Dr Ben Spencer is Shadow Science, Innovation and Technology Minister and member of parliament for Runnymede and Weybridge.
In my last article I argued that our politics has become too transactional, focused on short-term fixes and political expediency.
We need a return to principle and values as our guiding light. With conviction in what we believe in and what we want to achieve, we will shape policies to re-introduce pride, hope, and belief in Britain.
It is a core tenet of Conservatism that the individual is better placed than the state to make decisions about how they spend the money they earn, and that personal taxation is an encroachment which should be kept to a minimum. This is coupled with a belief in the benefits of low taxation based on limited government, personal agency, economic growth and free market principles.
We must escape the current trap of high taxation, centralisation and low growth. Given that taxation policy is responsive to shifting economic factors, this is a key area in which a clear set of principles can provide the overarching framework for dealing with changing circumstances.
One of the key principles I believe we need to introduce is solidarity. We should leverage the taxation system by introducing a new principle in personal tax policy: that of solidarity with our country and our communities. A solidarity taxation scheme could promote and incentivise pro-social behaviours which take pressure off public services and encourage individuals to invest in families, communities and broader society.
As a country, our economy is only sustainable if the majority who pay in via the taxation system do notdirectly or immediately get back what they put in, but in return benefit from stability, security and opportunities for growth. This is part of not only our social contract but our unspoken inter-generational one. Building an economy on sound and durable foundations should be regarded as a vital down payment on our children’s future and the long-term success of the country. It also ensures that we can continue to provide an essential safety net for those most in need.
However, we know that in this country more households are net recipients of state funds than net contributors. According to the Office for National Statistics, in the financial year ending 2023, 52.6 per cent of all UK individuals lived in households receiving more in benefits than they paid in taxes. Included in this is, as may be expected, a high percentage of retired individuals who are net recipients (89.2%) in comparison with non-retired people (46.0 per cent, largely because of the classification of State Pension and Pension Credit as cash benefits.
Yet with an aging population, this number is set to grow, meaning more and more households relying on an ever smaller percentage of households contributing more than they take. It is essential that we build the foundations to protect vital benefits such as the state pension, while also ensuring that we are not creating a ticking economic timebomb for future generations.
I believe that building the concept of solidarity into our taxation system is the way to achieve this; A radical rethink about how we incentivise personal and civic responsibility through our fiscal policies, not only to alleviate the burden on the state but to strengthen communities and foster choice and ambition within people’s lives.
The rewards from investing in this model go beyond pure economics. As a society and country there are many positive social behaviours that we want our citizens to adopt freely. From caring, volunteering, even raising a family. This is especially important in an era of declining birth rates and rising incidences of mental health diagnoses amongst our young people.
By using our taxation system to support and deliver solidarity, we can unleash people’s potential to make a positive difference through taking more responsibility for their own lives and for the lives of those around them and providing a fiscal incentive to do so. It provides a competing, hopeful alternative to the ruinous policies currently being pursued by the Labour Government. The imposition of VAT on school fees is an example of this; a divisive policy based on politics of envy which has reduced personal choice, increased reliance on state provision, and damaged our economy.
When people choose to use their hard-earned money to avoid drawing down on public services and seek alternative provision, it should be supported and encouraged as an act of solidarity with our country, not denigrated or disparaged as elitist as has been presented by the Labour Government.
There are so many areas where solidarity tax relief could work to reduce pressure on public services. Where citizens act in a way that reduces reliance on state provision and benefits, this should be supported, encouraged and incentivised. Good intentions and community spirit are important, but they have limits when it comes at an additional cost to the individual.
So, when people who chose to not take up a place in a state school for their child, and use independent education instead reducing the burden on the state, they should get solidarity tax relief on the fees they pay.
And if they chose to not use NHS services, and get private health insurance instead, they should get solidarity tax relief on their contributions. If health insurance is provided as an employment benefit, then the employing business should receive solidarity tax relief.
This would be a similar approach to that already taken for charitable giving, pension tax relief, and tax relief on personal investments such as ISAs. We should even look at solidarity tax relief for investing in British companies.
Today, with growing concerns around declining birth rates, we should not be surprised that many couples are choosing not to have children, seeing it as unaffordable.
Currently the school hours and terms times we set are outdated, built for a one parent at home model, yet our taxation system, and indeed child benefits and subsidised childcare provision model encourages a two-parent working model.
Parents need to be able to make the best decisions that work for their circumstances, knowing that the taxation system will show solidarity with them in exercising a choice about their childcare commitments and working lives. This should take the form of allowing stable family units, subject to some form of legally recognised commitment (marriage or otherwise) to apply for them to be treated as a single taxation unit, a household rather than as individuals.
This would help to avoid the pervasive and deeply unfair system that we have where, for example, two working parents earning £50,000 each pay a basic rate of tax at 20 per cent on family earnings of £100,000, but a household with one parent working an earning £100,000 pays 40 per cent tax on every £1 earned over the higher rate threshold of £50,217 and a tapering down of the personal allowance.
And we could go further. Rather than subsidising childcare, we should treat it as a necessary cost related to employment and explore options which could allow for the direct expensing of childcare costs against tax (subject of course to certain caps and thresholds).
Finally, and perhaps most importantly, we should use solidarity to answer the question as to how we support carers. Unpaid carers provide billions of pounds of care that would otherwise have to paid for by the State. Caring is a common cause for mainly women to work part time and not contribute fully to the paid economy, yet despite the clear benefits to our community and society, carer’s allowance for many is unsubstantial and inadequate.
Finding a solution to the growing cost of social care has been a colossal challenge for successive governments but resolved by none.
We need to view unpaid care as if it was a job, ensuring comparable support to that we would provide employees and ensure they receive some form of comparable care, given they are taking such a burden off the state. An initial step should be to provide carers who are also juggling paid employment, solidarity tax relief.
There will be many ideological opponents to this approach. Many will say that it is too hard or too much of a shift to be achievable. On all fronts, I say they are wrong. This is a time for bold decisions based on sound fiscal principles.
The challenges I have talked about here have taken at least a generation to accrue, and we cannot expect to resolve them overnight. The current approach of evaluating financial policies by reference to five-year forecasts does not equip us to understand how the measures we put in place today will affect the sustainability and prosperity of the economy we hand down to our children and future generations, nor the social benefits to our citizens: We must remember that while the backbone of a country is its economy, a successful economy is a means to an end, not merely an end in itself.
We need to broaden our horizons and look at ways of measuring the longer-term economic and social benefits of a solidaric taxation system. We must be ambitious about moving away from the politics of expediency and the “sticking plaster” approach to dealing with the problems we face as a nation.
Instead, we must be bold enough to make decisions that will deliver in the long-term and the political will to see them through, backed by a vision of pride, hope, and Belief in Britain.
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