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Increase business taxes and clamp down on tax avoidance

Green · what the evidence says

An independent, source-checked look at Green’s policy “Increase business taxes and clamp down on tax avoidance” — what it would actually do across the things that affect your life. Every claim below quotes the source behind it. How this works.

Tax & the money you keep — Mixed picture

minor · moderate confidence

This package mostly hits businesses and high earners rather than ordinary households directly, but two VAT changes pull in opposite directions: cutting VAT on hospitality and arts saves consumers money, while extending VAT to financial services and private school fees raises costs for those affected. The net effect on the average household is small and depends heavily on which services they use.

The evidence

Biggest unknown: Whether banks and financial services firms pass the new VAT burden onto retail customers through higher charges, and by how much, is unresolved and would determine the scale of any household cost increase.

Our reading: For O11 — household tax burden and take-home pay — this policy operates mostly at the corporate level. The windfall taxes on oil/gas and banks are levied on companies, not directly on household income or consumption; their O11 effect depends entirely on pass-through, which the evidence does not resolve. The VAT changes are where direct household effects arise. Reducing VAT on hospitality and arts would directly lower prices for consumers of those services, improving their real spending power — a genuine if modest O11 gain for households that use restaurants, live entertainment, and so on. Against that, extending VAT to financial services adds a new cost layer that, per the evidence, could be passed on to retail customers who cannot reclaim VAT. Adding VAT to private school fees raises costs for fee-paying families by an effective ~15% after input recovery; this affects a small share of households (roughly 6% of pupils change sector) but is a real household cost increase for those affected. The loophole-closing and HMRC enforcement measures are aimed mainly at businesses and high-net-worth individuals (business reliefs, inheritance tax, BADR) — not at the broad household population — so their direct O11 effect on average households is minimal. On balance the policy is mixed for O11: a modest gain from hospitality/arts VAT cuts is offset by cost increases on financial services and private education for those who use them. Neither side dominates at population scale, making the aggregate household O11 effect minor. Confidence is moderate because the pass-through of financial services VAT to retail customers is unresolved.

Public finances & the next generation — Helps

moderate · moderate confidence

This package of tax rises and enforcement investment is projected to raise several billion pounds a year, improving the near-term fiscal position. The main caveat is that behavioural responses — reduced North Sea investment, bank relocation, or avoidance — may erode some projected gains.

The evidence

Biggest unknown: Whether behavioural responses — reduced North Sea investment, bank relocation, or aggressive avoidance — significantly erode the projected revenue gains.

Our reading: The policy is a multi-strand revenue-raising package. On the EPL, the existing levy already generates around £2.9 billion annually; a further increase would generate additional near-term revenue, though industry sources warn of substantial behavioural drag on investment which, if it materialises, would shrink the future tax base. That risk is real but contested: OEUK's £50 billion investment loss figure comes from an industry advocacy body and should be treated as an upper bound. On the bank windfall tax, IPPR (institutional) suggests competitive damage would be limited if targeted, moderating the downside risk from bank CEOs' warnings. On VAT, private school VAT is already in legislation with a government-projected yield of £1.51 billion in 2025/26 — now correctly treated as a projected forecast rather than an observed fact. Adding VAT to financial services is complex and contested. Loophole-closing estimates come primarily from Tax Justice UK (advocacy) and must be treated as indicative ceilings. The HMRC enforcement investment has the strongest independent backing: HMRC's own multiplier of £9 per £1 spent, with a projected £5 billion net annual return by 2029/30 (though the sourcing is Fair Tax Mark, also advocacy-aligned). The OECD Pillar 2 implementation underpins the global tax element. In aggregate, the package points clearly toward improved near-term public finances — most components have credible revenue mechanisms backed by at least institutional or government sources. The behavioural risks are real but do not dominate the balance of evidence. Direction is 'improves' at moderate magnitude over this parliament, with moderate confidence reflecting genuine uncertainty about behavioural responses.

Prosperity & living standards — Mixed picture

moderate · low confidence

The package raises revenue and could cut costs for hospitality businesses, but windfall taxes on oil/gas and banks — alongside VAT on financial services — risk reducing business investment and competitiveness in sectors that matter for productivity. The net effect on living standards is genuinely contested and depends heavily on what the additional revenue funds.

The evidence

Biggest unknown: Whether investment lost in the oil/gas and financial sectors is more than offset by public investment from the raised revenue, and whether government spending decisions translate into durable productivity and living-standard gains.

Our reading: The policy bundles several distinct instruments with divergent effects on O13. On the downside for investment and productivity: the oil/gas windfall tax escalation, combined with the already-scrapped investment allowance, has already deterred North Sea investment with measurable headcount reductions. Industry projections of £50bn lost investment are from an interested party (OEUK) and should be discounted, but the direction of effect — reduced domestic energy investment and accelerated import dependency — has some grounding. Applying VAT to financial services, currently exempt, risks competitiveness for an internationally mobile sector, though independent analysis (IPPR) puts this risk as modest if targeted well. On the upside: a lower VAT rate for hospitality would reduce costs for a labour-intensive, geographically dispersed sector, likely supporting firm formation and economic activity in areas with fewer alternatives. HMRC compliance investment has a projected strong return from independent modelling, which if realised would fund public expenditure without distorting investment decisions. The OECD Pillar 2 mechanism reduces profit-shifting, potentially improving domestic revenue without additional distortion. Absent the policy, the status quo preserves existing investment patterns in oil/gas and finance but leaves the hospitality sector at a competitive disadvantage and the tax gap unclosed. The net effect is genuinely mixed: real risks to investment in oil/gas and financial services (near-term, this parliament), partially offset by hospitality sector gains and HMRC returns. Revenue recycling is the critical unknown — if used for productive public investment, the long-term living-standards effect could be positive, but that is outside the scope of this policy's own mechanism. Confidence is low because the largest magnitude claims come from industry advocacy sources.

