Clegg's wealth tax deserves a fair hearing

A wealth tax would be progressive and economically beneficial.

In his relaunch interview in today's Guardian, Nick Clegg calls for a new wealth tax, declaring that "if we want to remain cohesive and prosperous as a society" those of "very considerable" wealth should make an "extra contribution". To which Labour has replied: why did you vote to abolish the 50p tax rate, then? It's a reasonable debating point (the decision to scrap the 50p rate was both politically and fiscally foolish) but it's also rather disingenuous. As anyone who has read any of Clegg or Vince Cable's speeches will know, the Lib Dems have long argued that the burden of taxation should be shifted from income towards wealth (as, indeed, has the New Statesman). There is nothing inconsistent in Clegg calling for a wealth tax while also supporting the reduction in the 50p rate to 45p. You could argue that new taxes on wealth should complement, rather than replace, those on high incomes (and you'd be right), but this shouldn't blind the left to the merits of Clegg's intervention.

In Britain, wealth is concentrated in even fewer hands than income and represents a huge untapped source of government revenue. If taxes on income are to be reduced, as they must be (if one includes National Insurance, the effective starting rate is 32%), either through a significantly higher personal allowance or through a reduction in the basic rate, then taxes on wealth should be increased. As Clegg states:

In addition to our standing policy on things like the mansion tax, is there a time-limited contribution you can ask in some way or another from people of considerable wealth so they feel they are making a contribution to the national effort? What we are embarked on is in some senses a longer economic war rather than a short economic battle.

Taking their cue from John Stuart Mill, the Lib Dems rightly argue that the tax system should do more to reward merit, enterprise and innovation. As Cable put it in his essay for the New Statesman on reclaiming Keynes, taxation should be diverted away from "profitable, productive investment" and towards "unproductive asset accumulation". Wealth taxes are harder to avoid than those on income and, as a recent OECD report noted, they benefit the economy by shifting investment away from housing and into wealth-creating industries.

For now, Clegg's proposal raises more questions than it answers. Most obviously, at what rate and threshold would a wealth tax be set? But the details, we are promised, will be filled in by the time of the Lib Dem conference next month. What one can say with certainty is that, as Jonathan Portes puts it, it is both "good economics and fiscally progressive" to sharply increases taxes on the wealthy. By all means assail Clegg for his support for the government's disastrous economic strategy and its punitive welfare cuts, but don't ignore the fact that the most creative thinking on taxation is taking place in his party.

Deputy Prime Minister Nick Clegg said that those of "very considerable" wealth should make an "extra contribution". Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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The House of Lords must give EU citizens the right to remain

The government has used more than 3m UK residents as pawns. But the Lords could put a stop to it. 

Theresa May, David Davies and Boris Johnson like playing games. They are well versed in moving around a board, measuring their opponents and using pawns to lure them in.

It is a great relief, then, that the House of Lords are expected to put an end to the game the government is so desperate to play, and stop it from using people as pieces in a negotiation. 

It is my hope the Lords will do this by tabling an amendment to unilaterally secure the rights of EU nationals living in the UK, forcing the House of Commons to think once again.

It will be a welcome move by the Lords, with the country once again relying on an extra level of scrutiny to make sure the government's reckless actions do not risk ruining the lives of people who have lived here for decades.

And if the Lords do so, it will be to support the will of the people: an ICM poll after the referendum found some 84 per cent of British people support letting EU migrants stay, including 77 per cent of Leave voters. And a more recent Opinium poll found that only five per cent of Britons think EU nationals currently living in the UK should be asked to leave.

But those who lead us into the biggest negotiations of our time have said they simply cannot guarantee the rights of more than 3m EU citizens living in the UK until the rights of the 1.2m British citizens in the EU are reciprocated.

Constituents tell me they fear a situation where the government sits contemplating the different ways it can implement its policy of mass deportations.

Indeed, millions of people who are active in our communities and play a vital role in the economy are now worried about exactly that. My own constituents - and those of my colleagues in Westminster - are scared their lives will be torn apart if the government is not given a reciprocal gesture of goodwill.

Migrants make up 10.9 per cent of the workforce. These are people who have added to the sciences, to innovation, to the NHS and social care. These are people, not collateral.

Not only immoral, this approach seems fundamentally flawed. Would it not, as our Prime Minister said, be a good thing to approach the negotiations as friends with our European neighbours? Would it, therefore, not be the greatest gesture of friendship to afford EU citizens their right to reside in the UK at the soonest possible opportunity?

Already a leaked document has indicated the government’s approach making it difficult for EU nationals in the UK to acquire permanent residence is likely to mean British nationals living on the continent can expect a backlash of their own.

So, as the government prepares to quash any amendments proposed by the Lords to its bill, the onus will shift onto MPs on all sides of the house to accept this crucial amendment. 

Before the next vote Democratic Unionist Party and Conservative politicians must all ask themselves, are they happy to use people as “negotiating capital”?

Catherine West is the Labour MP for Hornsey and Wood Green.