Latest news with #NeilKinnock
Mint
a day ago
- Business
- Mint
A Wealth Tax Wont Solve Britains Fiscal Problems
(Bloomberg Opinion) -- The finding by British lawmakers that His Majesty's Revenue and Customs doesn't know how much tax the country's billionaires pay has done little to enhance the UK collection agency's prestige. A side effect of the report by Parliament's Public Accounts Committee may be to stoke support for a more radical method of ensuring that society's richest pay their fair share – namely, a wealth tax. Wealth taxes have a patchy record of success and have been abandoned by most countries that tried them. France is the most recent example, dropping its levy in favor of a real estate tax in 2018. Only four of the 38 countries in the OECD still impose one – Norway, Spain, Switzerland and Colombia. Yet the idea is gaining renewed global momentum, helped by the work of French economist Gabriel Zucman, whose blueprint for a 2% global minimum tax on billionaires was endorsed by the G-20 under Brazil's presidency last year. In the UK, former Labour Party leader Neil Kinnock proposed a 2% tax on assets valued at more than £10 million ($13 million) earlier this month, saying it would bring in as much as £11 billion a year. The Labour government of Keir Starmer, which is facing a fiscal shortfall of as much as £30 billion this year, has declined to rule out the idea, while groups including Unite, the country's largest trade union, have backed the plan. Patriotic Millionaires UK, a group that advocates for the wealthy to pay higher taxes, said last month that a survey showed 80% of the country's millionaires support the proposal. These concurrent events formed a suggestive backdrop for the cross-party committee's inquiry into whether Britain is collecting the right tax from its wealthiest individuals. HMRC might count itself a little unfortunate with the report's framing. It can point to successes: In 2023-2024, its compliance work brought in an additional £5.2 billion of revenue from the wealthy — which it defines as those with incomes of £200,000 or assets of at least £2 million in any of the previous three years — up from £2.2 billion in 2019-2020. The committee said the agency deserved 'great credit' for this, before immediately noting that its success meant either that non-compliance among the wealthy had got worse or that HMRC's previous estimates of the extent of avoidance were too low. Sometimes, you can't win. HMRC is hardly a laggard in efficiency, scoring well in international comparisons. It has brought down the UK's estimated tax gap – the difference between what should be paid and what is actually paid – by close to a third in the past two decades. The tax authority might question why the rich are getting so much attention when they're nowhere near the biggest evaders — that would be small businesses. And it has a defense to its lack of knowledge on what billionaires pay: As officials pointed out to the committee, it has no reason to collate this data because people aren't taxed on the basis of their wealth but on their income and gains. Then again, other tax authorities often do collect this information even when they don't levy a wealth tax. And HMRC's estimate of the tax gap may be wrong — even wildly wrong. That looks highly likely in the case of the £849 billion that British residents hold in offshore accounts. The authority's (partial) estimate of tax evasion on that pot is a mere £300 million — described as 'implausibly low' by the committee. Either way, the criticism of HMRC — by a cross-party committee with a Conservative chair — looks helpful to those who would like Britain to take a more robust approach to taxing the country's most affluent individuals. The social justice case for a wealth tax is compelling. Inequality has widened since the 2008 global financial crisis as monetary easing and government stimulus inflated asset values while average incomes in many countries stagnated. Making the richest pay a percentage of their wealth would go some way to redress the balance and repair national finances weakened by the extraordinary support extended during the pandemic. Global sentiment appears to be moving in this direction. Brazil and Spain announced the creation of a coalition of the willing to work on the topic in Seville at the start of this month, and have been joined by South Africa and Spain, Zucman told me. France's National Assembly voted in favor of a minimum tax of 2% on centi-millionaires in February. The practical objections are also weighty, though. The costs of evaluating and monitoring wealth and then collecting the levies are considerable. The biggest challenge is how to prevent capital flight. A level of 2% might not seem like much; low enough to ensure that net wealth keeps growing. But look at it as a share of the income stream that those assets might produce and it's much more significant. Assume a 5% annual return and 2% of the asset base equates to a 40% additional tax on that — unless other levies are simultaneously reduced or simplified. Britain already appears to have underestimated