How to Start Ending Neoliberalism at this Budget

Joe Wright is policy and advocacy manager at Tax Justice UK

Compared to last year, this Budget season has been remarkably quiet – dozens upon dozens of floated tax policies replaced with almost deafening silence, save Chancellor Healey’s ruling out of Capital Gains Tax equalisation (despite this being called for by large swathes of his own party, leading economists and investors themselves). At the same time, we now have a Prime Minister with vast ambitions compared to his predecessor – ending 40 years of Neoliberalism, creating a National Care Service, investment and growth in every postcode.

To raise the funds needed to turn these words to action and tackle the wealth inequality gripping this country, the Government must use this week’s Budget to tax extreme wealth and corporations profiting off a cost of living crisis. This will require structural tax reform, which means going much further than simply reversing a cut to the banking surcharge imposed under former Tory Chancellor Jeremy Hunt. 

Nigel Lawson equalised Capital Gains Tax with Income Tax rates, rightly understanding that there was no moral or economic reason for different kinds of income to be taxed differently. Healey must look at this option, alongside applying employee NICs to income from wealth and partnerships, following the same logic – equal treatment of income regardless of source. These two measures would raise £19.7bn and £6.1bn respectively by the end of the parliament – more than enough to fully fund a National Care Service, free at point of use (£18.5bn), as well as promoting economic growth by reducing distortions in the tax system. 

Importantly for a government that needs to build unity across the factions of the Labour Party and the broader progressive side of politics; CGT equalisation is backed by both the centre Growth Group, the Soft Left Tribune Group, the Socialist Campaign Group and many Liberal Democrats – this can unlock billions in revenue, promote growth and unite the Labour Party – which has been wracked by division since coming to power. 

Healey must also get our tax system and administration in order. We spend more than £200bn a year on tax reliefs, many of which like the Patent Box are unjustified giveaways to global multinationals, and have a £60bn tax gap – the difference between what HMRC should be collecting and what it actually receives. 

By getting our leaky sieve of a tax system in order, and investing in HMRC capacity and powers over the remainder of the parliament, the government would be in position to implement an annual wealth tax of 2% on those with more than £10m in assets, raising over £24bn a year – even accounting for any behaviour responses. Whilst not possible at this Budget, this would be achievable within 3 years – in time for the next General Election.  

Collectively, these measures could raise upwards of £70bn a year – enough to fully fund a National Care Service, build 100,000 council houses a year, restore central government funding to local government back to 2010 levels, fully fund sure start, fill the core schools funding gap, introduce free school meals for all pupils, and fund a cost-of-living package, with several billion left to spare. 

Burnham came into No10 with big promises about how he’d do things differently, to reset Britain and end neoliberalism. And the scale of the problem is widespread – from the cost of living crisis to profiteering in almost every aspect of our lives. So this Budget can’t be about half measures or poster campaigns to tackle minor annoyances. This has to be a moment that kickstarts a rewiring of the economy and the state. Failing to deliver this will spell trouble and could quickly deflate Burnham’s bounce.