Tax wealthy pensioners and homeowners to pay ballooning public services bill, says think tank
Raising extra billions by hiking taxes on Britain’s wealthiest pensioners and homeowners could help with the country’s growing public services bill, a leading think tank has said.
According to the Resolution Foundation, the UK is facing a funding crisis over the coming years as the population ages and health and welfare costs balloon.
The organisation estimates that public services will cost an extra £36bn a year by 2030, and £83bn by 2040 – which would require income tax to double over a 20-year period if no other source of revenue was found.
They recommend five changes to the current wealth tax system, arguing the reforms would raise an extra £7bn a year by 2022-23.
The think tanks suggests cracking down on inheritance tax loopholes, bringing council tax into line with the more progressive Scottish system and lowering tax relief for the wealthiest pensioners.
It also calls for ISA saving accounts to be scrapped and entrepreneurs’ relief to be capped at £1m rather the current £10m.
The proposals are in anticipation of the Spending Review, which is due later this year, when the Chancellor will set out his funding priorities for the rest of the parliament.
Director of the Resolution Foundation Director, Torsten Bell, said: “Britain has unfortunately got used to weak income growth but soaring wealth, which is now worth seven times the size of our economy. It’s time our tax system caught up with that fact.
“Maintaining our valued public services in the face of the big cost pressures of an ageing population, requires better wealth taxation to help fund this gap.
“Yes this is politically difficult, but the good news is that relatively large sums can be raised simply by tightening up our existing wealth taxes and subsidies.
“That is how we protect our public services without placing all the burden of taxation on hard earned income from work.”
Senior Economic Analyst at the Resolution Foundation, Adam Corlett, said: “The Chancellor can make small steps in this direction by tightening up five of our existing wealth taxes and subsidies – raising almost £7bn in the process.”
Shadow Chancellor John McDonnell said the think tank had kicked off "a much-needed debate on tax reform".
He said: "Labour is committed to conducting a review of tax reliefs in government and we consistently call for entrepreneurs' relief to be reviewed and evaluated against its effectiveness. We have also produced a tax transparency and enforcement programme that will close loopholes and flush out tax avoiders and evaders from the system.
"Labour will create a fair tax system that will get the rich and giant corporations to pay a little more to end austerity, fund our public services properly, and build an economy that works for the many, not the few."