Friday briefing: Would a wealth tax save our public services or be billionaire repellent?
In today’s newsletter: some think taxing the super-rich is a moral obligation, others says it drives cash away from the country. The truth may be somewhere in the middle
Morning pals, and let’s join in a heartfelt ευχαριστώ (thank you) to hedge fund billionaire Chris Rokos for the estimated £330m he paid to the UK Treasury last year, and sadly won’t be contributing in future as he’s relocating to Greece.
The publicity shy tycoon (and former Tory donor) has not made explicit his reasons for leaving the UK: so one can only speculate Rokos may be drawn by the noted health benefits of the Mediterranean diet, or the Greek government’s attractive €100,000 flat tax for overseas investors.
Predictably, one man’s decision is now being framed by some as a dire warning to government to halt taxes on wealth in the UK. Conversely, campaigners are arguing ever more stridently for a specific wealth tax. With taxes already at their highest level since the second world war, could this be the goose to lay the cure-all golden egg and fix our crumbling public services?
I spoke to our senior economics commentator, Aditya Chakrabortty, whose response might not be what you first expect it to be. And, yes, we get into goose-plucking too.
Five big stories
UK politics | Ministers are facing a backlash from the hospitality industry after they announced mayors in England would be given sweeping powers to levy taxes on holiday accommodation such as hotels and Airbnbs.
Economy | Nervous investors across big economies have been dumping government bonds, driving up the cost of borrowing, as surging oil prices amplified fears about rising inflation.
US news | JD Vance made a clear pitch that he should be the heir to Donald Trump, closing out the Republicans’ midterm convention with a blistering speech that featured exaggerated claims of success.
Israel | Testimony from 24 Israeli military insiders on the secret systems used in the war on Gaza has been revealed in a new documentary film about the mass killing of Palestinian civilians.
UK news | Consumers will pay higher energy bills unless the UK government speeds up work on a vast programme of upgrades to the electricity grid to enable the switch to renewables, the public spending watchdog has warned.
In depth: We need to think about what wealth actually means
Taxes are at record highs; satisfaction with public services at rock bottom. It’s a dichotomy familiar to us all from our own private focus groups, be that the street WhatsApp community or the bowling club.
Alongside this, wealth is rising exponentially while wages are not: from 2000 to 2025, for example, average weekly earning rose just over 100% while property prices went up by about 240%.
According to the British Social Attitudes Survey, the segment of the public who say the government should further increase taxes to spend more on health, education and welfare is at its lowest level in over a decade, at 36%.
Aditya offers me a quote from Jean-Baptiste Colbert, the minister of finances under King Louis XIV of France: “The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.”
“This has become harder to do as the tax burden has got higher,” Aditya tells me. “And so wealth taxes have really emerged as an attractive option to people in government, and to campaigners, not just here, but around western Europe and in America too.”
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What is a wealth tax and how would it work?
Most advocates, when they talk about a wealth tax, mean an annual tax on assets over a certain threshold. The Green party of England and Wales, for example, proposes an annual tax of 1% on assets above £10m and 2% on those above £1bn, estimating it could raise almost £15bn a year.
The campaign group Patriotic Millionaires – a bunch of likable sorts including Gary Lineker, Brian Eno and Val McDermid – suggests a 2% annual tax on total net wealth exceeding £10m, projecting revenue of £24bn a year. Oxfam, which is campaigning alongside them, says this rate would affect 20,000 people – about 0.04% of the UK population – and highlights polling carried out this May by YouGov, which found 76% of the public support “this fair wealth tax”.
Campaigners present this as a slam dunk – minimal hissing for maximum feather. But dig into that polling a wee bit further and you’ll find the YouGov tracker poll, which instead indicates that Britons, over the past seven years, have a baseline preference for taxing income, rather than assets. It seems that, while the public are attracted to the concept of a wealth tax, they’re pretty selective about how wealth is defined.
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Why not start plucking?
Critics of a wealth tax, in the right-of-centre thinktanks and the publications that report on them, argue that taxing the same wealth every year would penalise saving and investment; that a specific wealth tax would require expensive and unwieldy new administrative apparatus to value wealth; that focusing on the super-rich to raise revenue would make the UK a less attractive place for those people to work and invest.
Aditya may not share their ideology, but he has his own reasons for being sceptical about current wealth tax campaigning, which he argues “offers apparently easy solutions, which will always affect someone else and never me”.
