Last week the Times published their annual ‘Rich List’ – and it’s the latest sign that inequality must be a key general election battleground.
Labour proposes to raise income taxes for those earning more than £80,000 yearly. And even Prime Minister Theresa May has pinched one of Ed Miliband’s ‘Marxist’ policies to cap energy bills to aid her ‘just managing families’ (JAMs).
Yet the Rich List illustrates the scale on inequality that now requires much more fundamental. A wealth tax fits the bill.
The UK is now home to 134 billionaires – 14 more than last year. The wealthiest 1,000 families have combined wealth of £658bn, up almost 15% from last year.
Ludicrously, the Times characterises this as the product of a ‘Brexit Boom’, rather than the more obvious and accurate explanation of redistribution of wealth to the hyper-rich from everyone else.
Aggregate total wealth in Britain was £11.1tr when it was last calculated in 2014 by the Wealth and Assets Survey (WAS). Wealth has grown by almost one third, or £2.7tr, between 2008 and 2014 – the period when the British economy was recovering from the international financial crisis. This is equivalent to annual spending on the NHS for 25 years.
So where has all of this wealth been going? The WAS reveals that the wealthiest 10% of households in 2014 owned 45% of total wealth – almost £5tr – whereas the least wealthy half owned just 9%, or £1tr. Such wealth inequalities have not been seen since WWI.
The wealthiest fifth of Britons now have 117 times more wealth than the least wealthy 20% compared with 97 times more in 2008. This is a clear indication of a yawning gap in wealth coming mainly from growth in property and pension wealth at the top.
London, the South-East and the East of England are the wealthiest regions, while average wealth is significantly lower through the Midlands into Wales, the North of England and Scotland.
Given increasing wealth inequality sitting alongside disparity in top and bottom incomes, the case for a wealth tax is unanswerable as a mechanism to increase fairness and raise desperately needed finance for public services, economic regeneration and rebalancing regional prosperity.
A 10% one-off wealth tax on the wealthiest tenth of households (calibrated by percentile so that the top 1% pay a greater proportion than the next 1% and so on) could raise £500bn. Or an ongoing wealth tax could generate £50bn yearly. In either case, property, land, and top private pension wealth should be targeted. The upshot would be that the top 10% would still control £4.5tr, or 40% of total wealth – not exactly hardship.
The finances raised could achieve a range of objectives:
- The UK’s structural deficit could be eradicated, so that the national accounts would go into surplus and the public debt could be paid down over subsequent years.
- The NHS, social care and vital services delivered by local government could be rebuilt.
- The economy could be rebalanced away from concentration on services to other sectors, and from the South-East to regions in the Midlands and the North.
- Scientific research, on which future prosperity depends, could be properly funded.
- Nursery and higher education might be expanded and student fees eradicated.
- Environmentally friendly policies could be supported and the green economy extended.
This ‘Windfall on Wealth’ (WOW) tax could redress the over-accumulation of assets by the richest over the last decade – while providing an investment fund to rebuild Britain and as a buffer against the worst effects of Brexit.
Kevin Gulliver is Director of Birmingham-based research charity the Human City Institute, is former Chair of the Centre for Community Research, and part of the SHOUT save social housing campaign, but writes in a personal capacity.
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