{"id":265241,"date":"2025-07-14T21:23:11","date_gmt":"2025-07-14T21:23:11","guid":{"rendered":"https:\/\/www.europesays.com\/uk\/265241\/"},"modified":"2025-07-14T21:23:11","modified_gmt":"2025-07-14T21:23:11","slug":"why-wouldnt-a-wealth-tax-work-in-britain","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/uk\/265241\/","title":{"rendered":"Why wouldn\u2019t a wealth tax work in Britain?"},"content":{"rendered":"

Not so long ago, when Labour<\/a> was in opposition and still popular<\/a>, there was no question of introducing a wealth tax<\/a>. Yet today, influential figures such as former leader Neil Kinnock<\/a> and ex-first minister of Wales Eluned Morgan, and some trade unions, are advocating just such a change<\/a>.<\/p>\n

More tellingly, ministers simply refuse to rule out a wealth tax as they might have done before. The latest to do so is the transport secretary, Heidi Alexander, who was asked if the topic had come up at last Friday\u2019s cabinet away day<\/a> and enigmatically replied: \u201cNot directly.\u201d Teased at Prime Minister\u2019s Questions on the subject, even Keir Starmer<\/a> couldn\u2019t bring himself to issue a flat denial. Some wonder if a wealth tax could actually happen…<\/p>\n

What did Labour promise?<\/p>\n

There\u2019s nothing in the manifesto to rule out a wealth tax, but in an interview in August 2023, Rachel Reeves<\/a> was unequivocal: \u201cWe have no plans for a wealth tax. We don\u2019t have any plans to increase taxes outside of what we\u2019ve said. I don\u2019t see the way to prosperity as being through taxation. I want to grow the economy,\u201d she said, adding: \u201cWe won\u2019t be doing that. It\u2019s a denial.\u201d <\/p>\n

And as recently as her spring statement in April, she declared: \u201cWe\u2019re not interested in a wealth tax. Our priority is to grow the economy, and that\u2019s the way that you make working people better off and secure better public finances.\u201d<\/p>\n

What does the left want?<\/p>\n

It\u2019s usually stated as a 2 per cent levy on assets<\/a> \u2013 property, shares, art etc \u2013 owned by individuals in excess of \u00a310m. For example, someone worth \u00a312m would pay a levy of 2 per cent of \u00a32m \u2013 a bill of \u00a340,000. It could be paid immediately, or deferred to disposal (or death). Figures such as Richard Burgon, a left-wing MP who believes in it, says it would raise \u201cup to\u201d \u00a324bn. <\/p>\n

What does the chancellor say?<\/p>\n

As little as possible at the moment, suspiciously sticking to the \u201cworking people\u201d line (though some working people are worth \u00a310m, and more). No denials, then.<\/p>\n

What are the arguments for a wealth tax?<\/p>\n

It\u2019s said that the country shouldn\u2019t balance the books on the backs of the most vulnerable, and that fairness demands that those with the broadest shoulders bear the greatest burden. <\/p>\n

Recent controversies about disability benefits and children with special needs have heightened the arguments. It\u2019s also true that wealth in the UK is undertaxed compared with income, and that we live in an unequal society, at least by some European standards.<\/p>\n

Economists warn about what might happen as wealth accumulates through inheritance<\/a> over the very long run. As Thomas Piketty puts it: \u201cInheritance will eventually matter a lot pretty much everywhere \u2013 as it did in ancient societies. Past wealth will tend to dominate new wealth, and successors will tend to dominate labour earners.\u201d The present debate about \u201cintergenerational fairness\u201d is one artefact of this phenomenon.<\/p>\n

And against a wealth tax?<\/p>\n

It has been tried, and failed. Comparable nations such as France, Germany, Switzerland and Norway have more or less abandoned wealth taxes, or found them to be unproductive. Almost half a century ago, a previous British Labour government issued a green paper on a proposed wealth tax, but then the chancellor, Denis Healey, concluded it would be impractical and too costly to administer. <\/p>\n

