Making our tax system more fair and efficient at the Autumn Statement – Open Letter
Date Posted: Monday 27th November 2023
We are writing to you ahead of the Autumn Statement to urge you to make our tax system more fair and efficient by closing loopholes and ensuring the wealthiest individuals and big corporate polluters pay their fair share. This would reduce inequality and help raise the vital funds which are needed to ensure that the green transition is fair for everyone, at home and abroad.
The Prime Minister said in his net zero speech on 20th September that “it cannot be right for Westminster to impose… significant costs on working people especially those who are already struggling to make ends meet. ” We agree. Fairness in the government’s response to climate change is owed to the people of Britain and, through the UK’s historic emissions, to countries and communities around the world that are suffering from devastating climate impacts that they did little to cause. And we know that the people of Britain agree with us too – analysis shows fairness is important to people across the country, and polling shows a significant majority of people in the UK think our country has a responsibility to support lower income countries to address climate change.
Delivering fairness means two things in practice. Firstly, we must speed up, rather than slow down the green transition to significantly limit future costs of inaction , and to allow the UK to keep pace with the global race towards green tech being led by the US, China and the EU. The greener choices are also often the cheapest for consumers over time. Electric vehicles are cheaper to run than petrol or diesel vehicles. Energy provided through renewable sources is significantly cheaper than that provided through fossil fuels. And a well insulated home can significantly reduce a household’s energy use, and therefore household bills.
Secondly, fairness requires carefully designed policy to ensure that everyone can benefit from the enormous opportunities of the green transition, and be protected from the intensifying impacts of climate change. Targeted support is needed for those on lower incomes, for those with jobs in more polluting sectors, and for those in climate vulnerable communities in the Global South. Some examples include: increasing subsidies for public transport fares to help boost mobility for people on lower incomes to access more job opportunities; creating a dedicated fund for green skills development, skills transfer and retraining to increase opportunities for workers in high-carbon industries to access green jobs; and introducing some form of a social tariff in the energy market to help provide a safety net for households struggling to afford their bills. Contributing to a properly resourced UN-based fund for loss and damage, as well as delivering on the UK’s existing international climate finance pledges (predominantly through grants, and without further depleting the aid budget), would also help developing countries transition to green solutions and rebuild following climate disasters.
Some of the government spending required for these measures could be funded through borrowing, in particular for new green infrastructure investment – which is one of the best economic growth generators , and will therefore help to pay for itself. But for the policies that are needed specifically to ensure that the benefits of a greener society are felt by everyone, additional revenue will be required. It is widely accepted that those with the widest shoulders should bear the burden of additional costs. Therefore, raising taxes on the wealthiest people and on big corporate polluters is critical to support the level of government spending required.
The case for these kinds of tax reforms has never been clearer. The richest 250 families in the UK sit on a combined wealth of £748bn ; 1% of UK households own 25% of the wealth ; the wealthiest 1 percent of humanity are responsible for twice as many emissions as the poorest 50 percent combined; and in 2022 alone, five of the world’s biggest private oil and gas companies saw record profits totalling nearly $200bn. A range of groups and commentators also support raising wealth taxes – from the Patriotic Millionaires UK (a network of British millionaires asking to be taxed more), to the EU Tax Observatory , the IMF , the Resolution Foundation , and Bright Blue . This idea is also popular with the public – recent constituency level polling of 20,000 people across Great Britain by Survation showed that 82% of those who expressed an opinion would support the introduction of a wealth tax on the richest 1% of Britons to fund action on climate change.
To deliver the fiscal reforms required, the government should begin by closing loopholes and addressing the regressive nature of existing tax measures. Some policy examples include:
● The Institute of Fiscal Studies and Resolution Foundation have highlighted the opportunity to reform inheritance tax. Inheritance tax loopholes, which are used by a small minority of very wealthy people, currently cost around £1.4bn a year.
● The Office of Tax Simplification has called for equalizing capital gains with income tax rates, which could raise up to £15.2bn a year. The IPPR has also modelled the potential for reforms to capital gains tax.
● Reforming the rules on non-domiciled residents in the UK could raise around £3.2bn a year and remove the disincentive to invest in the UK.
● A number of commentators have highlighted the opportunity to address the regressive nature of council tax .
● The IPPR have proposed a share buyback tax at 4% , as introduced by President Biden in the US, which could raise approximately £2bn a year.
● The New Economics Foundation calculated that ending tax reliefs for oil and gas companies, including the latest windfall tax loophole, could raise at least £22bn over the next six years.
● Tax Justice UK has highlighted additional unfair loopholes that need reform, including subsidies for oil and gas companies, classic cars and video games producers.
Beyond these measures, a range of newly designed taxes are likely to be needed to meet the scale of finance needed for domestic and global climate action. For example, a 1-2% wealth tax on assets over £10 million could raise up to £22bn a year. And it has been estimated that a new global tax on fossil fuel extraction could, with a starting rate of $5 per ton of CO2 that progresses to an additional $5 per ton each year thereafter, raise around $300bn in 2030.  There is no lack of money, but a redirection of wealth from the richest individuals and most polluting companies is necessary to seize the enormous opportunities of climate action, significantly reduce long-term costs, and bake fairness into the heart of the green transition. We call on you to use the Autumn Statement to introduce the necessary reforms without delay. We look forward to hearing from you.
- Areeba Hamid and Will McCallum, Co-Executive Directors, Greenpeace UK
- Rebecca Gowland, Executive Director, Patriotic Millionaires UK
- Patrick Watt, CEO, Christian Aid
- Neil Thorns, Director of Advocacy and Communications, CAFOD
- Clare Lyons, Director of policy, advocacy & campaigns, Friends of the Earth
- Dr Mary-Ann Stephenson, Director, UK Women’s Budget Group
- Kate Metcalf, Co-Director, Wen (Women’s Environmental Network)
- Ruth London, Director, Fuel Poverty Action
- Robert Palmer, Executive Director, Tax Justice UK
- Hannah Peaker, Director of Research, New Economics Foundation
- Hannah Martin, Co Director, Green New Deal Rising
- Nick Dearden, Director, Global Justice Now
- David Hillman, Director, Stamp Out Poverty
- Rachael Orr, CEO, Climate Outreach
- Luiz Vieira, Coordinator, The Bretton Woods Project
- Fadi Itani OBE, CEO, Muslim Charities Forum
- Paul Cook, Head of Advocacy, Tearfund
- Tessa Khan, Executive Director, Uplift
- Mathew Lawrence, Director, Common Wealth
1 This assumes the tax was introduced in 2021, with up to 50% allocated to loss and damage depending
on a country’s income status https://www.stampoutpoverty.org/cdt-data-tables/