A wealth tax is needed to fund our neglected public services

We live in one of the richest nations on the planet, but we have become one of the most unequal. We need to tackle the unequal distribution of wealth in Britain head on. At the start of the industrial revolution, we were one of the most productive economies in the world. Today, in so many economic sectors, we are lagging behind. And regions that have helped Britain grow are being held back.

We can no longer tinker around the edges or disguise rhetoric as action. Transformative change in the taxation of wealth is urgently needed, especially after the devastating impact of Covid-19. Large sums of money can be collected in this way. It can be used to increase productivity in every region, refinance our public services, and build a country based on social justice and a green economy.

A major investment drive, designed to achieve the same levels of productivity across all regions as in London, would grow the economy by £220 billion a year.

But so far, the hardships resulting from the pandemic have by no means affected the very wealthy. Indeed, they saw 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 250 richest people have seen their wealth increase by £106billion since before the pandemic.

Juxtapose that with the fact that over 11 million people have lost their jobs, 14 million are living in poverty (of which 9 million are actually working) and there has been a 33% increase in food bank use in the last 12 months.

This is of course deeply unfair, and the public agrees. The UK Attitudes Survey found that 59% of the public believe differences in wealth in Britain are unfairly large.

The Conservative government does not “level”. It doubles down on the same failed approach that produced record levels of inequality. He cut Universal Credit, broke a campaign promise by increasing National Insurance and sits idly by as energy bills skyrocket. This week the Resolution Foundation predicted a £1,000-a-year hit on workers. It won’t affect the wealthy.

There is a huge amount of untapped wealth in this country which right now is either sitting idle in the bank accounts of the wealthy 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 £538billion.

In Britain, we don’t tax wealth. We tax labor income. Even with corporation tax, we have reduced the tax burden so that it only takes a quarter of the amount we take in income tax. The accumulation of wealth is largely ignored. It is time for that to change. In our late capitalist economy, the idea of ​​touching capital itself is almost a sacrilegious thought. It’s time to think about the unthinkable.

This week I released a report that proposes a radical overhaul of our tax system. The report includes four different options for a wealth tax, including a single tax, an annual tax and a hybrid tax targeting increasing wealth.

My office found that the median income of the four wealth tax options is £218.4billion over a five-year parliament. Aligning dividends with income tax would bring in £37billion over five years and doing the same with capital gains tax would bring in another £90billion. Additionally, closing tax loopholes and tackling tax evasion would bring in a total of £145.5 billion over five years.

Therefore, around £490.9 billion in additional tax revenue could be collected over a five-year period. These estimates are deliberately conservative to account for changes in behavior, administration costs and other factors.

If implemented, these measures would transform our public finances by making money available to our neglected public services. But above all, we could design an investment-driven transformation dynamic to rebuild a vibrant green economy capable of competing with the best in the world.

Fundamentally, these measures are also an important way to tackle extreme wealth inequality. Our political system is rigged in favor of global corporations and the super-rich who the Pandora Papers showed play by a different set of rules than the rest of us.

Let’s be clear, aligning wealth taxes with income taxes is both morally and fiscally correct. But it’s also a bold policy that will appeal to voters and the labor movement as a whole, precisely because it centers on one of our core values, fairness.

Jon Trickett is the Labor MP for Hemsworth