There is an alternative to public cuts

We have all heard about it. In fact, since 2008, there have been at least 1.13 million stories about the UK government cutting its spending. We also know why the UK government has to cut its budget. We have a public debt that stands at around £988.7 billion (as of February 2012); this is around 63.1% of our GDP. Of course, if the government doesn’t cut, then we would need to borrow more, and thus there would be greater spending on the debt repayments. And if we look like we are struggling to repay our debts then our borrowing rate (bond yields) will be no longer the nice 2% (as it is at the moment) but would rise to a dangerous level of over 7% – just like Greece (20%) Spain (6%) and Portugal (11%) etc. Therefore, the only way to reduce our national debt is to cut spending and boost government revenue (via taxes such as the VAT). However there is another way…

It is called the wealth tax (used in countries such as Norway, Switzerland and the Netherlands) – taxing peoples purchasing power stock (rather than income flow – such as income tax). These are things such as property, pensions, antiques and jewellery. I am not talking about people who have a ‘net worth’ of £500,000, or £1,000,000. I am talking about the ‘super rich’. These are the people that will be in the Sunday Times Rich List later this month. These are the households with an average wealth of £4 million.

So what are the figures? Well the total personal wealth in the UK stands at around £9,000bn (compare that with our national debt and it’s a pitiful £990 billion). Anyway, if you don’t feel you own that much wealth than that’s because you probably don’t. This is because the richest 10% own a very large amount (around £4,000bn). This averages at around £4 million per household. Therefore if we have a ‘one-off’ tax of 20% for the richest 10% (the 6 million households with an average net worth of £4 million) than the UK government would receive around £800 billion.

This would pay off the national debt and avoid the need for deep and harmful cuts in education, welfare and public services. It is a serious alternative to what is being proposed and carried out by the Coalition government. This amount of money would also boost our economy, as it will create/save jobs.

Of course there are arguments against it, such as it will be difficult to collect. But surely this will be easier than collecting income tax as it’s harder for someone to hide a million pound house than minimising their declared income through the country’s best accountants. But won’t they simply pack up and move out of the country? It is very unlikely that the top 6 million people will simply just pack up and live in somewhere like Poland. If people have this amount of assets and want to live here and be British, then they will have to pay their bit. The general public will have little time for simply unacceptable attempts at avoidance.

This isn’t my idea. All these calculations and ideas have been done by a group of academics at the Glasgow Media Group. They researched how many people agreed with this and a staggering 74% of the population agreed with this tax.

At present, the UK has been having sluggish growth. These are mainly due to policies that and affect the poorest people in our society. Why should the poorest people in our society pay for the mistakes that reduce growth (although our export markets haven’t been doing much better), increase unemployment the wealthiest have committed? No matter what has been said, these cuts are unfair.

The British people are not passive and it isn’t true that they will simply accept policies that they see as completely unfair. We only have to look back and remember what happened with the poll tax.

Although this tax may sound good, we probably know that it is very unrealistic thing to happen – either from Conservative or Labour. It is just too radical. But what is interesting is that the only thing we ever hear about is cuts cuts cuts. There is an alternative out there. The media’s narrow approach, that the only option is government cuts, seems to support the Propaganda Model by Herman and Chomsky. But maybe that’s for another day…

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David Gillies April 22, 2012 at 4:34 pm | Permalink

This is a fairly good example of why schoolchildren shouldn’t write tax policy.
1. Chris Attrill April 23, 2012 at 10:19 pm | Permalink
  
  Schoolchildren? This tax policy was written by academics at the University of Glasgow, headed by Professor Greg Philo.
  1. David Gillies April 24, 2012 at 4:09 am | Permalink
    
    That’s even worse. Either they’re second-raters, or they should know better. Even if we discount the fact that confiscating a fifth of someone’s wealth in one stroke is utterly wicked, as Barry S. points out, dumping such a huge quantity of illiquid assets on the market would do nothing to pay off the debt and would simply result in massive wealth destruction. It would be nothing more than punitive. To a certain mindset this is attractive, but as a debt-reduction measure it is puerile.
    1. Spammer April 26, 2012 at 11:44 am | Permalink
      
      With all due respect, once the tax is levied, it is the business of the individual who owes it to determine how to pay. [/moderate-libertarian moment]
      
      To be serious, though… how likely is it that a very wealthy individual, one who this would unquestionably apply to, would hold their wealth wholly in physical (in your word, illiquid) assets, or a combination of physical assets and financial instruments such that the action of a small number of individuals (rather than institutions, which conventionally exercise greater influence on markets by their actions) will substantially reduce the value of those assets in the latter category sold? And how likely is it that these individuals would nevertheless hold so little of a single financial instrument, or range of same, that making a choice to sell only within that range would not prejudice their own interests? If nothing else, would the posited detrimental effects occur at 20%, and still occur at a marginally lower – but still significant, on the scale of national debt – rate?
      
