your wrote, “rate of income tax was 33% and the top rate of tax was 98%, all that happened was that a few very rich pop stars emigrated. I lost no sleep about that. There was much greater equality and income was redistributed.” Therefore you should have expected people to think you were calling for higher income tax rates.
I agree with your three suggestions.
Roland, unions are important, and can clearly be greatly significant in protecting workers’ rights. But I did not mean to suggest that our policies identify us with them, only that we can often sympathise with their claims. Our policies that I cited on May 2 at 10.44, seeking a new Workers Charter and a Workers Protection Enforcement Authority for example, show our concern for all workers’ rights, not just for those who join unions; and our policies for workers have further expression in the same Fairer Society policy paper passed at this year’s Spring Conference which advocates major policies to relieve poverty.
I want to make one final point, referring back again to the excellent policy we passed at the September 2018 Conference, called Promoting a Fairer Distribution of Wealth. We asked in lines 66 to 72 concerning taxation of residential property for immediate introduction of higher bands to make council tax more progressive, and consideration of replacing council tax with “a simple percentage-based annual property tax based on up-to-date valuations, as is the case in most other developed economies and as recommended by the OECD, Resolution Foundation, IFS and IPPR.” Council tax, disregarded by the wealthy, is yet another blow for the poorest, when increased as for this year by underfunded councils to pay for essential services. Our newly elected councillors whom we rejoice with today could be asked to support such a much-needed reform.
@katherine – Thankyou for the clarification, having in my past served on a supervisory board as a shareholding employee representative, there were times we were battling both management and the unions… hence my wariness.
>” Promoting a Fairer Distribution of Wealth.”
Given the call for reparations for the transatlantic slave trade, we could frame this also as reparations, dating back to 1066 when William divided the country up between his mates, treating the existing population only slightly better than slaves…
Katharine, Indeed you are right, council tax is not progressive (in the technical sense of progressive taxation and not in the more common modern sense of modern left wing or trendy leftie depending on your point of view). It was deliberately designed to not be progressive by the Conservatives from the very start.
However, we also have to acknowledge that a substantial proportion of our support and particularly support for our MPs comes from people who are relatively well to do but with a social conscience. If we push hard on your proposal, we may well lose the support of the flakier of the social conscience brigade and so lose MPs.
Some here would argue that it is a price worth paying for ‘doing the right thing’. I would argue that having even less MPs will put us even further away from being able “to build and safeguard that fair free and open society” which we all hopefully aspire to, would be definitely a bad idea.
The cross-party APPG on Land Value Capture has commissioned a study on council tax reform. to be published this summer. Replacing council tax with “a simple percentage-based annual property tax based on up-to-date valuations is the simplest route to reform (as advocated by the FairerShare campaign).
However, as with many tax reforms there are additional changes to the structure of council tax that would likely need to be taken to achieve the primary objectives of alleviating poverty while retaining the necessary popular support that David Evans comments on.
These include the inclusion of a locally set tax free allowance for owner-occupiers (Homestead Allowance) on their principal private residence (an allowance based on local housing allowances i.e. values at lowest 30th percentile);and the splitting of council tax assessments on let properties and 2nd homes between Landowners and tenants (not applicable to unoccupied 2nd homes) in proportion to Land and building values (approx 65% to 35%) in London. These measures would make council tax much more progressive relative to income distributions, reduce assessments for the great majority of owner-occupiers and transfer a much greater share of the council tax burden to 2nd properties and the highest value properties (typically occupied by those in the highest income deciles) in any given area. The assessments on Landlords and unoccupied investment properties or holiday homes would become much closer to the kind of property tax levels assessed on other commercial businesses.
Roland,
King William did not divide England in 1066. It is highly unlikely that King William gave any land to “his mate” before 1st January following his coronation on Christmas Day 1066. It was after revolts between 1068 and 1071 and the Danish invasions that most of the land was transferred to “his mates”. (I wonder how much land King Canute gave to his mates after he conquered England in 1016.)
Joe Bourke,
Replacing Council Tax with “a simple percentage-based annual property tax based on up-to-date valuations” is a simple policy that people will easily understand unlike what you described. However, I would like us to also restore the Council Tax benefit system that existed in 2012 along-side this reform.
True poverty is a human rights issue. One person in absolute poverty is one too many. What is needed is a path to eliminating situations where people cannot afford to eat, heat their homes or cloth their children.
Peter Hirst,
As I think the UK definition of absolute poverty is arbitrary, I would change what you wrote to:
One person in relative poverty is one too many. We need a path to eliminating relative poverty and on that path we will eliminate situations where people cannot afford to eat, heat their homes or cloth their children or themselves or have a decent home.
According to Gordon Brown, there were last year 14.4 million people living in poverty, which he says are ‘the official government statistics’. In yesterday’s Observer, referring as Michael and I did to Rishi Sunak’s wrong assertion on poverty at last week’s PMQs, Mr Brown wrote about how ‘multibanks’ offering basic household goods as well as food supplies to poor people have been developing; his local one in Fife is apparently supporting more than 30,000 people. He writes, ” The fanfare for a king cannot obscure what is unfair for others – rising deprivation among those without money or power”, and adds an appeal for retailers and supermarkets to donate their surplus goods to the charities to supplement their urgent supplying of necessities, noting that Amazon and Tesco have already been donating.
Admirable as all this is, we Liberal Democrats demand that the state do more. Our policies on welfare with our new demand of Guaranteed Basic Income, requiring immediate changes to Universal Credit, should be adopted by the Labour Party. The needs are so urgent that I believe we should not wait for the possible hung Parliament to press our demands, which should be meantime central for us. Simultaneously we need to develop our plans for taxing wealth, to assure means of funds for the necessary reforms.