New Wealth Taxes

Jon Trickett Excerpts

Tuesday 14th June 2022 Westminster Hall

[Jon Trickett (Hemsworth) (Lab)]

It is a pleasure to serve under your chairmanship, Sir Edward. I congratulate my hon. Friend the Member for Leeds East (Richard Burgon) on securing this important debate.

I will not reproduce figures already mentioned, but there has been an explosion of wealth, certainly since the banking crash, and before that, alongside a growth in poverty. The two things are interconnected, because the growth in wealth is a function of the increase in poverty. It reminds me of Victor Hugo’s statement:

“The paradise of the rich is made out of the hell of the poor.”

That is the truth of the matter, but it is not simply about poverty. It is also about remuneration for middle and upper-income earners as well as lower-income earners. The truth is that there is a long-term secular decline in the proportion of GDP that goes into wages and salaries. That is the central problem with which we need to wrestle, if we intend to tackle the fiscal crisis that state services are now facing. There are four sources of tax. There is income tax, which is more or less half of all tax raised. There is tax on consumption, which is VAT. There is tax on household property, the council tax. There is tax on capital. The tax on capital is one twelfth of the amount raised from income taxes, and is imbalanced as a consequence.

It is even worse than that. If the amount of money going into the salaries and wages of the 33 million working people in our country is correct—it is, because a graph shows it clearly—the capacity of income tax, which is the largest amount of tax we raise, will be limited and in long-term secular decline. We must do something about that, if we want to continue with public services and tackle inequality. Where is the money going to come from? I do not think for one second that we want to increase VAT in any event, but particularly given the cost of living crisis. Nor do I propose an increase in council tax.

Income tax is in long-term decline for the reasons I have given. Therefore, there is only one other place to go, which is to tax wealth. Two of my hon. Friends talked of a one-off tax on wealth. I am not convinced that that is the right way to do it. First, a very large amount of money, a proportion of individual wealth, would have to be raised on a one-off basis to make a significant contribution. In any event, there is a long-term fiscal crisis, for the reasons I have described. Therefore, we need a regular tax on capital.

I have a further point to make on that, and it has already been made. For some reason, we tax income from work much more than income from wealth. That is wrong, imbalanced, asymmetric and should end. There is scope to do that. I published a paper about a year ago, which is now in the Library, about wealth and a wealth tax. We looked at several different ways of taxing wealth, and there are many. We worked out the median of a reasonably balanced wealth tax, taking account of behavioural changes, because wealthy people will change how they behave. We thought we could raise about £100 billion a year. The document is in the Library for people to look at. That is the central argument that needs to be made. Of course, there is an ethical argument about whether one human can be worth millions of pounds more than another. There is also an argument about inequality, tackling poverty and all those issues, but the central question is how to deal with the long-term fiscal crisis.

I will make one final point before I sit down. The Conservative party will not resolve this. Why do I say that? Tory donors who are among the top 250 richest people in our country have donated to that party £57 million. We all know that whoever pays the piper calls the tune. The Tories are not going to resolve the problem; they are part of the issue. There has to be a debate about these long-term problems, and a wealth tax is part of the solution.

[Sir Edward Leigh (in the Chair)]

Dead on five minutes. Well done. I call Jim Shannon.