Avoid welfare cuts at the Spring Statement by taxing extreme wealth more

The government is proposing more spending cuts as we draw closer to the Spring Statement. This is when the chancellor will give an update on the economy and could make big decisions on tax and spending.

This week, for example, the government said they want to cut welfare for disabled people and NHS England (the body that manages the health service in England).

Let’s take the first one. The government has said they want to cut £5 billion from welfare spending by making it harder to qualify for Personal Independence Payments (PIP).

PIP is claimed by some of the most marginalised people in our country, some of whom are unable to work due to chronic health problems.

Cuts are counterproductive

The government believes cutting their payments will incentivise disabled people to return to work. But the evidence suggests this won’t work. As Frances Ryan pointed out in the Guardian:

“Drives to get disabled people into work always go hand in hand with a punitive benefits system, despite all evidence showing such measures are counterproductive.”

Instead of taking from the most vulnerable in our society, the government should be looking to the growing number of super rich people (those with tens of millions of pounds) for more revenue.

Why is the government doing this?

They want to cut spending in order to meet their self-imposed “fiscal rules, which require that day-to-day spending is met by tax revenue. And that debt as a share of national income is falling by the end of this parliament.

But we know that there are other ways the government could meet their fiscal rules.

They could keep expenditure the same (avoiding damaging cuts to welfare and other public services) and increase taxes on the super rich instead, for example.

Even better would be increasing investment in public services to get the UK healthier and build a stronger, more resilient economy.

We’ve released a paper this week showing well supported, credible ways they could do this.

Tax extreme wealth

We were pleased to see the government introduce important changes at the October budget which will tax the wealthiest more, including closing unfair loopholes in inheritance tax and the windfall tax for oil and gas companies, and taxing private jets more.

But the government could go further and raise an additional £60 billion a year through just ten tax reforms, including a wealth tax on those with fortunes over £10 million.

We also propose equalising Capital Gains Tax with income tax – so those making money from their wealth pay the same as those making money from work.

The total that could be potentially raised – £60 billion – is a chunky sum of money that would make spending cuts unnecessary, and give the government room to invest more in public services.

Our Head of Advocacy Caitlin was on BBC5 Live last week making the case for these tax changes. She was also quoted in the Big Issue. 

Vested interests pushing back

The government is also under extreme pressure from the super rich and their army of accountants, lawyers and spin doctors.

OpenDemocracy broke a story last week showing just how this murky world operates.

They uncovered that the billionaire head of a giant wealth management company personally lobbied the Chancellor to soften the government’s non-dom policies.

It’s concerning how many resources the super-rich big businesses have to lobby those in power, compared to the rest of us.