There are problems with wealth taxes but avoidance, for once, isn't one of them

Taxing illiquid assets is, well, taxing.

Fraser Nelson, editor of the Spectator, has a column in today's Telegraph arguing that George Osborne needs to learn the lesson that "wealth taxes simply don't work". He writes:

The problems involved were fairly basic. Do you tax people’s worldwide wealth? If so, those much-needed businessmen will stay away. Do you tax only British wealth? Then people will move their investments abroad. The Treasury warned Healey that the proposed wealth tax was “political dynamite” – and not in a good way. At a time when Britain was in a desperate economic state, it risked dragging the country down further still. Healey gave up, saying he could not find any wealth tax that would be worth the political hassle.

This is disappointing, because Nelson is largely duelling with straw men here. It is indeed true that a tax on overall wealth could well lead to tax avoidance by the relatively simple tax planning strategy known as "keeping your cash in a Swiss bank account". The thing is, that isn't actually that much of a problem. After all, people avoid income tax as well, yet somehow we struggle on.

The measure for a tax is never "will everyone pay it rather than put their energy into avoiding it?", but "will enough people pay it to make it worth our while?" That's a different calculus, and one which Nelson doesn't address.

But the real disappointment is that, for all Nelson talks about the rising support for a wealth tax, he neglects to mention that most of that support is for taxing a very specific type of wealth: property. It's a shame, because that sort of tax – a "mansion tax", a "land value tax", or whatever form it takes – has its own set of problems which are under-discussed.

The important thing to note about property taxes do is that they completely fix the problems Nelson is concerned about when it comes to wealth taxes in general. You can keep money overseas, but a house in Britain is rather stuck where it is. To the extent that such a tax it increases the cost of living in Britain, it may keep wealthy foreigners away – but only those who haven't already been put off by the extraordinary cost of the sort of houses wealthy foreigners buy.

The thing is, land and property taxes aren't the golden bullet that many on the left like to think, for the key reason that houses aren't particularly liquid assets.

We've all heard the sob-story of the elderly pensioner who could be forced to sell the house he's lived in all his life to pay the land value tax (although we rarely hear it alongside its counterpart, the elderly pensioners who are being forced to moved out of houses they've lived in all their lives because of benefit cuts), but the key concern with such a tax is related to that problem.

If you are taxed, say, 20 per cent of your cash holdings, you pay that tax by handing 20 per cent of your cash to HMRC. If you are taxed on 20 per cent of the value of your land, you can't just hand a wing of your house over to the taxman. You either have to have the cash equivalent available, or sell your house.

Taken individually, that's not the end of the world – few will cry too hard if the odd landowner has to sell a few acres to pay the bill. The problem comes if the tax is set high enough that that sort of sale becomes commonplace.

If too many people end up trying to sell their mansions or land at the same time, then you're stuck with a sadly inevitable collapse in the price that land can go for. That's not just unfair – it means you would be taxing people on assets which are no longer worth what they were when you assessed them – it's also staggeringly inefficient. A well-designed tax should not encourage a fire-sale of assets.

These problems aren't insurmountable, by any means. But they do give pause for thought when considering the truely radical proposals like Peter Tatchell's plan to set the wealth tax rate at 20 per cent. Although back-of-the-envelope calculations suggest such a tax would generate truly staggering revenue, a more modest rate would be a better idea – at least at the start.

This mansion, in Kensington, London, was once the most expensive in the world. What'd the tax be? Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Why Clive Lewis was furious when a Trident pledge went missing from his speech

The shadow defence secretary is carving out his own line on security. 

Clive Lewis’s first conference speech as shadow defence secretary has been overshadowed by a row over a last-minute change to his speech, when a section saying that he “would not seek to change” Labour’s policy on renewing Trident submarines disappeared.

Lewis took the stage expecting to make the announcement and was only notified of the change via a post-it note, having reportedly signed it of with the leader’s office in advance. 

Lewis was, I’m told, “fucking furious”, and according to Kevin Schofield over at PoliticsHome, is said to have “punched a wall” in anger at the change. The finger of blame is being pointed at Jeremy Corbyn’s press chief, Seumas Milne.

What’s going on? The important political context is the finely-balanced struggle for power on Labour’s ruling national executive committee, which has tilted away from Corbyn after conference passed a resolution to give the leaders of the Welsh and Scottish parties the right to appoint a representative each to the body. (Corbyn, as leader, has the right to appoint three.)  

One of Corbyn’s more resolvable headaches on the NEC is the GMB, who are increasingly willing to challenge  the Labour leader, and who represent many of the people employed making the submarines themselves. An added source of tension in all this is that the GMB and Unite compete with one another for members in the nuclear industry, and that being seen to be the louder defender of their workers’ interests has proved a good recruiting agent for the GMB in recent years. 

Strike a deal with the GMB over Trident, and it could make passing wider changes to the party rulebook through party conference significantly easier. (Not least because the GMB also accounts for a large chunk of the trade union delegates on the conference floor.) 

So what happened? My understanding is that Milne was not freelancing but acting on clear instruction. Although Team Corbyn are well aware a nuclear deal could ease the path for the wider project, they also know that trying to get Corbyn to strike a pose he doesn’t agree with is a self-defeating task. 

“Jeremy’s biggest strength,” a senior ally of his told me, “is that you absolutely cannot get him to say something he doesn’t believe, and without that, he wouldn’t be leader. But it can make it harder for him to be the leader.”

Corbyn is also of the generation – as are John McDonnell and Diane Abbott – for whom going soft on Trident was symptomatic of Neil Kinnock’s rightward turn. Going easy on this issue was always going be nothing doing. 

There are three big winners in all this. The first, of course, are Corbyn’s internal opponents, who will continue to feel the benefits of the GMB’s support. The second is Iain McNicol, formerly of the GMB. While he enjoys the protection of the GMB, there simply isn’t a majority on the NEC to be found to get rid of him. Corbyn’s inner circle have been increasingly certain they cannot remove McNicol and will insead have to go around him, but this confirms it.

But the third big winner is Lewis. In his praise for NATO – dubbing it a “socialist” organisation, a reference to the fact the Attlee government were its co-creators – and in his rebuffed attempt to park the nuclear issue, he is making himeslf the natural home for those in Labour who agree with Corbyn on the economics but fear that on security issues he is dead on arrival with the electorate.  That position probably accounts for at least 40 per cent of the party membership and around 100 MPs. 

If tomorrow’s Labour party belongs to a figure who has remained in the trenches with Corbyn – which, in my view, is why Emily Thornberry remains worth a bet too – then Clive Lewis has done his chances after 2020 no small amount of good. 

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.