New Wealth Taxes

[Sir Edward Leigh in the Chair]

I beg to move,

That this House has considered the potential merits of introducing new wealth taxes.

It is a real pleasure to serve under your chairship, Sir Edward. This debate could not come at a more important time. People face the biggest single-year fall in incomes in 70 years. We in this House often hear shocking statistics, including about the 2 million food bank parcels that are handed out and the 5 million people who have to choose between heating or eating. Behind each of those statistics, however, is a real person who is struggling, be they a mother who is refusing certain foods at a food bank because she cannot afford to cook them, a pensioner riding the bus to keep warm, or a parent missing yet another meal so that their children have just enough to eat to get through the school day. For some, however, this is not a crisis; it is a boom time.

I thank my hon. Friend for securing this extremely importantly debate. As always, he is making a powerful speech. Britain has in recent years gained a record number of billionaires. Between them, they own £653 billion, which is about triple the annual operating budget of the NHS. During the pandemic, their wealth increased by more than a fifth. Does he agree that such wealth is obscene—especially in the midst of a cost of living crisis—and that we should do everything we can to redistribute it away from the super-rich, who have profited from the pandemic and rocketing prices, towards the workers who kept society running throughout and now face poverty and destitution?

As always, my hon. Friend makes a crucial point, and she is absolutely right: that is a moral imperative.

In the past few weeks alone, we have learned that the number of billionaires in Britain has risen to 177, and their wealth is now at record levels. Britain’s billionaires have increased their wealth by a staggering £220 million per day over the past two years. On top of that, we have learned that bankers’ bonuses are up 28% over the past year and are rising at six times the rate of wages. We have also learned that the bosses of Britain’s top 100 companies have seen their annual pay increase to an average of £3.6 million. We have food banks for nurses in hospitals, but at the top of Britain’s finance sector, the champagne corks are well and truly popping.

That phenomenon is not confined to Britain; it is global. The total wealth of the world’s billionaires is now equivalent to 14% of global GDP—up threefold since 2000. The global wealth of billionaires has risen more in the past two years than in the previous 23 years combined. If we are to tackle inequality and hardship, we need to address our rigged economic model.

The hon. Gentleman is making interesting points. I accept that there has to be a limit to the amount of wealth that can be accumulated by a small number of individuals; I do not think anybody would argue that equity is not important to some degree. He mentions the global situation. Many countries have actually stepped back from wealth taxes, which they found did not work because they are bureaucratic and administratively difficult, and they ultimately did not raise the money expected. Austria, Denmark, Finland, Germany, Iceland, Ireland, Italy, the Netherlands, Luxembourg and Sweden have all tried wealth taxes and decided that they did not work. Why does he think that is the case?

I encourage the right hon. Gentleman to read the report I have here. It is by some top academics and makes a compelling case for a wealth tax in the UK. I will return to that point in greater detail later in my remarks.

It is not about someone getting more money for doing their job; it is about the obscenity of people getting large amounts of money when others are getting smaller amounts of money. People get six-figure dividends when others live on £10 an hour. That obscene disparity is the issue.

I could not agree more. We are talking about multibillion-pound enterprises with people at the top hoovering up the wealth, while others do not receive anything. Only yesterday, I and colleagues visited a picket line in Wakefield, where bus drivers are on strike; they are calling for £13.40 an hour. Many people will be surprised that they are not already on at least that sum.

To address our rigged economic model, we must first acknowledge that trickle-down economics has been a lie. Wealth is not trickling down; it is being funnelled up into fewer and fewer hands. That is a consequence of 40 years of deregulation, privatisation, outsourcing, driving down working conditions, the weakening of trade unions and lower taxes on the rich. Contrary to what is said by the spin doctors of the right, decades of keeping taxes low for the very rich has not boosted economic growth. In fact, research by the London School of Economics and King’s College London looking at tax cuts over the past 50 years shows that lower taxes on the rich has led to higher income inequality because the top 1% has captured almost all of the gains, while there has been almost no effect on boosting economic growth.

Inequality and hardship are not just at the heart of our system—it is how our system is designed and how it functions. Poverty and inequality are structural and institutionalised. That is why we need a debate on wealth taxes. A wealth tax is an idea whose time has come.

Last year, the Secretary-General of the United Nations called on Governments to consider a wealth tax on those who had profited during the pandemic, to reduce extreme inequalities. The OECD has argued that there is a strong case for addressing wealth inequality through the tax system. The group Patriotic Millionaires has called on the Chancellor to introduce a wealth tax, saying:

“We know where you can find that money—tax wealth holders like us.”

