A one-off wealth tax is radical but astonishingly popular, says John Underwood

For over thirty years, the Glasgow Media Group has linked the analysis of media content with the processes by which audiences receive and interpret messages.  It has worked across a range of disciplines and well beyond the normal academic boundaries of communication studies.  It is not surprising, therefore, that the Media Group should now turn its attention to media coverage of the national economic “crisis” and the need for cuts.

In an article in today’s Guardian, Professor Greg Philo, Research Director and one of the leading lights of the Glasgow Media Group asks why – amidst all the discussion of the deficit – there has been so little discussion in the media of how much wealth we have in Britain.  The truth, of course, is that we are the sixth richest nation on earth with total personal wealth of £9,000bn. As Philo points out, this sum dwarfs the national debt.

Naturally, this wealth is overwhelmingly concentrated at the top.  The richest 10% of Britons own £4,000bn, an average of £4m for each of the richest households.  The poorest half own less than 10% of Britain’s wealth between them.

Most of the wealth owned by the richest 10% is held in property and pensions that would be relatively easily taxable.  So Philo proposes a one-off tax on the very wealthy to wipe out the national debt.  A simple 20% would do the trick.  It would raise £800bn (the size of the national debt) and since much of the deficit is made up of interest on the national debt it would certainly help there too.

Now some will say that this is predictable stuff coming from the Glasgow Media Group.  These were the people who brought you Bad News, More Bad News, Trade Unions & The Media, War & Peace News and more recently Market Killing.  They are, in effect, the usual suspects.  But the Media Group has also established an enviable, international reputation for backing its publications with copper bottomed research and its work on the national debt is no exception.

The Media Group commissioned a YouGov poll of almost 2200 people to compare attitudes towards a one-off wealth tax, a rise in VAT and cuts in public expenditure.  The poll findings make fascinating reading and can be accessed in full from the Glasgow Media Group website.

They show a remarkable 75% in favour of a one-off wealth tax and just 10% opposed.  Perhaps most remarkably these figures are virtually unchanged across all demographics.  It doesn’t matter whether you are male or female, young or old, working or unemployed the figures barely change.  It doesn’t even matter whether you are rich or poor.  75% of ABC1s support a one-off wealth tax compared with 73% of C2DEs.  These are extraordinary polling figures given that there has been no public discussion of this proposal.  By comparison, while the same poll showed some support for the need for spending cuts (with men significantly more in favour than women) the sample was split on the need for an increase in VAT (41% in favour, 40% against).

To be clear, there are arguments for and against a one-off wealth tax.  On the one hand it would help re-circulate some of the money that currently resides in inflated property values and it would stimulate growth but on the other hand it may be difficult to calculate and collect.

In a sense this is beside the point. Lest we forget, there is now a coalition government that proposes to stay in power until 2015 and there is no chance of this or anything like it becoming government policy.

The important point is this.  Philo’s one-off wealth tax proposal is as radical as it gets.  It is so radical he had some considerable difficulty finding any national newspaper who would publish his article – even in the August “silly season”.

Yet this radical proposal is supported by 75% of over 2,000 people questioned in a YouGov poll.  It is an astonishingly popular proposal and it carries a message for Labour’s leadership hopefuls.  It’s time to think big and bold.  The contenders could do worse than spend a few minutes perusing the figures on the Glasgow Media Group website.

John Underwood is a former director of communications of the Labour Party

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18 Responses to “A one-off wealth tax is radical but astonishingly popular, says John Underwood”

  1. Richard Nabavi says:

    Yes, telling people there is a magic money machine which can spew forth endless amounts of cash and allow the government to continue doling out freebies is popular. And a former Director of Communications of the Labour Party takes this seriously!

    Now shall we get back to the real world?

  2. David Boothroyd says:

    A wealth tax is far from radical. They are around in various forms in other European countries (France’s annual tax is the most notable). In Britain there was a Green Paper on the subject published 36 years ago this month (Cmnd. 5704) and the idea was in the Labour manifesto in October 1974: “The next Labour Government will introduce an annual tax on wealth above £100,000.”

    But the big problem is shown by what happened after that. The Government certainly wanted to implement the policy and involved Parliament by setting up a Select Committee to look into the arrangements. The reports from the Select Committee showed quite clearly how complicated it was to assess wealth and how easily it was moved out of the reach of the Customs and Excise. Although government buildings in Plymouth were allocated for staff to administer it, the Government had to admit defeat in November 1976.

    There is nothing that indicates that the practical problems with a wealth tax have diminished since 1976 and everything to indicate that they would be even more acute (especially with a one-off tax).

  3. John Barrett says:

    Good post. The budget deficit was caused by a drop in tax revenues due to the onset of the recession. So it seems obvious that higher taxes are the solution to decreasing the deficit (if that is even what is required – and it probably is *not* a good idea to do it at the moment).

    Even before the recession the rising inequality in wealth was causing severe problems for the poorer half, e.g. in housing. So why is raising taxes off the agenda? Let’s put it back on.

