George Monbiot: TAX THE RICH, TAX THEM HARD (Labour is already failing)
We need a genuine levelling up, across regions and across classes. The austerity inflicted on us by the Conservatives was unnecessary and self-defeating and Labour has no good reason to sustain it.
The new government insists it is ending austerity. It isn’t. As the Institute for Fiscal Studies (IFS) pointed out in June, Labour’s plans mean that public services are “likely to be seriously squeezed, facing real-terms cuts”. Similarly, the Resolution Foundation has warned that, with current spending projections, the government will need to make £19bn of annual cuts by 2028-29. However you dress it up, this is austerity.
We are constantly told: “There’s no money.” But there is plenty of money. It’s just not in the hands of the government. The wealth of billionaires in the UK has risen by 1,000% since 1990. The richest 1% possess more wealth than the poorest 70%. Why do they have so much? Because the state does not; they have not been sufficiently taxed.
There are two reasons for taxing the rich and taxing them hard. The first is to generate revenue: this is the one everyone thinks about. But the second is even more important: to break the spiral of patrimonial wealth accumulation. Unless you stop the very rich from becoming even richer, it’s not just their economic power that continues to rise, but also their political power. Democracy gives way to oligarchy, and oligarchy is intensely hostile to everything Labour governments seek to achieve, including robust public services and a strong economic safety net. When oligarchs dominate, you can kiss goodbye any notion of the public good.
Last year, I tried to estimate how much it would cost to restore a viable, safe and inclusive public realm after 14 years of Tory vandalism. While my effort was very rough, the sum came to between £65bn and £100bn of extra spending a year: between seven and 10 times more than Labour’s total. It’s a lot, although it’s dwarfed by the money the previous government spent on the pandemic: between £310bn and £410bn over two years.
While these sums are ambitious, and would require expanded borrowing (which Labour has foolishly ruled out) as well as taxation, there are plenty of opportunities to raise taxes on the rich. The government could, for example, replace inheritance tax with a lifetime gifts tax kicking in at £150,000, a level that would affect only wealthy people. This would increase revenue while ending a major form of tax avoidance. The government should raise capital gains taxes: it’s perverse that unearned income is taxed at a lower rate than earned income. It should close the carried-interest loophole, which ensures that private equity bosses pay less tax than their cleaners: a pledge on which it already seems to be backtracking.
The government could also levy a wealth tax, a luxury goods tax and a tax on second homes and holiday homes. It could make the windfall tax on fossil fuel revenues permanent. It could replace business rates with land value taxation, and council tax with a progressive property tax based on contemporary property values: both shifts would be fairer and would raise more money. But the only extra taxes the government propose are, as the IFS remarks, “trivial”.
By seeking to raise revenue through economic growth rather than redistribution, Labour avoids the necessary confrontation with economic power. Not only is the strategy uncertain of success (economic growth here is subject to global forces); not only does growth load even more pressure on the living planet; but this approach also fails to break the grip of the ultra-rich. Isn’t this the whole damn point of a change of government, after 14 years of Tory appeasement? Unless you seek to change the structures of power and redistribute wealth, the rich will continue to harvest the lion’s share of growth while using some of their money to buy the politics that expands and fortifies their dominion.
The focus on growth to ease the UK’s economic ills will not be nearly enough, says Guardian columnist George Monbiot