Does the hon. Member realise that there is nothing to stop those wealth owners who support a wealth tax making voluntary contributions to the Exchequer?

I thank the hon. Gentleman for his illustrative intervention, but I would paraphrase a former Labour Prime Minister, Clement Attlee: charity as a substitution for taxation can be a cold, heartless model. We should not be depending on the voluntary generosity of those at the very top to fund our public services. That creates a scenario that is almost servant and master—blessed is the giver and blessed is the receiver.

The UK does not have a wealth tax. Ministers have previously responded to me by saying that in practice we do, through taxes such as capital gains tax, but, while those earning wages are taxed on every penny of their income above permitted allowances, the same does not apply to the accumulation of wealth. For example, capital gains tax does not apply to all wealth but only to increases in the value of particular items of wealth. Structurally, we tax income much more rigorously than we do wealth. Of course, that favours the wealthy, as it is designed to do. I am afraid it is simply not good enough to pretend that even that system is working.

Does the hon. Member agree that the deliberate decision to increase national insurance contributions rather than other forms of income tax was a deliberate attempt to tax the poor rather than the wealthy for failings in the NHS?

That is absolutely right. The increase in national insurance contributions was iniquitous, regressive and absolutely outrageous, but from this Conservative Government, it was no surprise.

We currently have the scandal where income derived from wealth is taxed below income derived from work. For example, someone living off share dividend payouts would pay less in tax than someone who earns the same amount by getting up each and every day and going out to work. How on earth can that be justified? Likewise, capital gains tax, paid on profits when selling assets such as a second home, is paid below income tax rates.

There is huge scope for increasing tax revenues by ending the significant tax discounts afforded to income from wealth over income from work. Simply ending the lower rates paid on capital gains and share dividends, and removing the related exemptions on those taxes, would raise around £22 billion per year. That is a lot more than was raised by the national insurance tax hike on working people that we have just discussed.

I am grateful to the hon. Member for giving way, and I apologise for my voice. This debate is very important. People sometimes say that a wealth tax would not work because wealthy people would just up sticks and leave. Does the hon. Member agree that, actually, it is a matter of political will? If we chose to, we could levy an exit tax on vacating wealthy individuals, as they do in the United States. That would be a big discouragement for people to do that. Put simply, what is lacking here is political will—that is what is preventing us from attacking this obscene level of inequality, both here and around the world.

I could not agree more; it is a matter of political will. We often hear politicians using the phrase “tough choices”, but when they say that, they usually mean the easy choice of giving real-terms cuts on wages, benefits and pensions. The real tough choice—the real, morally correct choice—is to make those with the broadest shoulders pay their fair share at long last. It is important to note that more than half of all gains from capital gains go to just 5,000 people.

Before those on the Conservative Benches moan that such reforms are part of some kind of socialist plot, I remind them that Nigel Lawson raised capital gains tax rates to match income tax rates, and that it was a top recommendation by the current Chancellor’s own advisers, the Office of Tax Simplification, in 2020. Other tax reforms that touch on aspects of wealth, such as the regressive council tax system, could also be reformed and replaced with a proportional property tax, as my hon. Friend the Member for Easington (Grahame Morris) has so passionately argued.

Beyond making taxes that apply to certain aspects of wealth fairer, it is time for a new one-off tax on the very wealthy. That was recommended in 2020 by the UK Wealth Tax Commission, which was packed with leading tax experts. It was the first such report undertaken in 50 years, and it is recommended—in fact, essential—reading for every Member of this House, in my humble opinion. It concludes that a one-off wealth tax would be fair, as those with the most wealth have the broadest shoulders to afford an additional contribution to society in times of crisis. It would also be efficient. A one-off wealth tax would not discourage economic activity, and the administrative cost would be a small proportion of the revenue raised. It would also be very difficult to avoid by emigrating or moving money offshore. It could raise vast sums to tackle the ills of economic hardship and inequality.

In fact, the commission says that without a one-off wealth tax, we will not tackle inequality because, while we are one of the most unequal countries in Europe on income distribution, inequality is even worse when it comes to wealth. Almost one quarter of all household wealth in the UK is held by the richest 1% of the population—people whose wealth is above £3.6 million. That is why, today, in this debate, I am calling for a one-off 10% tax on any wealth above £10 million. That could raise £86 billion, according to the Wealth Tax Commission.

Order. Quite a lot of people have risen to speak, and I would like to give them all the chance to do so. I do not want to introduce a limit at this point, so I ask that you keep your speeches under six minutes.