Crucially, he says, if you’re running the government, the money raised by an annual wealth tax doesn’t make much dent in your bills, relatively speaking. The highest estimate is less than a third of the £80bn the UK government is planning to spend on defence annually by the end of the decade. And, once a tax is in place, so the dodges begin. “The one thing that the wealthy have in droves are advisers to show you how to avoid taxes.”
“It doesn’t mean you shouldn’t do it,” he adds, “just don’t oversell it as a magic bullet.”
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What’s this about a one-off wealth tax?
So with that bubble burst, Aditya points us to what he considers the most substantial piece of work done on wealth taxes in the UK to date. A couple of academics and a tax barrister came together during Covid lockdown, when the rest of us were struggling with the recipe for banana bread, to form the independent Wealth Tax Commission.
They propose a one-off wealth tax, arguing that its fairer because it targets people with the most ability to pay, is very difficult to avoid and wouldn’t distort behaviour because it’s one-time only. Accounting for behavioural responses and admin costs, they estimate this would raise a total of £260bn at a rate of 5% over £500,000 per individual, payable at 1% per year over five years.
To be clear: this would be paid by individuals whose total wealth after mortgages and other debts, and after splitting the value of shared assets such as a jointly owned family homes, exceeded the tax threshold, and only on the value of wealth above that threshold. For example, a wealth tax levied at 1% above £500,000 would require a couple to have net wealth of more than £1m before any wealth tax would be payable.
This is where Aditya gets excited: “£260bn is more than we get from income tax in a year. It would be transformative – you could put it in a sovereign wealth fund and invest in renewables. Or you could put it directly into the NHS and schools.”
It would, however, affect a very different tranche of the population – those de facto millionaires with property in desirable parts of Edinburgh or Manchester or London.
And that’s where the hissing starts up again.
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Are there other ways to tax wealth?
We’ve heard it many times before over other proposed taxes on wealth: Rachel Reeves reversed her plans to end inheritance tax breaks for farmers after lobbyists drove tractors up to the doors of parliament and drowned out speeches with their horns. When Ed Miliband proposed a mansion tax on properties valued over £2m, to raise £1.2bn annually for the NHS, in his 2015 manifesto, he was eviscerated by the rightwing media, party critics and Myleene Klass, who confronted him in a TV debate, arguing the tax wouldn’t just touch the super-rich but would devastate “little grannies” who bought modest London homes that had simply skyrocketed in value over the decades.
But times change, don’t they? And Reeves was able to avoid a similar backlash when she introduced a similar council tax surcharge on properties worth £2m or more at the last budget.
The Institute for Fiscal Studies has argued consistently that, rather than introduce a new wealth tax, the government should sort out the mess of current capital and property taxes. In May, Wes Streeting received a mixed reception when he proposed equalising capital gains with income tax, as part of his brief tilt at Labour leadership, describing it as a “wealth tax that works”. And of course, HMRC could get better at collecting tax from the super-rich: its own estimates suggest that at least £2.1bn extra could be raised from closing the wealthy tax gap.
The trouble with getting more granular on wealth taxation, Aditya says, is that many of the groups affected – whether that’s farmers, lawyers or GPs in partnerships – are also very well-networked and good at making a noise about the specific unfairness of targeting them as opposed to others.
Which takes us back to the more subtle point about burden-sharing and democracy that underlies his arguments: by focusing on the billionaires in the corner, we avoid looking at the millionaires in the mirror – and having an honest conversation about what wealth is and how sophisticated those who have it are at lobbying against further taxes on it.
An annual wealth tax has so much support right now because “it’s very politically palatable”, Aditya says. “It will poll brilliantly for you, because everyone will say that won’t affect them”.
His advice is to pivot, philosophically: “Forget about the wealthy. Think about wealth.”
We want to hear from you
Remember the Makerfield test? Andy Burnham promised it would be at the heart of his decision-making: whether policy worked for areas, such as his constituency, that feel overlooked by Westminster. Ahead of the Labour party conference I’ll be asking experts which of the prime minister’s decisions have passed or failed that test. Let me know which policies you want me to ask about by hitting reply or emailing first.edition@theguardian.com.
