This is the question being answered by a report from the Commission on Economic Justice. Their report has 72 recommendations to achieve a fairer and stronger UK economy. Some of them involve changes to the current taxation rules.
What is the Commission on Economic Justice?
This commission was set up in 2016 by the Institute for Public Policy Research (IPPR), after the EU referendum, because many people think the result was partly down to the financial hardship experienced by millions of voters.
It is not affiliated to any one political party and is made up of people from politics, business and economics including:
- The Archbishop of Canterbury, Justin Welby
- Frances O’Grady, leader of the Trades Union Congress
- Lord Bob Kerslake, former head of the civil service
- Mustafa Suleyman, co-founder of Deepmind, Google’s Artificial Intelligence firm
- Helena Morissey, of Legal and General Investment Management
- Dominic Barton, Global Managing Partner of McKinsey Consultancy
What does the Report say?
The report from the IPPR is called ‘Prosperity and Justice: A Plan for the new Economy – Final Report of the IPPR Commission on Economic Justice’. As explained in their introductory summary online, it “…argues that the economy is not working for millions of people and needs fundamental reform. Average earnings have stagnated for more than a decade; young people are set to be poorer than their parents; the nations and regions of the UK are diverging further. Many of the causes of the UK’s poor economic performance – particularly its weaknesses in productivity, investment and trade – go back 30 years or more.”
It is not blaming the policies of any one party for the current problems. It does identify low investment across all industries – from both government and business – as a major contributor to Britain’s stunted economic growth.
The report also highlights that the disparity between wages and the cost of living is a huge injustice that affects millions of UK citizens. Keeping wages low is another way for businesses to improve short term profits and benefit shareholders, but keeping increasing numbers of staff in a state of extreme economic hardship.
What recommendations does the commission make?
We are not going to go through all 73 recommendations here. The main suggestions for fairer tax regulations are:
- Corporation tax: minimum rate to be paid by large multinational companies like Amazon to tackle current tax avoidance. Higher rate of Corporation Tax overall.
- Dividend and Capital Gains tax: Get rid of both and have one income tax system for all types of income
- Inheritance tax: Abolish this tax and have a ‘Lifetime Gift tax’ instead. The new tax will not be on estates, but on individual recipients. The report estimates this will raise £9billion annually.
How would these changes affect your finances?
Other interesting recommendations:
- Devolve more economic power to the individual countries within the UK under an “economic institution”.
- Make the current Living Wage and minimum wage the same amount. Raise to £8.75 per hour generally and £10.20 in London, so people earning this can actually afford to live.
- All zero hours contract employees to be paid 20% more – to compensate for having totally insecure income.
- Introduce a regulator specifically to monitor technology firms. As Archbishop Welby said during his BBC interview: “They have enormous power and the use and handling of data has huge implications for people’s security. But it also has huge implications for the flourishing of individuals and the prosperity and fairness of our society. If you corner the market in data, you have probably more wealth advantages than if you corner the market in gold or oil. Data is the real place where the money is, and we’ve always said that people with huge power should be regulated.”
Will all these recommendation become policy?
These are only recommendations that the government is under no obligation to make policy. They can choose whether or not to listen to the conclusions and suggestions from the IPPR.
What is really interesting is their link between justice and economic growth. “The report argues that a fair economy is a strong economy: prosperity and justice can, and must, go hand-in-hand. But it is not sufficient to seek to redress injustices and inequalities simply by redistribution. They need to be tackled at source, in the structures of the economy in which they arise. Economic justice needs to be ‘hard-wired’ into the way the economy works.” What do you think?