“The richer you are, the lower the tax rate you are likely to pay due to the many reliefs and exemptions available to those who can afford clever accountants.”
By Jon Trickett MP
The chatter from inside the Treasury is that there is some “fiscal headroom” ahead of the upcoming Budget. If this is the case then we can be certain where the new found money has come from – hard-working people who have been hit by large Tory tax rises in the last two years.
How did this happen? Through a deeply unfair policy manoeuvre known as ‘fiscal drag.’ This is where workers’ wages are increasing but the threshold at which they pay tax has been frozen meaning that they are paying higher taxes.
Even after Chancellor Hunt’s National Insurance cut in October last year, working people are still significantly worse off due to the impact of ‘fiscal drag.’
So, it is off the backs of Britain’s impoverished workers that the Treasury has found any windfall. A cursory glance at the right wing newspapers shows that debate has begun about how the Exchequer should spend this money. Unsurprisingly, focus has turned to cutting inheritance tax, or perhaps even scrapping it altogether.
Inheritance tax has long been a bugbear of the right wing newspapers, whose wealthy owners and editors would likely be liable to pay were it not for clever accounting techniques that allow so many of the richest in our society to avoid paying this tax.
Senior Tory MPs including the aristocratic Jacob Rees Mogg and the Northern Research Group’s Jake Berry have spoken out against inheritance tax. Blue Wall and Red Wall Tory MPs seem united in the belief that the Tories should use the March Budget to offer certain voters a pre-election tax giveaway.
However, only a small wealthy minority of voters stand to gain anything at all from cuts to inheritance tax. In the tax year 2020 to 2021, only 3.73% of UK deaths resulted in an Inheritance Tax charge.
The threshold at which estates begin to pay inheritance tax is already set at a level that is higher than the value of the estates the vast majority of people in the UK leave when they die. Frankly, inheritance tax is not something that working people have to worry about.
Over the Christmas period I am sure that many Tory MPs travelled around their constituencies and they will have seen schools closed because the concrete problem has not been resolved, unfilled potholes, hospitals with cruel waiting lists, people unable to heat their homes and even people living on the streets.
There are unparalleled pressures on our public services as a result of chronic underfunding. Nothing seems to work in modern Britain.
I find it shocking that after fourteen years of Tory economic mismanagement that has left our country in a terrible state, they want to use ‘fiscal headroom’ to fund even more tax cuts for the most well-off individuals. Not more money for our crumbling public services. Not even tax rebates for the working people who have seen their taxes hiked in recent years.
Instead, they want to make the richest even richer. This is who the Tories are. They are a party of the rich, by the rich and for the rich.
When I raised the issue of inheritance tax in Parliament last week, I was accused by the government Minister of “the politics of envy”. I don’t accept that. What I heard from the Minister was a politics of wealth, privilege and greed.
Recent polling by Demos even found that just 21% of voters believe inheritance should be tax free whilst 75% say it should be taxed. The Tories simply do not reflect the British people’s priorities.
They certainly do not reflect the interests of voters in the so-called ‘Red Wall’ seats that swung from Labour to Tory in 2019. When you look at the ONS data for these seats you see that in the year 2020-21 there were only 206 estates that paid inheritance tax, at a total value of £29 million. By contrast, seats in London and the South East accounted for £1.3bn of the total inheritance tax liability that same year.
A government that was serious about defending the interests of working people and of held back communities in the North and Midlands, would have to look seriously at our tax system that is certainly in need of reform. But the priority would be to lift the tax burden off working people and increase the burden on the wealthiest in our society.
Whoever is in government should make sure that those with the largest valued estates pay the highest rate of inheritance tax. Right now, the richer you are, the lower the tax rate you are likely to pay due to the many reliefs and exemptions available to those who can afford clever accountants.
In the long term we should be looking at the possibility of introducing a Wealth Tax, so that large increases in wealth through unearned income are taxed in life, not just in death.
The Roman philosopher, Seneca, said: “A kingdom founded on injustice will not survive”. This year, whenever the election is, we will see what exactly will happen to the kingdom of injustice that the Conservatives have created.
- Jon Trickett is the MP for Hemsworth and a regular contributor to Labour Outlook. You can follow him on Facebook, Instagram and twitter.
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