Inequality & fair shares — Helps

moderate · moderate confidence

This package of windfall taxes, loophole closures, and VAT shifts predominantly falls on corporate profits and higher-income households, which tends to narrow the income and wealth gap. The main caveat is whether revenues are redistributed and whether economic knock-on effects partially offset the gains.

The evidence

Biggest unknown: Whether revenues raised are redistributed to lower-income groups via public services, and whether corporate tax rises cause sufficient economic harm to workers to offset the progressive incidence.

Our reading: The policy package targets several concentrations of income and wealth: oil and gas company profits (held largely by shareholders), bank profits, tax avoidance via loopholes including inheritance tax and disposal relief, and private school fee-payers. Each of these instruments has a broadly progressive incidence — the burden falls higher up the income and wealth distribution than average. The VAT reduction on hospitality and arts cuts costs for a broad consumer and worker base, reinforcing the progressive tilt. Strengthening HMRC and global minimum tax rules disproportionately recovers tax from those who use sophisticated avoidance, closing a gap that widens effective inequality between those paying statutory rates and those who do not. The private school VAT measure is already implemented, making it more than aspirational. The main countervailing risk is economic: windfall taxes on oil and gas have prompted industry warnings of investment cuts and job losses that could harm lower-paid workers in those sectors. However, these projections come primarily from industry advocacy sources (OEUK) and must be weighed against independent revenue projections; the cited evidence does not show these offsets dominate the progressive incidence of the package. On balance, the package credibly narrows income and wealth gaps at moderate magnitude, though the redistribution effect depends on how revenues are deployed, which is outside this policy's stated scope.

Cost of living — Mixed picture

minor · low confidence

Cutting VAT on hospitality and arts could lower prices for everyday spending, while raising VAT on financial services may push up bank and insurance costs passed to ordinary households. The net effect on most people's bills is modest and uncertain.

The evidence

Biggest unknown: How much of the VAT increase on financial services and the bank windfall tax will banks pass through to retail customers via higher fees and mortgage rates.

Our reading: This policy bundle has competing cost-of-living effects that partly cancel out. On the positive side, reducing VAT on hospitality and arts directly lowers the price of eating out and cultural activities — relevant to everyday spending for ordinary households. Revenue raised across the package (from windfall taxes, loophole closure, and HMRC resourcing) could in principle fund public services and benefits that ease cost-of-living pressures, though the policy text does not specify this. On the negative side, raising VAT on financial services is the most direct threat to ordinary households: since most financial services are currently VAT-exempt and consumers cannot reclaim VAT, banks and insurers are likely to pass some of this cost through in higher fees, mortgage costs, or insurance premiums. IPPR suggests a targeted tax would have only a 'small impact, if any' on competitiveness, but the pass-through risk to retail customers remains real. The bank windfall tax similarly risks partial pass-through. The private school VAT rise affects a relatively affluent minority and is unlikely to materially affect cost of living for most households; the main consumer impact is fee rises for those families. The competing effects — lower hospitality prices versus higher financial services costs — land on overlapping groups of ordinary households, making the net direction genuinely mixed. Magnitude is minor because no single element dominates the cost-of-living basket for most people, and the revenue-to-public-services link is unspecified in the policy text. Confidence is low because the key empirical question — how much of the financial services VAT and bank tax is passed to retail customers — is not resolved by the evidence provided.

Education & opportunity — Mixed picture

moderate · moderate confidence

Adding VAT to private school fees raises over £1.5 billion a year that the government says will go to state schools, but around 37,000 pupils are expected to move into the state sector, adding pressure to capacity — and SEND families face particular hardship. The net effect on education quality depends heavily on how the revenue is actually spent.

The evidence

Biggest unknown: Whether the additional funding flowing to state schools will materially improve standards and the attainment gap, or be absorbed by the cost of accommodating the extra pupils moving from private schools.

Our reading: The most direct O7 effect of this policy bundle is the VAT extension to private school fees. On the positive side, the government estimates this raises £1.51 billion a year by 2025/26, explicitly earmarked for state schools — a meaningful potential funding boost to the sector that educates the large majority of children. The broader tax-raising and compliance measures (HMRC staffing, loophole closure, bank and oil windfall taxes) could add further billions to public finances from which education spending could benefit, though there is no direct ring-fence beyond the private schools measure. On the negative side, around 37,000 pupils are projected to move into the state system, increasing demand on state school places and staff — partially offsetting the funding gain. The impact on SEND families is a genuine concern: children in private placements not funded by local authorities face fee increases their families may not be able to absorb, with no clear state alternative. Private schools with thin margins may close, further disrupting pupils mid-education. The net O7 direction is mixed: substantial new funding directed at state schools is a real upside for the majority, but the pupil-influx pressure and SEND vulnerability are real downsides. Confidence is moderate because the revenue projections rest on government estimates, the actual spending allocation is not guaranteed, and the pupil-movement figure is a forecast. The biggest determinant of whether this is ultimately positive or negative for education quality is whether the revenue genuinely translates into improved state school resources rather than being absorbed by capacity pressures.

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