A major report by Labour MP Jon Trickett has called for a wealth tax as part of a major overhaul of the UK’s tax system. It estimates that if the richest paid more in tax, it could raise nearly half a trillion pounds across five years.
A stark divide
The report is called The Nature of Wealth in Britain. It looks at various measures of how wealth is distributed in the UK; how our current tax system affects the richest and poorest, and what could be done to make the system fairer. A press release said that the report’s launch:
comes ahead of the Chancellor’s Autumn Statement that looks set to propose cuts to public services after the Chancellor has asked departments to find “at least 5 percent of savings and efficiencies from their day-to-day budgets.
Trickett launched the report with a video:
Gaping inequality
As the report lays out, the situation is stark.
It notes:
There are now more billionaires in the UK than at any other time in the 33-year history of the Times Rich List. And the richest 250 people have seen an increase of £106 billion in their wealth since before the pandemic.
Juxtapose this with the fact that over 11 million people have had their jobs furloughed, 14 million are living in poverty (9 million of whom are actually in work) and there has been a 33% increase in the use of food banks in the last 12 months.
To add to this, the Tory government is cutting Universal Credit, breaking an election promise by hiking up National Insurance and overseeing a huge jump in inflation.
Moreover, it notes that:
The richest people have seen their wealth increase, by £538 billion between the financial crash and just before the start of covid. Even under covid, the richest 250 increased their wealth by another £106.7 billion.
Unfairness, entrenched
The report also shows just how weighted in favour of the rich the UK tax system is. It details how:
- More working families are in poverty than ever before.
- Life expectancy in the poorest areas is declining. But in the richest areas, it’s increasing.
- Our system of income tax unfairly favours the rich.
Meanwhile, it outlined how:
- The London Stock Exchange has increased its value by over £600bn in the last year alone.
- UK businesses’ cash reserves have nearly trebled to £909m since 2006.
- “The UK is responsible for 558% of tax lost globally to corporate tax abuse – the second worst in Europe. Globally, only the Netherlands, China, Hong Kong and the Cayman Islands are responsible for higher shares of tax loss”.
- We’re the 12th most financially secret jurisdiction in the global Financial Secrecy Index. That is, we’re one of the worst countries for letting people hide their wealth.
The report also detailed that:
- Corporate lobbying of government is a major problem. Only 1% of lobbyists fall under legislation.
- The “revolving door” between politicians and corporations is still an issue.
- 10 big donors to the Tories have given over £13.6m to the party since Boris Johnson came to power. During this time, these 10 have increased their wealth by over £1.1bn.
- Government outsourcing of public services to private companies equates to £3,500 per household.
So, what can be done?
A wealth tax
Trickett’s report proposes four ways to start fixing this gaping inequality:
- An additional 5% tax on income over £500,000 as a one-off wealth tax. This could raise £260bn.
- Another type of one-off wealth tax would be on wealth over £2m with graduated increases. It could raise £197.6bn.
- An annual wealth tax on wealth over £2m with graduated increases. This could raise £22.5bn a year.
The report also proposes a “hybrid wealth tax”. It says that this would include the second tax outlined above, plus a tax on wealth people made after this. It noted that:
Over Covid, the richest 250 people, as listed in the Sunday Times, increased their wealth by £106.7 billion. If we taxed wealth increases at the same base rate of income tax (20%) it would raise £21.3 billion each year.
Closing loopholes
The report says that:
- Dividends (like money from selling shares) should be taxed the same as income. This could raise £37bn in five years.
- If the same was done for capital gains tax, this would raise £90bn over five years.
- If tax loopholes were closed and avoidance and evasion properly clamped down on, this could raise an additional £145.5bn in five years.
Overall the report’s proposals could raise £490.9bn in five years.
Public support appears high for some sort of wealth tax. For example, as the report noted:
In May 2020 YouGov produced a poll which showed that 61% support a wealth tax for people with assets worth more than £750,000 (excluding pensions and main homes)… In October 2020 IPSOS MORI also polled people about a wealth tax, with 41% strongly supporting one.
But what could this fairer taxation pay for?
Where could half a trillion go?
The report noted that just under half a trillion in additional tax could pay for:
- 15% NHS pay increase (£5.1bn nominal cost).
- Making the £20 Universal Credit uplift permanent (£5bn).
- Plug the Social Care funding gap (£4.3bn).
- Restore Sure Start funding (£1.2bn).
- Local Council funding gap (£7.4bn).
- Reverse education funding cuts (7bn).
- Levelling up transport by matching UK wide spending on transport to London levels of spend (£19bn).
- Insulating all homes, reducing energy bills and cutting carbon emissions by 10% through “Warm Homes for All” (£250bn).
- Building 150,000 houses a year (£75bn).
So, will it happen? Trickett thinks it must.
Trickett: a “cycle of inequality” that needs to be broken
Trickett said in a press release:
A wealth tax would transform our public finances making money available for our neglected public services…
It is also necessary to address extreme wealth inequality. Our political system is rigged in favour of global corporations and the super-rich. Wealth is turned into political power through donations and lobbying. Political power is used to advance policies that financially benefit the elite at everyone else’s expense. It is a cycle of inequality that leads towards oligarchy and threatens our democracy.
Bringing taxes on wealth into line with those on income is both morally as well as fiscally correct. But it is also a bold policy which will appeal to both voters and the labour movement precisely because it has one of our core values, fairness, at its centre.
Now, it’s up to the political parties to act. The Labour leadership must read and adopt Trickett’s report. Then, its proposals should be tabled as an opposition day debate. Moreover, it should form the basis for Labour policy at the next election. Anything less is missing a golden opportunity to truly ‘level up’ the UK.
Featured image via the Office of Jon Trickett – screengrab