What else we’ve been enjoying
After reading this ranking of Céline Dion bangers by Alexis Petridis, I’ll be spending my lunchtime listening to It’s All Coming Back to Me Now on repeat (not for the first time, honestly). Michael Segalov, newsletters team
You may vaguely know what the BBC charter is, how it defines the broadcaster’s relationship with the government, and even that it’s up for renewal next year. But what’s at stake in this “elaborate multi-year negotiation”? Barbara Speed investigates in this tremendous long read. Charlie Lindlar, newsletters team
I really appreciated this heartfelt ode to RuPaul’s Drag Race UK by Alex Needham, after the BBC announced the show was being culled. It’d be much betta’ if the Beeb U-turned. Michael
Between searching the app for winter hats for my son and winter knits for myself, I adored Kate Mossman’s report for the New Statesman on Vinted and its role in Britain’s addiction to fast-paced, low-cost online shopping. Charlie
Em Hilton makes a powerful case in her column for the new sanctions on illegal Israeli settlements from the UK government, and the need for imminent further action to halt atrocities in the West Bank and Gaza. Michael
Sport
Football | Matheus Cunha broke the deadlock and Bruno Fernandes and Benjamin Sesko were also on target in Manchester United’s 4-0 win against Sabah in the Champions League.
Tennis | Aryna Sabalenka’s grip on the US Open showed no sign of weakening on Thursday night as the two-time defending champion swept past Jessica Pegula 7-5, 6-2 to move one win from a third straight title.
Cricket | Dan Lawrence missed out on a century but said he was ‘really happy’ with recent displays, while Pakistan’s batting coach hailed his team’s potential.
Something for the weekend
Our critics’ roundup of the best things to watch, read, play and listen to right now
Theatre
East Is East (Bolton Octagon) | ★★★★☆
Thirty years on, Ayub Khan Din’s play about dual-heritage life in the 70s is revived for a tour with an exceptional cast. Read Nick Ahad’s full review.
Film
Pressure (in cinemas now) | ★★★☆☆
Andrew Scott finds levels of complexity in a stoic character based on meteorologist James Stagg, the man who persuaded Cmdr Dwight Eisenhower to delay Operation Overlord, for this slick wartime drama. Read Peter Bradshaw’s full review.
TV
Last Seen (Apple) | ★★★★★
Patrick Brammall and Maxine Peake star in this superbly acted and absolutely riveting drama about a father who thinks his missing daughter may still be alive after a mysterious phone call. Read Luke Buckmaster’s full review.
Music
The Tubs: Hard Life | ★★★★☆
Britain’s best indie-rockers hold fast to their defiantly old-school sound, slipping wry sideways looks at despair in among hooky melodies that always sound like a good time. Read Alexis Petridis’s full review.
The front pages
“‘A hammer blow’”: plan for English tourist tax angers hotel industry”, is the Guardian’s front page today. The Telegraph says “Labour mayors plot 5pc tourist tax”, the Mail runs with “Burnham’s holiday tax to hammer families on UK breaks”, and the Sun’s take is “What the hol, PM?”
The Times says “Households face £100 on bills to pay cost of wind”, and the FT leads with “Oil price surge and signs of stubborn inflation reignite global bond sell-off”. The Mirror, on Esther Rantzen, has “It’s too late for me”. Marking the 9/11 anniversary, the i Paper leads with “The day that changed the world”, and Metro says “25 years”.
Today in Focus: The Latest
Is Trump trying to buy votes with $5,000 pledge?
Donald Trump has pledged a payment of $5,000 to every adult American citizen if the Republicans win in the November midterms. The outlandish proposal, which would cost over $1tn, immediately raised legal and ethical concerns. It comes as the president’s approval rating has hit a record low, hovering at about 38%. Lucy Hough speaks to global editor Devika Bhat.
Cartoon of the day | Ben Jennings
The Upside
A bit of good news to remind you that the world’s not all bad
While Byker Grove is often credited for televising the first queer kiss in 1994, the UK actually first witnessed an on-screen same-sex smooch years earlier. When teen drama Two of Us first aired in 1988, the BBC insisted that the single snog be cut before broadcast, after the show had already been pushed into a late-night slot. And, initially, it was. But this didn’t stop a “gay mole” secretly sneaking the embrace back into the film, first in the version dispatched around the world for international viewers, and later when a rerun aired on the Beeb in a 1990 daytime transmission.
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Bored at work?
And finally, the Guardian’s puzzles are here to keep you entertained throughout the day. Until tomorrow.