A series of contemporary problems highlights how the role and relevance of taxation choices are likely to receive greater focus in social policy and elsewhere in the years ahead. As states move on from their large-scale fiscal response to the COVID-19 pandemic, attention is turning to the need to fund or shrink an expanded Welfare State. Both have implications for states’ tax arrangements and the former implies the need for an enhanced role for taxation, be it in the short, medium or long term. Simultaneously, the cost-of-living crisis triggered a tightening of the loose monetary policy states have enjoyed since the Great Recession of 2007–2009 with, consequently, reduced availability of plentiful and cheap borrowing to fund fiscal deficits. Coupled with higher interest rates governments will face choices including: raising more taxation revenue, adopting austerity measures, borrowing, or some combination of all three. The cost-of-living crisis, alongside and shaped by the repercussions of war in Europe, has also given rise to a slowdown in consumption and economic growth adding further challenges to the fiscal choices many countries face. The climate crisis also casts its shadow across this confluence of challenges. Inevitably, debates around social policy priorities, alongside debates about the design of taxation and the level and distribution of tax liabilities, have come into central focus. In the UK, the impact of these crises is exacerbated by a Brexit-driven reduced GDP, estimated to be some 4-6 per cent in the long term (Portes, Reference Portes2023; Kaya et al., Reference Kaya, Liadze, Low, Sanchez Juanino and Millard2023).
Against this backdrop, the social policy topics examined in this themed edition constitute key areas of policy choice and debate – intergenerational transfers of wealth, environmental sustainability, meeting social need, and the use of tax reliefs to achieve specific social policy goals – and our articles focus specifically on the distributional implications of taxation choices and responses.
Thus, this themed section brings together the increased relevance of and role for taxation with these key areas of social policy interest. The articles examine these challenges through a series of studies drawing on national and comparative experiences to offer an enhanced understanding of the inter-connectedness between social policy concerns and taxation policy choices. The contributions set their analyses in the context of the comparative literature on social policy and a growing literature on the interface between social policy and taxation (see Collins, Reference Collins, Tobin and O’Brien2016; Byrne and Ruane, Reference Byrne and Ruane2017; Bradshaw, Reference Bradshaw2019; Ruane et al., Reference Ruane, Collins and Sinfield2020; Rowlingson and McKay, Reference Rowlingson and McKay2021; Lymer et al., Reference Lymer, May, Sinfield, Lymer, May and Sinfield2023a, Reference Lymer, May and Sinfield2023b).
Social policy has at its heart a concern for meeting social need and how this is shaped by access to and command over resources. Its main focus has always been on the collective arrangements which are in place to address these questions. In the state-of-the-art article, Ruane addresses the distributional focus of the themed section by questioning our understanding of these arrangements, specifically by considering two interrelated phenomena which feature in debates about resource allocation: the tax system and redistribution. The article poses questions as to the adequacy of our understanding and use of these concepts. It argues for a reconceptualisation of the tax system which must be understood as an open system comprising a set of dynamic processes since the current use of the term ‘tax system’ often masks the way taxes operate and their true impact on the distribution of resources. Where redistribution is concerned, Ruane draws attention to several key aspects which remain relatively neglected in the field of social policy. Acknowledging the shaping of the distributional consequences of taxation through its interaction with wider aspects of society, the article proposes a modified approach to the conceptualisation of redistribution, advocating greater attention to the concept of ‘structural redistribution’ to distinguish between redistribution from some individuals to others and redistribution which alters the character of society by altering inequality and/or social cohesion.
Wealth divides have come into sharper focus as data on their scale, composition, and distribution fuels more evidence-based academic, political and policy debates on their implications, including the equity considerations arising from large-scale intergenerational transfers in the decades ahead. McDonnell and Collins’ article considers the economic and social rationales for the taxation of these intergenerational wealth transfers and questions the popular perception that they are unfair. Following a review of comparative data on the composition and distribution of household wealth across high-income European countries, they focus on one country, Ireland and explore whether current inheritance taxation policies counter or perpetuate wealth inequalities. They also identify reforms, justified on the basis of their contribution to equity and societal fairness, which, they argue, provide one avenue to address persistently high levels of net wealth inequality. McDonnell and Collins conclude that societies should consider taxation revenue from intergenerational wealth transfers as a new and substantial source of recurring funds that will be available to fund public services and redistribution policies.
