A wealth tax would be a disaster – and an admission of total failure
Why wouldn’t Downing Street rule out a wealth tax? It isn’t difficult, you just say “we will not introduce a wealth tax” and the show moves on.
Instead, when asked about the growing clamour in Labour circles for new tax aimed squarely at the well-off, Downing Street’s spokesperson simply talked about the need for “the wealthiest in our society to pay their fair share of tax.”
I suspect the government and I are at odds over what constitutes a fair share. The top five per cent of earners (£100,000 plus) currently account for 48 per cent of revenue generated by income tax. The top one per cent (those on more than £213,000) account for 28 per cent. The idea that this group represents an under-tapped resource is laughable.
And yet, one year into a Labour government that kicked off their agenda with a £40bn tax raid we now face fiscal déjà vu; another summer dominated by speculation over which taxes will be raised in the autumn, and by how much. Ministers know how damaging that period of speculation was last summer; it led directly to depressed confidence and weak business investment.
It’s not unreasonable to expect, therefore, that if a wealth tax was off the table the Treasury would be at pains to stress as much. Instead, they sent Darren Jones to the Commons yesterday to answer an urgent question on the government’s fiscal policy, tabled by Mel Stride.
The shadow chancellor pushed the minister to rule out a wealth tax, and the minister declined to do so. Read into this what you will.
Fresh tax hikes are nailed on
Jones is a smooth operator but he did not exude confidence yesterday. Perhaps he is still traumatised from witnessing a bust-up between his two bosses; Keir Starmer and Rachel Reeves. Under a barrage of questions about future tax rises, all Jones could do was insist that these decisions will be taken in the autumn.
After last year’s mega-tax budget, the Chancellor assured us all that it was a “once in a lifetime” measure, necessary to “fix the foundations of the economy.”
As recently as a few weeks ago she was sticking to the line that she had “no intention” of coming back for more taxes, but after digging their own blackholes and with the OBR likely to downgrade growth forecasts again, fresh tax hikes are pretty much nailed on.
There are no damage-free options facing Reeves, but a wealth tax would be among the most disastrous choices she could make.