The UK Movement To Tax Extreme Wealth Instead Of Defunding Foreign Aid

Forbes

25-03-2025

Protestors call for an extreme wealth tax outside the UK Treasury.
Not many wealthy people plead with their government to tax them more. One of this rare sort is Victoria Lupton, who leads Seenaryo, an arts charity working in the Middle East. Lupton, who recently returned to the UK from Lebanon, feels the weight of the millions of pounds she inherited from her family. 'People with the broadest shoulders need to be paying more in tax,' she stresses.
Lupton joined Patriotic Millionaires UK, an offshoot of an American group calling for fairer tax policies, a year ago. But she's become especially energized in the last month, after the surprise announcement that the UK government would be drastically cutting its international development budget.
She'd already seen the effects of the aid disruptions caused by the US government; over 80% of USAID projects have now been abruptly eliminated. 'The immediate impact is thousands of people out of work in Jordan,' Lupton reports, in critical areas ranging from refugee education to conflict prevention. She believes the longer-term impact is a whole generation of people in Jordan denied an education because of these cuts, and 'a generation of women who won't be entering the workforce.' Jordan and Lebanon host more refugees per capita than any other country. 'Supporting refugees is not the responsibility only of the immediate neighboring countries,' Lupton argues.
So it's been gutting for her to hear that the UK is following the US example. Creating a tax on extreme wealth would be a way for the UK to continue to meet its responsibilities both overseas and at home, Lupton feels. 'The system right now really is rigged to serve the interests of the ultra-wealthy. Work is heavily taxed, and wealth just isn't.'
Momentum around this proposal is building.
In February, just four months after the UK's prime minister told the UN General Assembly that the country would be 'restoring our commitment to international development', he announced that the UK would actually be cutting its development budget, in order to prop up military spending. Defense spending is already 3.5 times more than development spending, which currently sits at 0.5% of gross national income (GNI). The proposed cut would reduce it further to 0.3%.
This would not be sufficient to increase the defense budget as much as the UK government would like. Already it has announced cuts to disability funds as well. Some observers believe the initial raiding of the aid cupboard was an attempt to curry favor with the Trump administration, following its even more extreme demolition of aid. 'It is no surprise that aid cuts were announced just days before Starmer met with Trump,' comments Jerry Moriarty, the senior communications officer for the member of Parliament Chris Law. 'This was done as a political stunt,' believes Nick Dearden, director of the campaign organization Global Justice Now.
Unlike in the US, at least the UK aid shrinkage won't start right away. The cuts are due to go into effect by 2027, leaving some time to prepare. The government has already stated that Gaza, Sudan and Ukraine will be priorities, but these programs alone would more than swallow up the future aid budget. Judging from a previous (smaller) UK aid cut in 2021, programs benefitting women and girls could be particularly hard hit.
Another trend is that much UK aid going forward will be administered by British International Investment (BII), the agency making private-sector investments in low- and middle-income countries. However, there are concerns about so much of the UK's development funding moving from grants to loans, at a time when African countries already spend more on interest from debt than on health and education. And Dearden believes that it's hypocritical for the UK, whose own healthcare system is largely public, to disburse development loans to less affluent countries for private-sector healthcare.
The UK has been disregarding its own aid rules for years. It's legally obligated to spend at least 0.7% of GNI on aid, but Parliament suspended this in 2021. UK aid has already been whittled away in part because a large portion has been diverted to attending to asylum seekers who have arrived in the UK. In other words, supposedly overseas aid is being spent at home. In 2023, 28% of the UK's aid budget went to such domestic spending. This is a large amount of money indeed, despite reports of squalid conditions for the people seeking safety in the UK. In 2024, this growth industry catapulted Graham King, who operates accommodation and transportation for asylum seekers, into the Sunday Times Rich List for the first time.
Dearden argues that UK spending on refugee costs at home reveals deep flaws in its handling of migration. With asylum seekers stuck in limbo for years, unable to work, 'you are basically spending a lot of money on the fact that your system is broken.' He believes there would be more impetus to reform that system if it came out of a funding pot that politicians generally cared about more than aid.
Mikaela Gavas, the managing director of the research organization CGD Europe, says there are serious problems with how overseas development assistance (ODA) is counted, and the UK has been flouting norms. The OECD's Development Assistance Committee (DAC) has specified that for refugee costs within donor countries, 'it's only the first year cost that really can be counted. But the UK chose to ignore that threshold and has continued to count all of these costs as part of their ODA,' Gavas explains. 'The DAC itself has no power or say in what countries should do; it's not a policing type of body. So the UK can do pretty much what it likes and it has inflated those costs dramatically.' CGD has estimated that the country's actual overseas aid spending will reach just 0.1% of GNI, in light of the cuts.
The UK isn't alone in this creative accounting. 'In-donor refugee costs,' in aid jargon, reached an all-time high following Russia's full-scale invasion of Ukraine.
Nor is the UK alone in following the US' lead on slashing development funds. 'The government of the Netherlands also decided that they're going to stop funding any projects that do women's participation, women's rights, gender equality, and climate initiatives,' explains Daniela Vancic, Europe policy and advocacy lead for the nonprofit Democracy International. 'I believe this is really a direct result of the US aid freeze.' She worries about the message this sends where democracy promotion programs have been supported by foreign aid. 'It's sending a green light to authoritarians to say, 'Yeah, you can step back. You can backtrack from democracy and stop supporting also any civil society organization.''
