Survival of the Richest. Last week, on the opening day of the World Economic Forum in Davos, Oxfam published its report “Survival of the Richest: How we must tax the super-rich now to fight inequality”. The report (backed by Bill Gates) highlighted how the wealthiest 1% “grabbed nearly two-thirds of all new wealth… created since 2020, almost twice as much as the bottom 99 percent of the world’s population”. It calls for a “wide-ranging increase in taxation of the super-rich”, specifically an annual wealth tax of up to 5 percent on the world’s billionaires and multi-millionaires, which Oxfam says could raise enough money to lift 2 billion people out of poverty, deliver a plan to end hunger, and deliver healthcare to low- and lower middle-income countries. However, Oxfam is not alone in its calls for higher taxes on the wealthy. As the cost of living crisis continues, the gap between the richest and poorest grows, and climate catastrophe becomes reality, more and more seem to be turning to wealth taxes as a possible solution to the world’s, and the UK’s, economic problems. While momentum for the idea grows among inequality campaigners, they are certainly not alone. Economists, journalists, and policy experts across the political spectrum are starting to consider wealth taxes as a viable solution.
The proposals. Those who call for higher taxes on wealth agree that taxation is currently too heavily concentrated on income from work and not on assets or income acquired outside of work (for example, through inheritance). However, taxation of wealth comes in a variety of forms. In the UK, current forms of wealth taxes generally tax transfers of wealth such as inheritance tax and capital gains tax. Some, such as centre-right think tank Bright Blue, focus on the need to reform such taxes or to make it easier for those taxes to be avoided or evaded. Others call for the introduction of taxes on stocks of wealth, as opposed to transfers. These come in the form of annual or “one-off” wealth taxes.
The politics of wealth taxes. Prime Minister Rishi Sunak has been under continuous pressure to cut taxes throughout (and leading up to) his premiership and, together with his Chancellor, Jeremy Hunt, has been accused of being responsible for “the highest tax burden since World War Two”. However, Sunak has repeatedly demonstrated that he is unwilling to share that “burden” with those whose income stems from wealth rather than work. Other than lowering the threshold at which people pay capital gains tax (doing little to increase taxes on the very wealthy), Sunak has not introduced or increased any wealth taxes and in his role as Chancellor in 2021, rejected calls for an emergency wealth tax to fund pandemic spending.
Drivers of declining affordability. The Joseph Rowntree Foundation’s (JRF) new report identifies falling social housing stock, the decline in housing subsidies and the removal of rent controls in 1989 as key drivers of declining housing affordability since 1979 (See the Tony Blair Institute’s Ian Mulheirn points to Twitter thread and blog explainer).
Lack of green industrial strategy means “the world is giving up on Britain”. Tony Danker, Director-General of the Confederation of British Industry has once again warned about the government’s lack of industrial strategy, in his speech at Davos. Danker argued that “the overwhelming view of CBI members is that Rishi Sunak has dropped the ball on the green energy transition,” and losing out investment as companies look elsewhere to capitalise on opportunities in the US and EU. He also warned against mass deregulation as the UK pursues regulatory divergence from the EU.
Carbon offsetting exposed. A 9 month investigation of Verra, “the organisation at the very heart of the carbon offsetting industry”, found that more than 90% of rainforest carbon offsets are “worthless” and “do not represent genuine carbon reductions”.
New round of leveling up funds. The Government has announced a further £2.1bn of funding for local infrastructure through Round 2 of the Levelling Up Fund. Local authorities have to apply for competitive pots of funding (See the Institute for Government’s explainer of why this process is “inefficient”).
Momentum building on social tariffs. Jonathan Brearly, CEO of Ofgem, gave a briefing on the energy market this week where he backed calls for a social tariff (a discounted rate for energy bills for the poorest households) and called for a transition towards “more homegrown, secure, and renewable sources of energy supply”. Eon and EDF energy recently joined fuel poverty campaigners in calls to introduce a ‘social tariff’, as well as decoupling the cost of gas from electricity prices and accelerating energy efficiency of UK homes.
Labour’s position on energy. Sir Keir Starmer pledged at Davos that a future Labour government wouldn’t open any new oil and gas fields. New polling shared with the New Statesman also found that there is broad support amongst voters for plans to create a publicly owned renewable energy company - such as Labour’s proposals for Great British Energy (74% supported the idea). More than half (51%) also supported their plan to invest £28bn a year into clean energy until 2030.