Could a wealth tax fix our broken economy?

wealth coins

Britain is broke, for the second time in 12 years our economy has hit the buffers but this time the noises coming out of Government suggest that it is the wealthy who will pay to fix it. This would be in contrast to the austerity policies of the coalition, Cameron and May governments.

A recent You Gov poll found 61 per cent of the British public supported a wealth tax on individuals with assets worth more than £750,000, excluding pensions and the value of their main home.

Former Head of the Civil Service Gus O’Donnell said yesterday “there may be more of an appetite for a wealth tax than you might have thought”.

The goals of a wealth tax

The IFS start with the fact that


and that ….

wealth old 2

Wealth is increasingly associated with being old

wealth old

and concentrated in housing and pensions


Many people may have wealth tied up in assets but little income.

wealth 3

There are very few countries in Europe which still have meaningful wealth taxes and this reflect the historical fact that wealth taxes tend to be introduced after a major crisis. There have been few major crisis of late and the last one was dealt with through cuts in public services and increases in taxes on spending which hurt the poor most.

At an abstract level, a wealth tax seems to be aligned with the goal of a fairer tax system, but clearly it is a tax that will present practical difficulties to introduce.

Reasons we don’t have a wealth tax (on the living)

A large part of the IFS presentation focused on the practicalities of introducing and maintaining the taxes. In particular issues of avoidance (trusts, emigration, borrowing), valuation and liquidity.

But despite the issues surrounding a wealth tax, the IFS pointed to recent public opinion polls that suggest that we are ready to see a wealth tax in Britain for the first time (the land value tax introduced in 1909 was repealed ten years later when it was found that it was costing more to administer than it collected). The last time the UK looked at a wealth tax was under Harold Wilson’s Government in 1974.

The IFS will be looking at a final report on whether Britain should have a wealth tax later in the year.

Gus O Donnell’s arguments for considering the hard problem are

  1. That with Covid-19 we have a “clear burning platform” for change
  2. We have a Government with a big majority
  3. There is a desire withing Government for genuine reform
  4. This can only be done at a time (like now) when we have a popular Treasury

While Covid’s health impact has been on the elderly and males, the economic impact is likely to be on the young and females. In terms of “least bad options” , tax increases and especially taxes that don’t hurt those impacted, appear  to score well.

A tax on the living or a tax on the dead?

The meeting concluded by thinking about inheritance tax, a tax that has fallen into disrepute,

O’Donnell pointed out that the council tax which was brought in to replace the hated poll tax started well and has also fallen into disrepute.

According to O’Donnell, introducing a new tax (or a package of new taxes) would be easier than to reform a broken tax (where the losers would shout louder than the winners).

Whatever the solution that the Treasury choose, it is clear that it’s going to be tough. In a modern way of living, the new taxes we pay should respect the way we want to live our lives. Right now our tax system doesn’t look like it pays that respect.

Now is the time for us to talk about  the way we fund our way out of the pandemic and this was a good start to that debate.


Gus O’Donnell





About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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4 Responses to Could a wealth tax fix our broken economy?

  1. DaveC says:

    How did the Roman Empire fund it’s way out of trouble?


    The idea that the ‘wealthy’ can meaningfully pay more tax to fund the country out of its troubles is wilful ignorance.
    Those able to pay the most are already contributing a lot, and are those most able to pay more increasingly move to somewhere like Singapore.
    This is the same old argument again and again.

    This is ‘news’ to placate the gullible.

    The reality will be making those who can pay, but unable to meaningfully avoid, pay more.

    I expect all those who bought a BTL for a meaningful income from their savings (due to low interest rates due to failed monetary policy) can expect another punishing rise in taxes on their ‘wealth’ via a new council tax.

    Print print print, with token punishments for the ‘wealthy’… and the very wealthy who already pay the vast proportion left alone lest they leave…

  2. Mike Post says:

    Hilarious that the paper at one point confuses O’Donnell with McDonnell and pubic with public! Freudian slips?

    • henry tapper says:

      Thanks for pointing out the typos – when you are doing 2000 words before breakfast you do get some – but hope that you got the gist.

  3. ConKeating says:

    I am not at all surprised that the reaction to this proposals should be negative among this audience. I think we can expect an avoidance industry to come into being. I also have reservations over the way in which pensions wealth has grown and suspect a valuation issue there. I would also expect to be captured by such a tax. Having said all this, such a tax is a necessity if we are ever to address the many facets of inequality that blight our society and .economy. Those problems are now pressing and in the wake of Covid, highly visible. Left unaddressed, we should expect increasing lawlessness. Enlightened self-interest should have the wealthy realise that their wealth depends upon the rule of law. Our police force may have come into existence to protect the wealthy from an underclass but that is no longer the case.
    If the wealthy wish to emigrate to Singapore or other parts, I wish them luck.


    3adressed,wecanexpect anincreasinglylawless

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