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Labour must be bold and back a wealth tax

Protester demanding wealth taxes (Credit: Karl Black / Alamy Stock Photo)

3 min read

Alongside the King’s Speech and the Budget, the Autumn Statement is one of the big events of the political calendar; and yet the forthcoming statement is rapidly looking like an unprecedented irrelevance.

The actions of a government that most believe is almost certain to be out of office within 12 months become increasingly irrelevant as eyes turn towards the incoming party.

The only interest is if the Chancellor can use the undoubted level of budgetary headroom he has to improve the Conservative Party’s electoral prospects and at best reduce the likely Labour majority at the next election.

So, I expect an Autumn Statement that presages a Spring Budget aimed at restoring pre-election what pollsters used to call the “feel good factor”.

There is only so much a chancellor can do in normal times but after 13 years of austerity, which have resulted in the near collapse of our public services, there is almost nothing this Chancellor can do in the short term that can visibly turn this around.

Taxing capital gains at the same rate as income tax would bring in an estimated £17bn

It’s more probable that although there will be some lip service to more money for health and education, the Chancellor will resort to pulling a few tax break rabbits out of the hat in a desperate attempt to shore up the traditional Tory vote that has stayed at home in the recent by-elections. 

What is really needed is a concerted programme that lays the foundations of tackling what has now become commonly known as ‘broken Britain’.

In a recent report I drafted with Andrew Fisher, Labour’s former head of policy, we set out the scale of cutbacks in departmental spending since 2010. It is staggering and potentially represents the most difficult inheritance any incoming Labour government has faced in the last 70 years. 

With seven million on NHS waiting lists, social care collapsing with councils near bankrupt, and a deteriorating mental health crisis, years of underfunding means that our caring services are often simply no longer able to cope. To return to the historical average of  four per cent annual funding increases in the NHS would cost an additional £12bn a year. 

In education, it would mean investing £21bn a year just to get spending back to 2010 levels. Even reaching the OECD average would cost £5bn more a year. 

Overall, the scale of investment that is needed in our public services just to reverse 13 years of austerity cuts and deliver modest but much-needed expansion is likely to be in excess of £70bn extra in day-to-day spending. 

Just how broken Britain is, is best evidenced in the recent report by the Joseph Rowntree Trust. The report estimated that nearly 3.8 million people, including one million children, were destitute at some stage last year. Destitution means a person is unable to stay warm, dry, clean and fed either through lack of clothing, heating, shelter, food or income.

So, in the Autumn Statement, if the Chancellor is unwilling to launch a programme to rebuild our public services, my plea to him is to at least do something immediately to lift our children and their families out of poverty. Taking a simple step by increasing universal credit and other legacy benefits by £20 a week would cost about £6bn and would go some way to tackle the destitution that stains the reputation of our country.

To fund the restoration of our public services and tackle poverty, my advice to any chancellor, Labour or Conservative, is to recognise that the fair taxation of wealth is a necessity. 

Taxing capital gains at the same rate as income tax would bring in an estimated £17bn to make a start, and more importantly would open the door to a serious debate about taxation of wealth. 

John McDonnell, Labour MP for Hayes and Harlington and former shadow chancellor 

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