National and international commitments to address the climate crisis require more decisive state attention, a focus underscored by the 2022–2024 energy crisis in Europe and the limited, or even negative, progress made on environmental sustainability targets in recent years (UNEP, 2022: 5). One aspect of state intervention concerns taxation measures intended to encourage more environmentally sustainable behaviour among individuals and households, with these becoming a central plank of many nations’ policy responses. However, as Bridgen and Collins suggest here, these initiatives arise alongside other taxation and redistributive policy objectives focused on equity. Their article sets out to explore the taxation policy design challenges raised by attempts to pursue environmental sustainability and social justice objectives simultaneously. Finding that the existing, largely economics, literature on carbon taxes frames their use in terms of meeting carbon emission targets at the expense of a consideration of equity, Bridgen and Collins develop a social policy framework for the analysis of these taxes, based on the energy justice literature. They outline how this facilitates consideration of the fairness of environmental tax arrangements and the processes used to manage sustainable development trade-offs between social justice and environmental goals. The authors then apply this framework in a comparative analysis of two high income countries (the UK and Ireland) which have a stated commitment to sustainable development but contrasting carbon taxation approaches.
High income countries share a number of challenges in the post-pandemic period, not least of which is the requirement to make health and care systems more resilient to meet need (OECD, 2022, 2023). The COVID-19 pandemic underscored the unavoidable inter-dependency of health and social care systems and this, plus demographic trends in ageing and associated public expenditure, reinforced the significance of their pre-existing weaknesses. However, these challenges and the associated costs of addressing them occur in many countries in a context of straitened financial circumstances and electorally or fiscally unappealing options. Ruane’s article examines one major policy response to these challenges: the attempt to raise additional tax revenues to increase funding for health and social care in the UK, a country with persistent capacity shortages in both areas and unresolved problems in the social care funding system. The article examines the role of social need both in justifying proposals for a new social insurance levy and as a ground of opposition to it. It argues that the rise and fall of the levy reveals how the relationship between taxation and need goes well beyond revenue raising to fund public services and income support and is instead complex and multi-dimensional, mediated by wider social, political and economic factors.
Data improvements facilitate heretofore limited comparative assessments of the choices governments make regarding spending policies financed through taxation reductions and other tax expenditure measures, with implications for the adequacy of revenues raised for redistributive policies. Tax expenditures are financial benefits such as tax breaks and allowances, granted through preferential tax treatment, that lower governments’ revenues as well as the tax liability of the beneficiary taxpayer. Nowadays they are widely used by governments to pursue different economic goals (e.g. boosting innovation and job creation) and to pursue social goals (social tax expenditure) such as mitigating inequality and poverty. To date, most assessments of tax expenditures have been single country specific or, where comparative, have focussed on only a few countries or specific policies to compare cost, outcomes and impact. However, in their article Aliu and Redonda draw on the recently launched Global Tax Expenditure Database (GTED), with data from over 100 countries, to investigate the use of tax expenditures in government social spending across the world. Their article offers the new data-driven assessment on the presence and comparative size of social tax expenditures in states, ranging from high-income to low-income states, and highlights their contrasting patterns, substantial cost, and frequent lack of transparency. The article also provides a more detailed analysis of a selected group of OECD countries allowing a comparison of their direct social spending to that delivered via tax expenditure. Aliu and Redonda argue for a greater understanding of the role tax expenditure plays in the social policy approach of countries and highlight the importance of enhancing the evaluation of the effectiveness, or otherwise, of these less-visible social policy choices.
Taken together, these articles demonstrate the importance of a consideration of taxation to social policy by focusing on the way taxation measures and choices shape distributional outcomes with questions of fairness permeating this themed section. McDonnell and Collins engage with the perception of intergenerational taxes as unfair and outline the social policy case for fair and transparent inheritances taxes. Ruane examines how considerations of fairness were central to the critical narrative which emerged after the announcement of the UK’s Health and Social Care Levy. Aliu and Redonda show how tax expenditures constitute preferential tax treatment and in doing so, they benefit certain social groups rather than others and reduce government revenues available for redistributive programmes. Bridgen and Collins develop a social policy framework for the analysis of carbon taxes, one which facilitates consideration of the fairness of environmental taxes and the trade-offs between these measures and sustainable development goals.
Collectively, the articles in this themed section bring together a sharpened awareness of the relevance of taxation to many contemporary social policy concerns. Our intention is not to be comprehensive, as there are many other areas of social policy where there is a role for taxation e.g. labour market and employment policy, family policy, pensions, gender equality, housing policy, local government and local services, corporate welfare, international development, and addressing income-adequacy, poverty and inequality among others. However, we hope that they provide a timely literature- and evidence-based contribution to current, and forthcoming, debates across a range of social policy topics and will assist to foster further interest in exploring the inter-connectedness of social policy and taxation policy choices.
