Editorial 2
Let's really tax the rich!
THIS ISSUE of Socialist Outlook goes to press on the eve of Gordon Brown’s third Budget speech, amid a welter of speculation over its content.
One area of policy on which he has made no secret of his ambition is child benefit, where he and top civil servants have been seeking a formula through which it could be taxed for those on top incomes. This might raise up to £450 million a year which could then be directed to more worthwhile causes. How could socialists object?
The first objection is that this issue is a gigantic smokescreen, designed to create the illusion of Brown as some kind of redistributive Chancellor, taking from the rich and giving to the poor. Nothing could be further from the case: his pledge not to increase from the low levels of taxation inherited from the Tories has already created a further bonanza for those on top salaries, while squeezing the cash available for health, education, pensions, social security and council services.
Brown’s approach is no different from that of Trade & Industry Secretary Stephen Byers, who claims that the main issue is no longer to distribute wealth, but simply to create it – in the form of profitable capitalism.
The second point is that if Brown really did want to tax the rich, he should tax all of the rich, and not just well-paid people with children. The richest 50 people in Britain have combined wealth and income of £34 billion – far more than the total wealth of the poorest 5.5 million.
Beside this grotesque inequality the prospect of slapping a tax on a possible £14.40 per child per week for a handful of top earners is pitifully small beer.
The third point is that by seeking to tax child benefit for the rich, Brown is undermining the concept of a universal benefit, and one of the principles underpinning the welfare state.
A benefit which is exclusively targeted at the lower income and less-influential families becomes ever more vulnerable to future erosion and attack.
We have seen this time and again over the years, not least with the cynical run-down in the value of the basic state pension, the miserable level and increasingly vicious strings attached to benefits for the unemployed, and the way in which local government social services have been subject to years of sustained cash pressure.
The recent Royal Commission on Long Term Care should remind us of the Tory success in shunting off long-term care of the elderly from the NHS (where it was free at point of use, funded from taxation) and social security (where all individuals were entitled to income support) to local government – where it has been subjected to means-tested charges.
The argument against scrapping these charges, like the argument for taxing child benefit for top earners, is that a handful of wealthy families would potentially benefit, while the poorest pensioners would not automatically gain any extra help.
But the fact is that the separation of the wealthy from the poorest through means-testing serves to marginalise and impoverish the state provision, which has increasingly become a service only for those with no savings or income. As long as the system continues to depend on means-testing the houses and savings of pensioners, attention is diverted from the need to raise more in general taxation to pump in enough resources to raise the standards of care for all elderly people.
The present government is so reluctant to tax the rich that it seems unlikely to implement even the partial reform called for by the Royal Commission – and scrap the charges for "personal" care in long-stay nursing and residential homes.
Rather than tinkering about with a tax on a handful of rich parents, Brown could do much more by scrapping the ludicrous and reactionary ceiling on National Insurance contributions, which gives the top-paid a free ride at the expense of the poorest. This one step could raise an extra £3 billion a year – enough to scrap the current charges for continuing care of the elderly and halt the current round of cuts in social services.
And while he’s at it, Brown could consider raising the ridiculously low level of employers’ contribution to national insurance towards the levels paid by employers in other EU countries. This would raise billions more.
Unfortunately the one thing we can be sure about, as New Labour digs in and the demoralised Tory opposition further disintegrates, is that the last thing this government wishes to do is to tax the rich – and that means that the rest of us have to pay more, for less.