  4. james says:

    David says: “There is nothing that indicates that the practical problems with a wealth tax have diminished since 1976”

    No, there have been no technological advances whatsoever that could assist the enforcement of the law 😉

  5. Margaret Handford (Mrs) says:

    I totally agree with this idea. When we have the nerve to tax folk earning only £12k per annum, why on earth should there be any qualms about taking thousands of pounds off people who will hardly miss them? I say this with the caveat that this does not mean we should not examine very carefully the fairest and most sensible ways of allocating all the money we all contribute to the national coffers on an annual basis

  6. Luis Enrique says:

    “spot on” Sunny? Have you given much thought to how much this would work?

    never mind the probably of measuring wealth in the first place.

    Just look at the numbers. Say it applies to the top 10% who own £4000bn. So you want to raise £800bn. Now obviously these people can’t pay that money out of their income (because the sum is many many times their post-tax income). So they have to sell their property and other assets to raise the cash.

    But who can they sell it to? They can’t sell anything to anybody else in the top 10% because that will just mean assets and money swap hands and nobody within the top 10% actually raises any money. I guess they can either sell to foreigners, or they’ve got to find buyers amongst the poorest 90% of the UK. And where are we going to get the money? £800bn is also many many times our post-tax incomes too. Do you think there’s enough money kicking around amongst the poorest 90% of this country so that we can find £800bn to buy assets off the top 10% so that they can pay their taxes?


  7. Luis Enrique says:

    NB above based on 20% tax applied to wealth of top 10%.

    Think about what would happen to the value of those assets in a fire sale. As asset prices fall, the amount of money you raise by selling them falls. If the 20% is applied to assessments of initial value, then one the sales start they’ll have to sell far more than 20% of their assets to raise the money.

    If you like the foreigners route, think about the long-term economic (and political) consequences of putting £800bn of UK income generating assets in the hands of foreigners – well, the actual quantity of assets would be higher than that once prices fall – who will be receiving rents / profits from those assets in perpetuity.

  8. Luis Enrique says:

    75% of ABC1s support a one-off wealth tax

    extraordinary! what proportion of UK citizens are ABC1s? I wonder, if the tax was implemented, what proportion of their assets these people would have to sell to pay the tax. I bet they think it wouldn’t hit them.

    Does anybody know what the top 10% cut off is? How much wealth do you need to own to get in that band? I presume we’re including the house you live in?

  9. james says:

    Luis, it is obvious that the 20% rate has been chosen for provocational purposes. Wealth taxes do exist in other European countries, though at much lower rates – usually around 1% rather than the 20 suggested by Philo.

  10. Luis Enrique says:

    I’m sorry – it wasn’t obvious to me that this professor promoting the idea in a newspaper chose a rate that was supposed to be self-evidently absurd.

    an odd rhetorical technique

  11. james says:

    Philo obviously came up with a rate that would wipe out the deficit since this is the priority of the coalition government.

  12. graham says:

    The problem for Britain, and many other developed nations, is that we are living beyond our means. We are paying ourselves in total more than we are collectively earning.
    The most painless way to resolve that is by currency devaluation. We can achieve this by printing the money to pay of our debts. The Tory solution is to make people unemployed.
    To protect the poor we also need to restore the income distribution back to how it was before Margaret Thatcher came to power. I suggest we do this by increasing the minimum wage.

  13. Jack says:

    I don’t agree with a one off wealth tax, but I do firmly support shifting the burden of tax off of income and onto wealth. Inheritance, property, land, assets, shares, etc.
    A one off tax would do nothing to encourage fiscal disclipline. An annual budget surplus for a decade of two is the best way to clear the debt. But that doesn’t have to mean cuts, just the integrity to balance the books year in year out.

  14. Rob Carver says:

    ” The richest 10% of Britons own £4,000bn, an average of £4m for each of the richest households.”

    How is this possible? 10% of 60 million is 6 million; 6 million x 4 million is £24trn not £4trn.

    According to more accurate sources the average wealth held by the top 10% of the UK population is £176,000; or about £1trn. This is roughly the same as the UK national debt so it would actually require a 100% one off wealthtax to solve the deficit

  15. Paul Mackilligin says:

    We can argue over the details but what strikes me is the fact that 75% of the people who would be paying this proposed tax are in favour of it. They would rather lose 20% of their wealth than see public services cut to the extent that is currently being planned. I find that rather impressive.

    Surely some version of this idea can be made to work. It would really only reduce the gap between rich and poor by a very modest amount. Other European countries (France, Switzerland, Netherlands, Norway) have an annual wealth tax of about 1% or so for their richest citizens. They do alright don’t they? Their economies are hardly crippled. A one-off 20% may or may not be workable but I’m sure the basic idea can be made to work. Given the huge popularity of the idea, if a government will not implement it, one has to ask why not.

  16. Dave says:

    “Given the huge popularity of the idea, if a government will not implement it, one has to ask why not.”

    Because after its short-term gains are achieved — gains, by the way, that will be much smaller than expected due to liquidity effects — the subsequent long-term losses will more than wipe them out.

    A thing may poll well but that does not mean it’s an ideal economic course of action.

  17. Martina Weitsch says:

    Why don’t we have a referendum on this proposal?

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