Europe has already seen plenty of democratic backsliding itself, notably in Hungary. Still, Trump following in the footsteps of Orbán, whom he admires, has been 'sending a shockwave to us in Europe,' Vancic says.
UK aid supporters have proposed a raft of other ways to fund a fatter defense budget without cutting into essential services, including a technology tax, use of seized Russian assets that have been frozen, an oil and gas windfall tax, higher tax on private jets, and a specific levy for defense. Going further, campaigners and researchers have suggested tackling tax evasion and other structures that entrench global inequality. 'A lot of the reasons why low-income countries remain low-income is because corporations and individuals are able to shift profits across borders,' Lupton says.
But the messaging has coalesced around one revenue source in particular: a tax on extreme wealth. It's a simple message, which Dearden believes could be palatable for the British public: 'We should be taxing the richest, not taking money from the poorest, if you're going to do this.'
This would be a tax of 2% on wealth above £10 million. It's been estimated that it would apply to just 0.04% of the British population, and would collect £24 billion a year. This would dwarf UK spending on international development. Just one of the supporters of a wealth tax is actor Brian Cox, best known for playing embodiment of corporate greed Logan Roy on Succession.
Another member of the 0.04%, who would be proud to pay a wealth tax, is Lupton. A 2% wealth tax certainly wouldn't pinch her. 'People in our position simply wouldn't feel a material impact on our lives,' she says.
There's plenty of anti-aid sentiment in the UK at the moment, including from people who scoff that anyone can voluntarily pay extra tax, without a policy change. But collective tax reform isn't the same as individual philanthropy, Lupton points out. Already, most of the members of Patriotic Millionaires UK she knows are engaged in philanthropic giving. With tax, 'the whole point is it's mandatory and any contribution that a handful of individual people would make to HMRC [His Majesty's Revenue and Customs] really wouldn't be consequential.'
Part of why politicians in wealthy countries are currently treating aid as an easy target is because so many of their constituents are struggling, and feel that sending money to other countries is unfair. 'We're obviously in a moment where because of the level of inequality in our countries, the most vulnerable people at home are also struggling enormously,' Lupton says. So 'it's not the poorest and most vulnerable people in the UK and the US who should be shouldering the responsibility of international aid budgets. That's exactly why we're calling for attacks on wealth.'
As others have noted, cutting foreign aid won't improve the situations of people in donor countries. Aid savings will be spent instead on tax cuts (in the US) and weapons (in the UK).
A major sticking point with wealth tax proposals is the fear that it would drive rich people away in search of lower tax regimes. There is indeed evidence of this from previous experiences. In Colombia and Sweden, wealthy people hid or lied about their riches after wealth taxes were imposed. Valuing assets can be challenging in general, although narrowing the number of people covered by a wealth tax would help with the administration. Ease of movement for ultra-rich Europeans has helped them to move themselves and their money elsewhere.
Thus, wealth taxes have generally collected less than was hoped. So it's probable that a UK tax on extreme wealth would also gather in less than the most optimistic estimates, though it could still be a considerable amount. On the other hand, because wealth held by the richest tends to increase over time, wealth taxes also bite them less than opponents claim.
Wealth tax advocates are also hoping that new versions of this tax would build on lessons learned from previous experiments. It's possible that increased tax transparency (although it's still very flawed) could make wealth taxes more feasible now, while increased inequality could make them more popular. And there are ways to make it less appealing for the uber-wealthy to simply trot to another country, such as extending wealth taxes to those who leave, for a certain period. Careful design and enforcement of any UK wealth tax would be critical to success.
For her part, Lupton says, 'I'm not going anywhere.' And she doesn't believe that many Brits would ditch their country because of a 2% tax on £10 million. 'The millionaires that I know have built their lives and their communities in the UK. Their worlds are here in the UK. Their children are educated here. Their families live here.'
Similarly, Dearden believes that there are strong incentives for most entrepreneurs to remain in the UK, given that 'an awful lot of the industries here get state support. They enjoy a stable regulatory environment, a reasonably well-educated population with good healthcare.'
Cooperation among countries would help. If many nations agreed to a common minimum wealth tax, there would be less reason for an ultra-millionaire to move to a lower tax jurisdiction. However, it's proven challenging to achieve consensus.
Improving enforcement of tax policies in Africa would also bring in resources that could help plug the gap in foreign aid. Currently, much wealth and income held in Africa goes untaxed. The International Centre for Tax and Development has calculated that improved enforcement could raise up to US$5.5 million in Uganda, for example. Assessing and collecting the fair amount of property taxes would be especially effective. So far, in response to the UK aid cuts, Ethiopia has proposed a new income tax to pay for projects previously funded by USAID, including medicines, vaccines, and literacy programs. There have also been suggestions of domestic taxes on tobacco and alcohol. However, an earlier series of sales tax hikes in Kenya sparked unrest. Unlike a wealth tax, consumption tax hits the poorest hardest.
Back in the UK, it gives Lupton hope that in a time where many people are despairing, solutions like an extreme wealth tax are being proposed. 'People are willing to rebalance, and understand that the system isn't currently fair,' she believes. 'This isn't an impossible mountain to climb.'