Politicians need the courage to reject silver bullets like a wealth tax
Student protest against cuts
(Contributor: Bowline Images (Stephen Barnes) / Alamy Stock Photo)
4 min read
Who leads in a democracy? Do politicians deliver what voters want? Or do politicians persuade voters of what they should want?
The answer is both. But the question reveals a big problem: too often these days, politicians take the easy path, avoid blunt conversation about trade-offs and arguing for policies with principle, and instead promise voters that every choice is a win-win that everyone benefits from.
On this, the public are ahead of politicians. They are suspicious of those who promise everyone will benefit from bold choices.
Action to decarbonise our economy, for example, is supposed to enhance security, create jobs, reindustrialise the country, grow our economy, produce cleaner air, and get to net zero faster. But voters in my constituency are, rightly, sceptical that the ‘green’ economy is the answer to the long-term decline in industrial production in Northern England. That is not an argument against massive investment in nuclear energy, for example, but it is a reminder that politicians must be honest about who will benefit and why. Nothing damages trust more than a win-win that never transpires.
The wealth tax debate must avoid this at all costs. Before explaining why, let me be clear about my own principles.
I think the rich have not paid their fair share in recent decades. Our economy has become anti-competitive, protecting rent-seekers above hard-working entrepreneurs who create jobs and drive growth. Too much foreign wealth is locked up in UK assets and land that contributes not a jot to UK productivity or the security and opportunity of British people. Land and property ownership remains in some places almost feudal.
The rich should be taxed at whatever level will maximise revenue to the Treasury to spend on schools, hospitals and investment in infrastructure. In this, I agree with Nadia Whittome, a strong advocate of wealth taxes who I respect immensely.
But the debate comes down to a judgement: at what level does taxing the rich cost more than it generates? Let me be clear about the stakes. Get it wrong and you harm, not help, social justice. You lose cash to spend and make our country poorer. That is bad for everyone but those it harms most are those who benefit most from strong public services and investment in infrastructure.
While I am open to ideas, I am sceptical that some of the specifics get that judgement right. The UK already has a tax on dividends that is higher than similar countries. Taxing share-buybacks is likely to stop those very buybacks. Evidence from Europe suggests a tax on assets is very unlikely to work: only three European countries still have a wealth tax and only Switzerland’s works. Spain raised €632m with theirs, and the NHS costs £500m per day.
There are things we should do. We should finally tackle the inequitable taxation of property, confronting the scandal that council tax bands have not been reassessed for decades. That harms my constituents in the North and benefits Londoners. We should look at heavily disincentivising industrial-scale land ownership that fails to provide any public or economic benefit. We should find ways to tax rent seeking, including taxing the capturing of human attention, a sorry excuse for a flourishing internet economy.
But whatever we do, we must at all costs avoid the pretence that a wealth tax will allow this country to escape its fiscal predicament. It will not. Taking away the Champagne bottles of wealthy men on yachts is seductive, but it changes nothing about the fundamentals: we are an ageing economy, our state does more than we can afford, and we must all, together, decide what we wish to prioritise and what we want our state to do.
Trust in politics is already broken. We should have a conversation about taxing wealth, assets, and land. But if we are not honest about the trade-offs, the hard choices that exist for our country in the years ahead, the public will not forgive us. What happens then will be much uglier.
Josh Simons is the Labour MP for Makerfield
