Good morning from New Economy Brief.
At the weekend, the Sunday Times published its ‘Rich List’: an annual inventory of the country’s very wealthiest people.
According to Tax Justice UK, the top 350 individuals and families on the list hold over £772 billion in wealth, more than the GDP of countries like Belgium, Argentina or Iceland. Meanwhile, campaigners say that the Treasury is losing out on billions by inadequately taxing the country’s very richest.
This week, we unpack the reaction to this year’s Rich List, the options available to tax wealth more, and how HMRC can avoid missing out on revenue through loopholes and tax havens.
In recent months, there has been plenty of noise about the “record fall” in UK billionaires, with the government’s abolition of the ‘non-dom’ regime given as the reason why the very rich are “fleeing” the UK. But such headlines disguise a much more significant trend of entrenched wealth inequality. In reality, this year’s list represents a tiny dip in the number of billionaires, against an otherwise soaring upward trend. In 2024, there were 165 billionaires in the UK. This year, there were 156. Yes, this is nine fewer, but in 1990 there were just 15 billionaires. When it was first published in 1989, members of the Rich List needed 6,000 times more wealth than the average Briton to make the cut. Today, that has tripled to 18,000 times. Research by the Equality Trust also finds that the UK’s richest 50 families now hold more wealth than the poorer half of the population.
Extreme wealth. Increasingly, experts are calling for an “extreme wealth line”, akin to the World Bank’s extreme poverty line – a point at which the concentration of wealth is deemed harmful to individuals, society and the environment. A report published last year by the Good Ancestor Movement and Patriotic Millionaires found that extreme wealth poses a threat across critical areas of human life by creating “a psychological and physical buffer between those with extreme wealth and the reality for the vast majority of society.” The wealthy themselves note that extreme wealth threatens democracy, with a recent poll finding that 75% of millionaires think the super rich buy political influence (we covered this research in more detail back in January). Campaigners say that more research needs to be done to determine where an extreme wealth line should be drawn, but a third of millionaires believe the line should be drawn at $10 million per person.
Growth of extractive wealth. In its new report ‘Billionaire Britain’, the Equality Trust argues that the sources of extreme wealth have become more passive and unproductive. It finds that over half of UK billionaires made at least some of their fortunes through rent extraction: via property, inheritance or financial markets. This also suggests that “the growth of the ultra rich has little to do with success for the wider economy.”
There is a growing chorus calling for higher taxes on wealth to fund much-needed spending on public services. Recent YouGov polling for Oxfam suggests this would also be popular: it found that 77% of the public would prefer increased taxes on wealth to spending cuts.
But what do we actually mean by a wealth tax? Tax Justice UK and others are calling for a 2% wealth tax on assets over £10 million – a levy that would affect just 0.04% of the population yet raise up to £24 billion per year. 78% of the public would support such a tax, according to Oxfam’s research. The tax could be annual or one-off, with different options explored in the 2020 Wealth Tax Commission’s final report. And new research by King’s College London’s Dr Ben Tippett in collaboration with Patriotic Millionaires UK finds that it could have raised £160 billion over the past 32 years – enough to have built 80 new hospitals in that time.
One of the main concerns about wealth taxes is the ease with which the super-rich can avoid paying them. The world is losing half a trillion US dollars to tax abuse per year, according to the Tax Justice Network. But much of this is within UK government control – the same research shows that the world’s top three corporate tax havens are all British Overseas Territories: the British Virgin Islands, Cayman Islands and Bermuda. What’s more, the UK is one of eight countries trying to block a UN convention aimed at improving international tax cooperation. Not only is the UK government depriving itself of funds for public services, but is also contributing to a “quarter of global tax dodging” according to Tax Justice UK, , which does particular harm to Global South countries.
Capital flight? Research indicates that higher wealth taxes have little effect on the behaviour of the rich. Interviews with wealthy Britons for a London School of Economics study found that tax considerations are not a major factor when deciding whether to move to or from the UK. Concerns about career disruption, family upheaval, the emotional toll of leaving their homes, burdensome bureaucracy, and potential damage to their reputations were all more influential. Experts also suggest that the UK could easily implement an “exit tax” – similar to those in Australia and Canada – ensuring that the UK taxes all gains that an individual makes whilst living here.
Next month’s spending review looks set to be bruising, and many are looking to the untapped assets of the wealthiest as a way not just to avoid immediate cuts to public services but also to provide extra funding for much-needed long-term public investment. What’s more, experts are increasingly sure that extreme wealth is linked to the growing global threats of climate change, inequality and the erosion of democracy. The arguments for action are strong and urgent. Yet so far, the government has resisted calls to tax wealth effectively and tackle its pernicious influence – although Deputy Prime Minister Angela Rayner did propose a range of modest taxes on wealth before the Spring Statement. But with unprecedented pressures on public services and government finances, the government may find wealth taxes unavoidable if it’s to deliver the change it promised last year.
Strong competition policy is good for business, workers and growth. A new report from IPPR proposes that a more robust Competition and Markets Authority (CMA) can drive growth, boost UK private investment and ensure “markets work for citizens, workers, startups, and wider prosperity, not just dominant incumbents.” (Check out the government’s ‘strategic steer’ on “growth-focused priorities for the CMA here.)
How do you reduce child poverty? Baroness Ruth Lister proposes a wide range of policies to reduce child poverty in a report for Compass, ahead of the publication of the government’s Child Poverty Strategy. Research from Joseph Rowntree Foundation and More in Common has also found that how you talk about the two-child limit makes a big difference to what people think of it. If removing the limit is described as a way of helping children get a good start in life, a majority support it in each of Labour's key voter groups, including 'red wall' voters.
Renewal. Social democracy journal Renewal has relaunched, with articles from Eleanor Shearer and Matt Davies on the progressive approach to AI, Alex Porter on egalitarian investments in childcare, and an interview with Andy Burnham on what the UK Labour leadership can learn from his time in office as Mayor of Greater Manchester, and more.
The BBC as a ‘public service mutual’. Common Wealth has published a report in collaboration with the Media Reform Coalition on how to democratise the BBC by introducing public representation and participation. Although it is publicly funded, taxpayers currently have no say in how the BBC operates. But with the government required to renew its Royal Charter by the end of 2027, there is an opportunity for reform. The report’s authors argue that the BBC should operate as a ‘public service mutual’ and reform the licence fee system so UK residents become BBC members.
