Making the tax system a bit fairer would raise the funds needed to transform society, argues Richard Murphy, in a new report launched today.

This week sees the start of a new tax year, during the course of which we will, inevitably, have a new government. To mark this event I have published what I call the Taxing Wealth Report 2024.

This report seeks to answer the question that every journalist loves to ask of every politician, which is, “How are you going to pay for it?”

What we know is that Labour is acting as if it still believes Liam Byrne’s claim, made in 2010, that “there is no money left”.

In the Taxing Wealth Report, I show that by making up to thirty relatively simple changes to existing UK taxes, up to £90 billion of new tax revenue could be raised a year, entirely from those who are well off or who are straightforwardly wealthy. A summary of the proposals made in the report is available here.

Some of the suggestions made, and the amounts that they might raise in additional tax, are:

1) Charging capital gains to tax at the same rate as income tax would raise £12 billion of extra tax per annum.

2) Restricting the rate of tax relief on pensions to the basic rate of income tax, whatever tax rate a person pays, would raise £14.5 billion of extra tax per annum.

3) Charging VAT on the supply of financial services, which are inevitably consumed by the best off, could raise £8.7 bn of extra tax per annum.

4) Charging an investment income surcharge of 15% on income earned from interest, dividends, rents and other sources above a minimum threshold, which minimum might be set at higher levels for pensioners,  might raise £18 bn of extra tax per annum. Lower tax rates could, of course, be charged.

5) Charging national insurance at the same rate on all earned income, whatever its amount above the existing minimum, might raise up to £12.5 bn of extra tax per annum.

6) Investing £1 billion in HMRC so that it might collect all tax owing by the UK’s 5 million or so companies when 30% of that sum goes unpaid at present might raise £12 billion per annum.

In addition, the report suggests that if the tax incentives for saving in ISAs and pensions were changed so that all new ISA funds and 25% of all new pension contributions were required to be saved in ways that might help fund new infrastructure projects in the UK, including those linked to climate change, then up to £100 billion of funds might be made available for that purpose a year.

The great fear amongst many people in the UK at present is that Labour might form a new government this year but will not change anything because of their commitment to harsh fiscal rules that appear to promise more austerity. The Taxing Wealth Report 2024 shows that this austerity is not necessary. The existing tax system only needs to be made a bit fairer and the funding required to transform our society would be available.

The real question is: why would Labour not want to do this? Why would it prefer to impose austerity than create a fairer tax system for those who are wealthy in this country? And why wouldn’t it want to deliver the great transformation that this country needs that these funds could enable? Those are questions for Rachel Reeves and Keir Starmer to answer.

Richard Murphy is Professor of Accounting Practice at Sheffield University Management School and director of Finance for the Future LLP. The Taxing Wealth Report 2024 is a joint production between the two of them. Richard is a political economist, having previously been a practising chartered accountant for forty years. You can read his blog here.

Image: https://www.flickr.com/photos/upyourego/3351669186. Author: Ryan Morrison. Licence: CC BY-NC-SA 2.0 DEED Attribution-NonCommercial-ShareAlike 2.0 Generic