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.

Arsène Wenger. Credit: Getty
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My biggest regret of the Wenger era? How we, the fans, treated him at the end

Arsenal’s greatest coach deserved better treatment from the Club’s supporters. 

I have no coherent memories of Arsenal before Arsène Wenger, who will leave the Club at the end of the season. I am aware of the Club having a new manager, but my continuous memories of my team are of Wenger at the helm.

They were good years to remember: three league titles, seven FA Cups, the most of any single manager in English football. He leaves the Club as the most successful manager in its history.

I think one of the reasons why in recent years he has taken a pasting from Arsenal fans is that the world before him now seems unimaginable, and not just for those of us who can't really remember it. As he himself once said, it is hard to go back to sausages when you are used to caviar, and while the last few years cannot be seen as below par as far as the great sweep of Arsenal’s history goes, they were below par by the standards he himself had set. Not quite sausages, but not caviar either.

There was the period of financial restraint from 2005 onwards, in which the struggle to repay the cost of a new stadium meant missing out on top player. A team that combined promising young talent with the simply bang-average went nine years without a trophy. Those years had plenty of excitement: a 2-1 victory over Manchester United with late, late goals from Robin van Persie and Thierry Henry, a delicious 5-2 thumping of Tottenham Hotspur, and races for the Champions League that went to the last day. It was a time that seemed to hold the promise a second great age of Wenger once the debt was cleared. But instead of a return to the league triumphs of the past, Wenger’s second spree of trophy-winning was confined to the FA Cup. The club went from always being challenging for the league, to always finishing in the Champions League places, to struggling to finish in the top six. Again, nothing to be sniffed at, but short of his earlier triumphs.

If, as feels likely, Arsenal’s dire away form means the hunt for a Uefa Cup victory ends at Atletico Madrid, many will feel that Wenger missed a trick in not stepping down after his FA Cup triumph over Chelsea last year, in one of the most thrilling FA Cup Finals in years. (I particularly enjoyed this one as I watched it with my best man, a Chelsea fan.) 

No one could claim that this season was a good one, but the saddest thing for me was not the turgid performances away from home nor the limp exit from the FA Cup, nor even finishing below Tottenham again. It was hearing Arsenal fans, in the world-class stadium that Wenger built for us, booing and criticising him.

And I think, that, when we look back on Wenger’s transformation both of Arsenal and of English football in general, more than whether he should have called it a day a little earlier, we will wonder how Arsenal fans could have forgotten the achievements of a man who did so much for us.

Stephen Bush is special correspondent at the New Statesman and the PSA's Journalist of the Year. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.