Otax on the incomes of the rich, proclaims Rowan Williams, former Archbishop of Canterbury. Start with a one-off seizure of the top 1%, then introduce a 1% wealth tax that could bring in at least £70billion a year. It’s finally time for the poor to inherit the Earth – or at least a small part of it.
The past two years of Covid have seen tidal waves of wealth pour into the pockets of those who already had it, just as the cost of living disaster drains funds from low- and middle-income households. The pandemic should open our eyes to an already hugely unequal country, suddenly engulfed in further undeserved excess.
Williams’ hard-hitting words are actually subdued in the context of what’s happening right now: house prices are rising at the fastest pace on record and the stock market is soaring, while low-income people get into debt. “The spiral of inequality,” he says, is “deeply damaging to our morale and our collective trust.” The super-rich with “grossly disproportionate rewards” should welcome a windfall tax not as a burden but as an “opportunity to build a sustainable economy that works for everyone”. It’s optimistic. But if the wealthy don’t see his laudable advocacy in this light, surely the top 1% can be electorally ignored? There are just 250,000 households in this bracket, owning a minimum of £3.6m (although many are worth much more). And squeezing the very wealthy is electorally popular: Denis Healey denied saying he would squeeze them “until the pips creak”, although he did.
Yet the electoral power of the plutocrats lies not in their small number of voters, but in the control they wield over the ears of conservative ministers – especially those hyper-donors who allegedly bought their place on the ‘advisory council’ secret from Boris Johnson. Keir Starmer, in The Observer, asks why nothing is being done to make London the ‘money laundering capital of the world’? He suggests “Maybe the answer lies in the Conservative Party accounts”.
The Tories operate in a world of extreme money, backed by Tory Party co-chairman Ben Elliot, whose luxury concierge service, Quintessentially, has helped him attract a stack of mega-wealthy – and sometimes dodgy – donors since which Johnson named him in 2019.
Meanwhile, the government turns a blind eye to the extraordinary gains made by some in the Covid years. What will voters think of six companies alone making £16billion in excess profits thanks to Covid? Rio Tinto, recently in the news for blowing up two ancient Aboriginal caves in Western Australia, is handing out a $16.5bn (£12bn) dividend. FTSE mining companies made £42bn in extra profits. The big four banks are expected to report annual profits in excess of £34billion – and pay out £4billion in bonuses. Shares of manufacturer Premier Foods, home to Mr Kipling, have risen 237% during the pandemic. Gambling profits have skyrocketed. These are just a few examples.
As everyone knows, as energy bills scorch households, oil and gas profits soar, putting $38 billion in profits in stock buybacks for investors, not green investments. Labor would tax this surplus like a windfall: companies drilling in the North Sea that cannot flee overseas to escape tax. Labour’s latest windfall tax, popular in its 1997 manifesto, clawed back £5.2billion from privatized public services sold too cheaply in the 1980s. it is supported by public opinion.
In this explosion of asset values, Williams is calling for a windfall wealth tax of far greater magnitude. He is right to say that extraordinary times call for radical remedies. National debts are reaching World War II proportions – and yet, unlike in wartime, the government makes no appeal to contributions from private wealth. In times of war, wealth was enlisted, so why not now? Covid has dramatically widened the wealth gap, the Resolution Foundation tells me, which will have profound consequences for social mobility and income inequality in the future.
Instead, Tory MPs are calling for tax cuts, ignoring struggling public services. NHS waiting lists will grow for years. Despite urgent skills shortages, funding for continuing education will still be well below 2010 levels by 2025. Teachers and nurses are paid less in real terms than in 2010. Students spend 9% less in real terms than in 2010. , sports and theater devastated. The early years are dangerously neglected. “We don’t promise the moon on a stick,” Chancellor Rishi Sunak said recently, bragging about his caution. Indeed, it does not. For him, “building back better” is just moonbeams.
A one-time tax on those with a net worth of more than £2million – payable at 1% per annum over five years – would raise £80billion, says Professor Arun Advani of the University of Warwick. This is how relatively few things taken from relatively few, just once, could finance the regeneration of all that matters around us. But that’s probably only useful as a thought experiment in this most tax-unfriendly country, where we’re taxed less than our EU neighbors. Ed Miliband’s modest mansion tax was a lesson in how reasonable measures are dismissed by lobbyists and think tanks funded by the wealthy. Take inheritance tax, fairest and most hated: only one in 20 estates pays, mainly those worth over £1m – yet the wealthy and their newspapers scare away ordinary landlords than that happens to them. Would they do this to something called an “exceptional wealth tax” for individuals?
Follow the saying of Jean-Baptiste Colbert, Louis XIV’s Minister of Finance: pluck as many feathers as possible from the goose with a minimum of whistles. Institute for Fiscal Studies Deputy Director Helen Miller lists less wheezy tax reforms with her elegant TaxLab showing how taxes are raised, complete with grotesque anomalies. Reassessment of council tax would see northern England’s bills drop by 20% as southerners pay just a fraction of the true value of their properties. Leveling capital gains and rents so that all unearned income pays the same tax and national insurance would prevent plutocrats from disguising their income.
Basic fairness is the first step, but a loud cry from a former archbishop for abusing the wealthy is welcome. Deliberate misinformation means that too few are aware of the undertaxed wealth that is cascading into the pockets of the few, bolstering the life chances of their heirs.
This article was last updated on February 28, 2022. An earlier version misquoted Professor Arun Advani as saying an exceptional one-off 10% tax on all UK wealth would bring in £1billion. This has been corrected.