If the likes of Philip Green's family desire the rights that come with UK citizenship, they should be required to make fair tax contributions. Photo: Getty
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Leader: Labour should make itself the party of tax cuts and bold tax reform

If the party was radical rather than obsessed with process and presentation, it would be setting out proposals to overhaul our tax system.

Our tax system is just about the most unfair and inefficient imaginable. The Institute for Fiscal Studies has said that the UK has “an opaque jumble of different effective rates [of tax] as a result of tapered allowances and a separate National Insurance system”. The system urgently needs reform but which politician has the stamina and originality of thought to achieve it?

However, some change might be coming. It has been reported that George Osborne is considering merging National Insurance (NI) and income tax into a single tax. Such a move would, it has been suggested, have advantages for a Conservative chancellor. It would further weaken the contributory principle that was the foundation of the welfare state but that has long since been eroded; it would also raise the headline rate of taxation, and thus increase a desire for tax cuts because people would have a clearer sense of how much of their income they were paying to the state.

Yet, in spite of these objections, we would support the merging of NI and income tax in the interests of greater transparency but also because we believe low- and middle-income earners in Britain already pay too much tax, especially when fuel duty, VAT, council tax and stagnant real wages are taken into account. Ed Miliband complains about a “cost-of-living crisis”. Perhaps, in response, he should consider cutting the average earner’s tax burden.

Our income-tax system is opaque. Governments delight in obfuscation and complication. At present, the marginal income-tax rate on a single earner on the median salary of £26,500 is officially 20 per cent; in fact, when you take NI into account, it is 32 per cent. The coalition government likes to boast that, by raising the personal tax allowance to £10,000, it has taken low earners out of income tax altogether. It has done nothing of the kind.

If the Labour Party was radical rather than obsessed with process and presentation, and if it wanted to win a popular mandate rather than merely limp over the line in coalition with whatever might be left of the Liberal Democrats at Westminster after the general election in 2015, it would be setting out proposals to overhaul our tax system.

Indeed, it would aspire to become a party of tax cuts for low- and middle-income earners and seek to switch some of the burden of taxation from income and consumption to static assets such as property and land, as well as environmental bads. It would reform inheritance tax so that the rich become less able to avoid it. It would introduce land value taxes, at least for business and agricultural land but also potentially for property. The rebanding of council tax, which is based on valuations more than 20 years old, would also be an essential part of any wide-ranging programme of reform.

Such policies would ensure that those who have benefited most from the house-price inflation of the past decade or so were making a fair contribution to the national burden: property, unlike capital, cannot be hidden in offshore accounts.

Creating the political space for such a course of action, however, would require the Labour Party to make a more persuasive case for progressive taxation. For too long, paying your fair share in taxes has been framed as an unfortunate burden, rather than part of what it means to live as a responsible citizen in a free and open society.

A first, bold step towards achieving a more equitable and transparent tax system would be to change the rules concerning those ultra-rich British citizens who reside abroad for tax reasons. If those such as the family of Philip Green – the billionaire chief executive of the Arcadia retail group (and adviser on public spending to the Conservative Party) whose wife is resident in Monaco – desire the rights and security that come with British citizenship, they should be required to make a fair contribution in taxation to the British state.

If an American wishes to retain US citizenship, he is liable for federal taxes no matter where he lives in the world. It is a convention that dates back to 1861 and the American civil war. Surely it is time for all those Britons who hide their money tax-free in overseas accounts or in tax havens to pay up, as Americans are obliged to do – or renounce the right to be British. Here is one policy that, if it were adopted by the Labour Party, would have genuine popular appeal. What’s there not to like about it? 

This article first appeared in the 02 July 2014 issue of the New Statesman, After God Again

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We still have time to change our minds on Brexit

The British people will soon find they have been misled. 

On the radio on 29 March 2017, another "independence day" for rejoicing Brexiteers, former SNP leader Alex Salmond and former Ukip leader Nigel Farage battled hard over the ramifications of Brexit. Here are two people who could be responsible for the break-up of the United Kingdom. Farage said it was a day we were getting our country back.

