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A wealth tax can help deliver real change for the common good

The Green party's leader Natalie Bennett announces a new policy: an annual wealth tax to combat inequality in Britain.

The Green Party is today launching a call for a wealth tax. Photo: Getty
Inequality in Britain today has many faces.

It’s the school pupil, fleeing the bedroom that she has to share with a younger sibling in an overcrowded home, struggling to do her homework in a noisy, crowded library in the one-hour rationed computer slot available, while her classmate sits in her private study in her multimillion-pound family home, using the latest iPad with the help of a private tutor.

It’s the young man, who did everything right, got the 2:1 university degree, the first in his family, forked out for the expensive Master’s, who’s now working in a pub on weekends to fund another unpaid internship, while his fellow intern is relying on the bank of Mum and Dad, free to socialise and network in every spare moment.

The gaps are getting bigger and bigger. The financial crisis, quantitative easing, this government’s harsh and unfair cuts to benefits – the whole approach of austerity - are pushing Britain further in this direction, past Twenties levels of inequality and on towards Victorian levels.

And the key trend of the past decade – both here in Britain and around the world is that the super-rich have got richer. The 1 per cent have been soaring away from the rest, while the middle stagnates and the poorest fall backwards. That’s what led Thomas Picketty to call for a global wealth tax, and what’s left the poorest 20 per cent of the British population living in conditions closer to their compatriots in Slovenia and the Czech Republic than France and Germany.

The gap between rich and poor, and the super-rich and the rest, is a social problem. And it’s an economic problem – the super-rich can’t keep an economy going with purchases of yachts and gold-plated taps. When you’ve got the IMF and World Bank (hardly institutions known to their commitment to fairness) expressing concern about the impacts of inequality, it’s clear there is a problem.

It’s a problem on a global scale, but we can start to tackle it here in Britain, the seventh most unequal country in the OECD, where the problem is visible and obvious from the oligarch-ridden streets of Chelsea to the struggling high streets of Northern England.

That’s why the Green Party is today launching a call for a wealth tax.

We’re proposing a 1 per cent-2 per cent annual tax on the richest 1 per cent of people in Britain – those with wealth of over £3m. They’re people doing really well from our society: the richest 1 per cent of people take 13 per cent of our country’s total income.

It’s part of a package of measures that will be included in our fully costed 2015 manifesto, which will also include a call for a Living Wage, pay ratios for companies so that the highest-paid worker isn’t paid more than 10 times the lowest paid, a land value tax to replace council tax and business rates, a more progressive income tax system and a raising of the corporate tax rate back towards global standards. 

Our wealth tax would affect about 300,000 people, and the annual cost to them would be £30,000 to £60,000. Most of them would comfortably afford it; assuming a 5% return on their wealth, £150,000, they’d only be paying around a 20% effective tax rate. For the relatively small number in this group with a single illiquid asset, such as a house, and relatively low income, special arrangements could be made to put off tax payments.

Such a wealth tax would raise £21bn to £43bn a year – about 15% of the cost of the NHS: a significant sum that wouldn’t transform the national budget, but would certainly have a significant impact on it.

This is a relatively new idea in Britain, but not globally – France, Spain, Iceland, the Netherlands, Norway and Switzerland all have wealth taxes, and there’s evidence of public support here from a YouGov survey in 2010 that found 74 per cent of people were in favour of a wealth tax at ten times the rate we’re proposing.

We need real change in Britain, to really start to rebalance our society so that it works for the common good, not just the 1 per cent. A wealth tax is a measure who’s time has come, and I’m proud that the Green Party, with its growing support and growing membership, is putting it on the national agenda.

Natalie Bennett is leader of the Green party.

 

See more:

The Greens may become a force to be reckoned with (21 July 2014)

Without older voters the Greens have little hope (22 July 2014)