We live in one of the richest nations on Earth, yet we have become one of the most unequal. We need to tackle the inequality of wealth distribution in Britain head on. At the start of the industrial revolution, we were one of the most productive economies in the world. Now – in so many economic sectors – we are falling behind. And, regions that have contributed to Britain’s growth, are being held back.
No longer can we tinker around the edges or disguise rhetoric as action. Transformative change in the taxation of wealth is urgently required, especially after the devastating impact of Covid-19. Large amounts of money can be raised this way. It can be used to drive up productivity in every region, re-finance our public services and build a country founded on social justice and a green economy.
A major investment drive, designed to achieve the same levels of productivity throughout every region as exists in London, would grow the economy by £220bn per year.
But for now, the hardship resulting from the pandemic has not in any way touched the very wealthy. Indeed, they have seen their wealth skyrocket.
There are now more billionaires in the UK than at any other time in the 33-year history of The Sunday Times’s rich list. And the richest 250 people saw an increase of £106bn in their wealth since before the pandemic.
Juxtapose this with the fact that more than 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 per cent increase in the use of food banks in the last 12 months.
This is of course a deeply unfair, and the public agrees. The British Attitudes Survey found that 59 per cent of the public think that wealth differences in Britain are unfairly large.
The Conservative government is not “levelling up”. It is doubling down on the same failed approach that has produced record levels of inequality. It cut universal credit, broke an election promise by hiking up national insurance and is standing idly by as energy bills go through the roof. This week, the Resolution Foundation predicted a £1,000 per year hit on working people. It won’t touch the wealthiest.
There is a huge amount of untapped wealth in this country that at present is either lying unproductive in the bank accounts of the richest or hidden away in offshore schemes.
The total market value of the London Stock Exchange stands at £3.8 trillion. The combined wealth of the 1,000 richest people living in our country in 2020 was £538bn.
In Britain, we don’t tax wealth. We tax earned income. Even with corporation tax we have reduced the tax load so that now it is only raising a quarter of the amount we raise from income tax. The accumulation of wealth is largely ignored. It’s time for this to change. In our late-capitalist economy, the idea of touching capital itself is almost a sacrilegious thought. It’s time we thought the unthinkable.
This week I have published a report that proposes a radical overhaul of our tax system. The report includes four different options for a wealth tax, including a one-off tax, an annual tax and a hybrid tax targeting increases in wealth.
My office has found that the median revenue of the four wealth tax options is £218.4bn over the course of a five-year parliament. Bringing dividends into line with income tax would raise £37bn in five years and doing the same with capital gains tax would bring in a further £90bn. In addition, closing tax avoidance loopholes and tackling tax evasion would raise a total of £145.5bn in five years.
Therefore, approximately £490.9bn in additional tax revenue could be raised in a five-year period. These estimates are deliberately conservative to account for behavioural changes, administration costs, and other factors.
If implemented, these measures would transform our public finances making money available for our neglected public services. But above all, we could engineer a transformative investment-led drive to rebuild a dynamic green economy capable of competing with the best in the world.
Crucially, these measures are also an important way of addressing extreme wealth inequality. Our political system is rigged in favour of global corporations and the super-rich who the Pandora Papers have shown to play by a different set of rules to the rest of us.
Let’s be clear, 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 that will appeal to voters and the wider labour movement, precisely because it has one of our core values, fairness, at its centre.
Jon Trickett is Labour MP for Hemsworth