As Ed Miliband outlined in his ‘Rebuilding Britain with a One Nation economy’ speech earlier this year, the next Labour Government will put a fairer tax system at the heart of its priorities.
This is crucial if we are to create the foundations for a sustainable, long-term recovery that is made by the many, and not just a privileged few at the top.
Indeed, for the Labour Party at least, politics is all about priorities – about building an economy to which everyone can contribute whilst providing support to those who need it most, rather than those with the broadest shoulders. And it means individuals and companies paying their fair share of tax, whilst clearly expecting those with greater capacity to pay more to do so.
At a time when ordinary people are paying the price for the Chancellor’s economic failure, with living standards being seriously squeezed, the public services upon which people rely being cut or threatened across the country, and unemployment remaining far too high – never has making the case for these priorities been more important.
But what would this mean in practice? Well, instead of handing millionaires an average £100,000 tax cut, a One Nation Labour Government would bring forward a mansion tax on properties worth over £2million to fund a tax cut for millions of people on low and middle incomes.
With almost one million 16-24 year olds currently out of work, a Labour Chancellor would incorporate a bank payroll tax within the bank levy to fund a Youth Jobs Guarantee. But instead of fighting the scourge of youth unemployment and the prospect of a lost generation, George Osborne spends his time fighting European plans to limit bank bonuses.
And a Labour Government would reverse the Coalition’s decision to stop tax relief on pension contributions for people earning over £150,000 being limited to 20% – to fund a Compulsory Jobs Guarantee for long-term unemployed adults. With the number of people out of work for more than two years at its highest since June 1997, it’s absolutely vital that these people are supported into the workplace, rather than being abandoned on the scrapheap with all the long-term social and economic costs that brings.
Of course, One Nation taxation isn’t just about individuals. It’s about ensuring that whilst good British firms and millions of families are paying their fair share, we put an end to the situation whereby some powerful multinationals have gone to extraordinarily lengths to avoid doing so.
Nobody doubts the importance of multinational corporations to the British economy in terms of the jobs they create and support, the investment they bring, and the goods and services they provide to UK consumers. And there are sometimes good reasons why companies pay little tax – because they are investing large sums in R&D, assets and infrastructure, for example.
But it’s simply unacceptable for firms to continue to use extremely complex arrangements to shift profits offshore that have actually been generated from hard-working, UK tax-paying consumers and firms. And we cannot continue to allow the manipulation of outdated tax rules, with no purpose other than to reduce a company’s tax liability.
That’s why Labour is conducting a consultation – as part of the ‘Your Britain’ policy review process – into how a One Nation Labour Government would fundamentally reform our corporate taxation system so that it works properly in the modern world, delivers outcomes that are clearly and transparently fair, and ensures a level playing field for those companies who do pay their tax.
This includes our pledge to put an end to the era of tax secrecy – through a system of a country-by-country reporting with all multinationals required to publish the key pieces of information needed for people to be able to properly asses the amount of tax they pay. It’s clear that some companies that are otherwise compliant have been prepared to engage in complex planning that significantly reduces their tax bills because they think no one will notice, or find out.
But the shifting of profits and use of tax havens to avoid tax is a symptom of a system that’s failed to keep up with global economic developments. So, we also need to update our rules, working with our international partners, to ensure that our corporation taxation system is fit for the 21st century and deals properly with issues such as brands, IP and ideas which can be traded globally between different parts of the same group.
And of critical importance – a One Nation tax system would stop undermining the very body expected to collect the tax receipts we rely on to fund our public services. HM Revenue and Customs was already facing a further 10,000 job losses and £2billion in cuts over the course of this Parliament – and will now see an additional 5% funding cut by 2016 as a result of George Osborne’s recent Spending Review. There has to come a point where Government accepts there is a limit to HMRC’s capacity to do more with less.
So – as well as being fair to individuals and companies alike – a One Nation tax system must be robust and effective in the modern world. It has to support investment and job creation whilst dealing effectively with the complexities of modern business. And – given the catastrophic breakdown in public confidence in the current system – it must be transparent and better understood by people, whether experts or not.
Catherine McKinnell is the Labour MP for Newcastle-upon-Tyne North and Shadow Exchequer Secretary to the Treasury