A 20% wealth tax on the mega rich would raise up to £800bn

If Nick Clegg is serious about introducing a wealth tax, here's how it could work.

Danny Alexander and Nick Clegg
Danny Alexander and Nick Clegg. Photograph: Getty Images

The government's solution to the economic crisis is swingeing cuts in public services. David Cameron claims, Thatcher-style, that cuts are the only option. Not true. There are serious alternatives.

Even Nick Clegg seems to now realise this, with his recent proposal for a wealth tax. The only problem is that he hasn't spelt out the details. There are no specifics.

So let me help out the Lib Dem leader with an idea of how it could work. A one-off graduated 20 per cent wealth tax on the richest 10 per cent of the population would raise £800bn – more than enough to create the jobs needed to revive the economy and a concrete way to avoid harmful cuts in public services.

The wealthiest 10 per cent of the population have combined personal assets totalling four million, million pounds. This is a million pounds multiplied four million times. Many of these people have multi-million pound homes (often several of them), plus private yachts and jets and vast art collections. They can easily afford a once-only 20 per cent tax on their immense wealth. Selling off one of their six houses, a Lamborghini car or a Jackson Pollack painting won’t cause them to suffer. Indeed, it is in their self-interest to pay this tax because if we slip into a new depression they will lose much more than 20 per cent of their wealth.

The 20 per cent tax rate would be the average. People at the less rich end of the richest 10 per cent would probably pay a wealth tax of only one per cent, while those at the very richest end might pay 30 per cent. Everyone would be assessed individually. No one would be made to pay in ways that caused them hardship. The tax would be assessed and collected in the same way as other taxes, such as income tax and capital gains tax. People could be given the option to defer payment until after they die, so it would become a tax on their estate.

By raising a massive £800bn, this tax would be enough to pay off the entire government deficit more than four times over - or it could be used to clear most of the national debt. A reduction in the national debt would dramatically cut the government’s huge debt interest payments, which amount to nearly £50bn a year. This vast sum of money would be better spent on schools, hospitals, pensions and job creation.

Alternatively, and even more useful in terms of reviving the economy, the £800bn (or part of it) could be used to fund the proposed Green New Deal. Modelled on Roosevelt’s 1930s New Deal, which got America back to work and helped end the Great Depression, the Green New Deal would create hundreds of thousands of green jobs in energy conservation, renewable energy, public transport and affordable homes; simultaneously helping remedy climate destruction and kick-starting economic recovery.

It could ensure that Britain leads the world in sustainable economics and green technologies, opening up new export markets and boosting our economic revival for many decades to come.

According to a YouGov poll in June 2010, 74 per cent of the public favour a one-off tax on the richest people in Britain. Only 10 per cent oppose it.

With great wealth comes great responsibility. The mega rich have the capacity and responsibility to help the country out of the mess we are in. They benefited disproportionately from the boom times. Now that times are tough they should contribute disproportionately to get the British economy back in shape.

Put bluntly: The super rich have a patriotic duty to help save the economy by paying more tax. If they love Britain, they will be willing to do this, in order to help us win through the current economic crisis.

Contributing more tax is in the interest of those with huge wealth. If the economy fails, their losses will be even more than the increased tax they are being asked to pay. By giving more to the exchequer they would be doing the morally right thing for the country and its citizens. Moreover, by helping save the economy they would also save most of their own riches. It’s enlightened self-interest. Over to you, Nick Clegg.