The opposition has made it clear that, though it plans to close tax loopholes to raise a reported £4bn in revenue, a Labour government would not introduce taxes on more affluent Britons.
“We have no plans for a wealth tax,” Rachel Reeves, the shadow chancellor, told the Sunday Telegraph in August. “We don’t have any plans to increase taxes outside of what we’ve said. I don’t see the way to prosperity as being through taxation. I want to grow the economy.”
Not long after that, on stage at the FT Weekend Festival, Reeves had the decidedly uncomfortable experience of being both lauded for protecting the newspaper’s wealthy subscribers and heckled by protesters waving a “wealth tax now” banner.
New analysis shared exclusively with New Statesman Spotlight reveals that a stark gender wealth gap risks the “sustained” economic growth that Labour is aiming for under its first national mission.
A gender wealth gap of 28 per cent between men and women aged 35-44 rises to 42 per cent on average by the age of 64, according to analysis of the Office for National Statistics (ONS) Wealth and Assets Survey by the Women’s Budget Group (WBG) think tank. On average, men have £92,762 more in total wealth than women – a gap of 35 per cent. The data also revealed a 90 per cent gender gap in private pension wealth, with men on average having £83,879 more than women, and a 177 per cent disparity in the average value of UK shares held by men and women.
And while, for most men, a private pension is their main source of wealth, women’s wealth is more precarious and less independent. On average more than 50 per cent of a woman’s wealth comes from property, household possessions and vehicles typically shared with other members of her household. The data analysed covered April 2018 to March 2020, and included private pension wealth, financial wealth, physical wealth (household possessions and vehicles) and property wealth.
“Wealth inequality is gendered because of the unequal distribution of unpaid care and structural discrimination against women,” says the WBG’s report, released today.
One of the main reasons for the gap is motherhood, Mary-Ann Stephenson, WBG director, told Spotlight. “You see the gap start to widen when women start looking after children. It’s the point at which the pay gap and earnings gap gets bigger.” Women tend to reduce work because of the costs of care. There is evidence too, Stephenson added, that when a heterosexual couple “spends down” their savings because of care costs, it is often the woman’s savings that go first.
[See also: What is the point of inheritance tax?]
Wealth taxes are not necessarily the first priority for a government looking to promote a gender-equal economy, but they are “one of the tools in a toolbox”, said Stephenson, alongside addressing wider inequalities. “It’s about redistributing the gap after it emerges,” she added, as well as preventing the inequality happening in the first place. “Unpaid care is at the heart of women’s economic inequality,” she added. “That has all sorts of knock-on effects. Children are not poor by themselves – they are poor because their mothers are poor.”
The WBG is calling on the government and other political parties to introduce wealth taxes to help close these gaps. “Wealth itself is not directly taxed in the UK,” explains the WBG’s report. “Also, capital gains that result from holding wealth are taxed at a lower rate than income from employment. This under-taxation increases income and wealth inequality, reinforcing existing disparities and gender gaps. The Women’s Budget Group has argued that wealth tax is a feminist issue because it can help to reduce gender wealth disparities and, at the same time, raise public revenue to strengthen our social infrastructure.”
As we head closer to a general election, will support for wealth taxes grow? In February a YouGov poll found that around three-quarters of respondents supported a wealth tax, with even more in favour when the threshold on paying that tax is high.
“Sunak flirting with scrapping inheritance tax seems to be going against the tide,” said Stephenson, noting trends among think tanks, economists and other groups calling for the introduction of fairer taxes on wealth. Getting rid of inheritance tax “would massively increase wealth inequalities”, she added, with women more likely to lose out from the drop in revenue for public services.
Tax Justice UK, a campaign group, and Patriotic Millionaires UK, a network of high net-worth individuals, are also supporting the WBG’s call. Is it a bit rich for wealthy Britons to urge political parties to just let them pay more taxes? Julia Davies, who has been funding environmental projects since selling her stake in the outdoor equipment company Osprey Europe, certainly doesn’t think so.
“Wealthy people aren’t taxed enough,” Davies, a member of Patriotic Millionaires UK, told Spotlight. “I have no time for any wealthy people that suggest this is an incursion.” Davies would like to “see some honesty” from a future government on where funding will come from if wealth taxes aren’t used. “The suggestion that we can fund investment in public services from growth, or from wishing it to be – it’s not going to happen.”
While she is a philanthropist herself, Davies said the goodwill of the rich is not enough. “It shouldn’t be voluntary” to contribute taxes on wealth, which would ultimately go towards funding crucial public services, she said. In a society as wealthy as the UK, good care and good jobs should not be “pipedreams”.
And, said Davies, “we absolutely should have inheritance tax”, though the current system “isn’t fair”, with wealthier estates able to take advantage of exemptions to reduce their tax burden. “I don’t intend to organise my affairs so I reduce tax when I die,” said Davies. “People talk about it as double taxation, but it isn’t. There is no inheritance tax when money passes between couples, and there is no justification for huge estates passing through generations.”
Like wealth taxes, the polling on this would indicate that people are broadly in favour. In June, research by the think tank Demos found that, among Labour, Conservative, and Lib Dem voters, around three-quarters support some level of inheritance tax. Wealth taxes might just win votes after all.
[See also: Tax wealth to fix broken Britain]
This article was amended on 3rd October to correct an error in the report findings