Tax cuts are bad news for women
Date Posted: Wednesday 15th November 2023
A blog by Susan Himmelweit, emeritus professor of economics at the Open University and Chair of WBG's Policy Advisory Group
Ahead of the autumn statement, the Chancellor is once again rumoured to be looking for tax give-aways to placate his government’s back benchers in what may be his penultimate fiscal event before the next General Election. Tax cuts would be bad news for women.
Tax is the contribution people make to pay for collectively provided goods and public services: our vital social infrastructure, from our NHS to our schools and nurseries. And while public services are important to us all, for women they are essential. When those public services aren’t functioning and private substitutes aren’t available or too expensive, it’s women who usually step into the breach, by doing the work themselves. And often they have to curtail their employment and thus their income to do so. Recent research by the Fawcett Society found that a quarter of a million mothers with young children (one in 10) have left their jobs due to childcare pressures, while many others have given up career opportunities.
Tax also pays for our social security system, making fair taxation a crucial tool in enabling women and their families to restore their living standards when the cost of living is spiralling. The protection of social security is important for us all, but women are more likely to need it during their lives because they are more likely than men to lose income through taking on unpaid caring roles. Women make up 57% of the people on Universal Credit and 73% of households that have their benefits capped are single-parent families, the vast majority of which are headed by women.
Tax cuts inevitably favour the better off, paying out more to those who already have more, and therefore to men more than women. It’s unconscionable to reward the wealthy with tax cuts at the expense of the vital social infrastructure holding our economy together. The current tax take may be high historically by UK standards, but it lags behind better-functioning European and OECD economies. More than £50 billion in revenue has been lost due to tax giveaways since 2010, disproportionately favouring men and higher-income taxpayers.
We need instead for the Government to consider ways of making the tax system fairer. In particular to look at ways in which the wealthy can pay back by contributing properly to strengthening the infrastructure of the economy from which they have done so well. Wealth is not currently directly taxed in the UK, and even income from wealth is taxed at a much lower rate than income earned by work. The under-taxation of wealth and income from wealth exacerbates income and wealth inequality and deepens gender disparities. The gender wealth gap stands at 35%, with men’s average wealth more than £90,000 greater than women’s, with the gap soaring to 49% and over £200,000 for those between 65 and 74 years old.
Similarly, there’s no justification for letting oil and gas giants rake in massive excess profits purely from energy prices pushed up by the war in Ukraine. These are the same high prices that are causing hardship to millions. Such excess profits should be taxed away and the loopholes in the current Energy Profits Levy that encourage further investment in oil and gas rather than in renewables should be removed.
But instead of thinking creatively about ways in which to raise revenue from those who can afford to contribute more, rumours suggest that the Government may be considering cutting or even abolishing inheritance tax, a tax which tempers the unfairness of inheritance by which wealthy parents create wealthy children, making social mobility between generations even more difficult. Cutting inheritance tax would further erode social mobility and hamper revenue generation.
In many previous budgets there have been “sweeteners”, tax give-aways that favour particular groups of people. Whether by cuts in fuel or alcohol duty, it is almost inevitably men who benefit more from such give-aways. Inheritance tax cuts would be no different, favouring the already wealthy, those who are likely to inherit most, over the women who depend on the public services that inheritance tax contributes to funding.
Instead of such gimmicky give-aways, we need to start talking about tax positively, as a contribution to creating the sort of society we want to live in, rather than looking for where to cut it. And we need a wholesale reform of the tax system – so that it raises more revenue from those who can afford to contribute more – and a programme to invest the additional revenue in our public services and social security system. Without such a reform and change in how we think about tax, all inequalities, including gender inequalities, will only increase.