The wealthy have always found ways to avoid such taxes and protect their assets, while the super-rich simply skip the country altogether. Tax expert Dan Neidle judges: \u201cThe idea that we can do something different is naive. It\u2019s arrogant to think that we in the UK can achieve a holy grail everyone else has been too stupid to find.\u201d<\/p>\n

What wealth could be taxed?<\/p>\n

An uncomfortable truth is that the easiest wealth to tax would be the most politically difficult \u2013 and arguably, the least fair: homes and pension pots belonging to individuals worth far less than \u00a310m, and who would fall into the category of \u201cworking people\u201d that Labour has pledged to look after. After all, you can\u2019t take the house in which you live and move it overseas. And many of the assets in question will have been taxed already. <\/p>\n

Any government that tried to tax a capital gain on a principal private residence would place itself in opposition for a generation. <\/p>\n

What are the practical problems with a wealth tax?<\/p>\n

Imagine obliging everyone to declare an accurate value for the property (and everything else) they own, along with how much they paid for it, or when it was inherited and its value at the time, and then employing HMRC<\/a> officials to undertake checks and audits on such a mass of information. <\/p>\n

Should theoretical, unrealised gains be index-linked to allow for inflation? Any allowance for, say, renovating a derelict building? What counts and what doesn\u2019t? Wedding rings? A classic car? The family business? And how about offsetting capital losses on bad investments or failing companies? It would take years to process.<\/p>\n

What could Reeves have her eye on?<\/p>\n

It could be large, uncrystallised capital gains on assets such as rental properties, bonds, pension pots and shares at death, which mostly escape inheritance tax<\/a> (IHT). It would basically be an extension of inheritance tax, itself a deeply unpopular levy (albeit few pay, and the thresholds are generous). <\/p>\n

Anything else?<\/p>\n

Capital gains on virtually anything except a main home are already taxed, as are pension pots in certain circumstances, and there isn\u2019t that much room left to hike these tax rates. Stamp duty on mansions has already been increased substantially, and of course \u201cnon-dom\u201d status was abolished by the previous government. The \u201cfamily farm tax\u201d \u2013 the removal of the IHT exemption for agricultural property \u2013 is another recent, and unwelcome, change for many. They\u2019ve even specifically taxed private jets. <\/p>\n

Beyond a certain level, heavy disincentives to save and invest start to kick in, which would be bad for the economy. For example, Neidle shows how this can depress investment: \u201cA 2 per cent wealth tax doesn\u2019t sound like much, but for someone earning an 8 per cent return on their assets, that plus existing dividend tax creates an effective rate of 60 per cent \u2013 and on a year when assets decline, an effective rate of over 100 per cent. That creates an incentive to avoid the tax out of all proportion.\u201d<\/p>\n

Tax rates set too high on savings mean that people are unduly encouraged to consume rather than make provision for their old age or any periods of unemployment, with dire long-term effects on the Exchequer and on economic growth. It might therefore not raise much revenue for long. Politically, it makes a government look desperate, as if it\u2019s constantly looking for new things to tax rather than getting the economy to grow.<\/p>\n","protected":false},"excerpt":{"rendered":"Not so long ago, when Labour was in opposition and still popular, there was no question of introducing…\n","protected":false},"author":2,"featured_media":265242,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5018,3,4],"tags":[748,393,4884,1144,712,16,15,1764],"class_list":{"0":"post-265241","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-britain","8":"category-uk","9":"category-united-kingdom","10":"tag-britain","11":"tag-england","12":"tag-great-britain","13":"tag-northern-ireland","14":"tag-scotland","15":"tag-uk","16":"tag-united-kingdom","17":"tag-wales"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@uk\/114853694846993974","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/265241","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/comments?post=265241"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/265241\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media\/265242"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media?parent=265241"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/categories?post=265241"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/tags?post=265241"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}