Yet let alone getting our country back, we could be losing our country. And what is so frustrating is that not only have we always had our country by being part of the European Union, but we have had the best of both worlds.

It is Philip Hammond who said: “We cannot cherry pick, we cannot have our cake and eat it too”. The irony is that we have had our cake and eaten it, too.

We are not in Schengen, we are not in the euro and we make the laws that affect our daily lives in Westminster – not in Europe – be it our taxes, be it our planning laws, be it business rates, be it tax credits, be it benefits or welfare, be it healthcare. We measure our roads in miles because we choose to and we pour our beer in pints because we choose to. We have not been part of any move towards further integration and an EU super-state, let alone the EU army.

Since the formation of the EU, Britain has had the highest cumulative GDP growth of any country in the EU – 62 per cent, compared with Germany at 35 per cent. We have done well out of being part of the EU. What we have embarked on in the form of Brexit is utter folly.

The triggering of Article 50 now is a self-imposed deadline by the Prime Minister for purely political reasons. She wants to fix the two-year process to end by March 2019 well in time to go into the election in 2020, with the negotiations completed.

There is nothing more or less to this timing. People need to wake up to this. Why else would she trigger Article 50 before the French and German elections, when we know Europe’s attention will be elsewhere?

We are going to waste six months of those two years, all because Prime Minister Theresa May hopes the negotiations are complete before her term comes to an end. I can guarantee that the British people will soon become aware of this plot. The Emperor has no clothes.

Reading through the letter that has been delivered to the EU and listening to the Prime Minister’s statement in Parliament today amounted to reading and listening to pure platitudes and, quite frankly, hot air. It recalls the meaningless phrase, "Brexit means Brexit".

What the letter and the statement very clearly outlined is how complex the negotiations are going to be over the next two years. In fact, they admit that it is unlikely that they are going to be able to conclude negotiations within the two-year period set aside.

That is not the only way in which the British people have been misled. The Conservative party manifesto clearly stated that staying in the single market was a priority. Now the Prime Minister has very clearly stated in her Lancaster House speech, and in Parliament on 29 March that we are not going to be staying in the single market.

Had the British people been told this by the Leave campaign, I can guarantee many people would not have voted to leave.

Had British businesses been consulted, British businesses unanimously – small, medium and large – would have said they appreciate and benefit from the single market, the free movement of goods and services, the movement of people, the three million people from the EU that work in the UK, who we need. We have an unemployment rate of under 5 per cent – what would we do without these 3m people?

Furthermore, this country is one of the leaders in the world in financial services, which benefits from being able to operate freely in the European Union and our businesses benefit from that as a result. We benefit from exporting, tariff-free, to every EU country. That is now in jeopardy as well.

The Prime Minister’s letter to the EU talks with bravado about our demands for a fair negotiation, when we in Britain are in the very weakest position to negotiate. We are just one country up against 27 countries, the European Commission and the European Council and the European Parliament. India, the US and the rest of the world do not want us to leave the European Union.

The Prime Minister’s letter of notice already talks of transitional deals beyond the two years. No country, no business and no economy likes uncertainty for such a prolonged period. This letter not just prolongs but accentuates the uncertainty that the UK is going to face in the coming years.

Britain is one of the three largest recipients of inward investment in the world and our economy depends on inward investment. Since the referendum, the pound has fallen 20 per cent. That is a clear signal from the world, saying, "We do not like this uncertainty and we do not like Brexit."

Though the Prime Minister said there is it no turning back, if we come to our senses we will not leave the EU. Article 50 is revocable. At any time from today we can decide we want to stay on.

That is for the benefit of the British economy, for keeping the United Kingdom "United", and for Europe as a whole – let alone the global economy.

Lord Bilimoria is the founder and chairman of Cobra Beer, Chancellor of the University of Birmingham and the founding Chairman of the UK-India Business Council.