      These are academics who worked the numbers to find a viable and socially acceptable solution. The most direct means of implementation would, theoretically, produce some logistical issues, but I should be interested to hear, with some attempt at quantification, how this would be unworkable, or necessarily have the same punitive effect your criticism suggests, as a one-off occurrence. It is hardly as though we are following Iceland’s example in dealing with bankers.
      
      If nothing else, please check out the nations which do employ the tax. The most prominent criticism I can find which doesn’t approximate, “but that’s not fair on the people who pay it…” pertains to implementation on an ongoing basis.
BarryS April 22, 2012 at 7:11 pm | Permalink

Only one question, if the richest have to sell off 20% of their assets to pay your bill who will buy them? it won’t be you or me as we don’t have that amount of cash so the assets will be sold at less than true value (distress sale) and not raise the required amount.

Idealistic but naive thinking.
Neil Moffatt April 24, 2012 at 9:07 am | Permalink

I think it prudent to give the guy a break.

The rich are getting richer at the same time that most of us struggle more and more. So to address the debt problem, it would seem wise to tap into this large vein of cash. The rich are so rich that they are happy to pay £11,000 for a wrist watch, or considerably more for cars and houses. The exact amount is not a problem because they are so rich. In fact, the expensive wrist watch is desirable simply because of its excessive price. So extracting money via luxury goods is not going to have anywhere near the adverse effect that cut backs in social services are having. Attacking the already oppressed is the wrong way to go.

At least that is my opinion.
Mr Larrington April 24, 2012 at 10:50 am | Permalink

Surely these people have promised, if forced to pay taxes like the “little people”, to leave the country in droves? I know the likes of Jim Davidson, Phil Collins and Paul Daniels did and frankly we’re probably better off without them
Waine April 24, 2012 at 4:33 pm | Permalink

While I agree that there are some naiveties in the idea as proposed. The central point that taxation is as viable a way to balance a public budget as spending cuts seems to have been lost. It’s well worth reminding people that it’s an option.
1. Kevin Arscott April 24, 2012 at 6:16 pm | Permalink
  
  I think this is a good point. Whilst the government insists that more can be squeezed from the welfare bill / NHS / education – knowing that it takes money away from the poorest people in society or services that are absolutely crucial to a civilised state – they simultaneously insist that nothing more can be done to tax the rich.
  
  The goverment’s reasoning that taxing the wealthy will simply move them out of the country seems to be based on little more than conjecture. After all, many wealthy people have moved abroad to avoid our current / previous tax systems and many have remained. Either way, it hasn’t seemed to be particularly significant in terms of real economic performance. As for the scrapping of the 50p tax rate because the richest people in the UK ‘just avoided paying it anyway’ seems to me to be a reason to reassess the way that we tax the wealthiest in society, not a reason to simply reduce the rate again.
  
  One suggestion – a mere guess that the goverment is happy to base tax policy on – is that they will be less inclined to dodge a 45% / 40% rate over a 50% rate. No evidence, no studies; just a thought projected by rich Conservatives to give a tax break to their rich friends. As for the reasoning that people avoided paying tax because they shifted income around between tax years, as everyone pointed out at the time of the budget: this is a one year trick.
  
  So, the government raised tax rate to 50%, rich people fiddled around with income received to put it into a different year – a temporary solution, goverment made doing so well worthi it by quickly reducing tax rate the financial year after. They essentially rewarded people dodging tax.
  
  The overwhelming majority of people in the PAYE system will never have the opportunity to dodge tax, those with greater wealth have plenty of chances to dodge tax and the government rewards them for it – or seems scared to even consider taxing them.
The Wealth Tax « Chris Attrill's Blog April 26, 2012 at 7:41 pm | Permalink

[...] my recent article on The New Journalist, I wrote about the wealth tax – and why it should be implemented. Although [...]
Colin Bain May 1, 2012 at 5:57 pm | Permalink

“Taking 20% is a cruel stroke”
Hmmmm. Cutting pay by 20%, plundering pensions, deliberately increasing unemployment, by implication is therefore less cruel. Although it falls on many many people, while tax shelters and the extremely wealthy pay less and less. not to mention the plundering and worse of our economy by multinational companies whose taxes are paid elsewhere.
Soory, but the cruelty has already been dome and is going to be worse.