the behavioral response to other revenue measures targeted largely at the wealthy — such as the abolition of non-dom status and the imposition of value-added tax on private school fees. There are also potentially more insidious second-order effects to consider, such as the impact on enterprise and innovation, and the fostering of a culture that looks to lean on one group of taxpayers. A wealth tax might start out with a low rate and a high cutoff point, but the temptation would be to expand it and move down the distribution. The UK had 22,000 taxpayers with at least £10 million and 626,000 with at least £2 million, according to a 2020 study by the Wealth Tax Commission, a research group. It's difficult to see how a wealth tax will work except as part of a coordinated global program. That may be the direction of travel, but it's some way away from becoming a reality. Britain's fiscal challenges are a lot more urgent. There's no immediate solution here. More from Bloomberg Opinion: This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners. Matthew Brooker is a Bloomberg Opinion columnist covering business and infrastructure. Formerly, he was an editor for Bloomberg News and the South China Morning Post. More stories like this are available on
Spectator
7 days ago
- Business
- Spectator
Why wealth taxes don't work
The nation owes the former Labour leader Neil Kinnock an eternal debt for losing the 1992 general election when he was clear favourite to win it, thereby sparing us whatever socialist folly he might have brought to Downing Street. I salute him again for popping up to propose a 2 per cent wealth tax on fortunes above £10 million that might raise a supposed £11 billion for the hard-pressed Chancellor – thereby bringing into sharp focus the vague threat that several cabinet ministers have studiously refused to rule out. Pressure is building on Rachel Reeves from backbenchers, unions and anti-poverty campaign groups to mount a raid on the rich in her autumn Budget. But Kinnock of all people, a firebrand backbencher at the time, should remember that Labour's 1974 manifesto included the promise of 'an annual Wealth Tax on the Rich [and] a new tax on major transfers of personal wealth' – which was dead within two years. Why? Because of concerns in the Treasury, and among worldly Labour voices such as the (millionaire) cabinet fixer Harold Lever, that at a time of dire UK economic performance, such a confiscatory measure would provoke an exodus of capital and a crisis of business confidence. Sound familiar? Once upon a time, wealth taxes were in fashion in a dozen OECD countries, as bien pensants bought Thomas Piketty's thesis, in his absurdly bestselling tome Capital, that a global levy was the moral solution to the fact that the rich were getting richer even while ordinary folks' real incomes were squeezed. But one by one, most of those taxes were scrapped as being difficult to collect, economically counter-productive and an incentive to entrepreneur flight. In Europe, only Norway, Spain and Switzerland still have them – and further afield, Colombia, presumably in pursuit of cocaine loot. Spain is reckoned to have lost 10,000 of its richest since the higher rate was raised to 3.5 per cent in 2022. In short, the tired old wealth tax concept is a classic red flag of envy politics – and we must thank Lord Kinnock for waving it. Not with a bang Meanwhile, Reeves's 'Leeds reforms' ahead of her Mansion House speech on Tuesday made great play of slashing City red tape. But after a backlash from the sector she has U-turned on her well-advertised plan to cut the £20,000 tax-free cash Isa limit in the hope of pushing savings towards UK equities. Spin ahead of the day's speeches talked of a new 'Big Bang'. But until there's a tidal shift of capital towards high-growth UK companies – and valuations rise accordingly, driven by a revival of international confidence in UK prospects generally – all other City reforms risk being dismissed (to misquote T.S. Eliot) not as bangs but as whimpers. Rose among clowns Congratulations and an overdue apology to Cindy Rose, the senior London-based Microsoft executive who has been headhunted to revive WPP, the advertising and PR conglomerate that has never fully recovered from the acrimonious departure of its creator Sir Martin Sorrell in 2018. One of the few world-scale businesses built in Britain in the past 40 years and a long-time constituent of the FTSE 100 index, WPP stands accused of running adrift in the era of social media marketing. Torn by internal strife, it has lost clients and seen its shares plunge; another sharp fall followed the resignation of the current chief executive Mark Read and a profits warning last week. Some analysts say the best hope is a break-up into its constituent agencies, while Sorrell himself declares unhelpfully that WPP may be 'too far gone' to be turned around, even by Rose. Who is she? A New York-trained lawyer, she has also worked for Vodafone and Virgin and been called 'the most powerful woman in UK tech'. And I'd guess she's well skilled at deflating the overblown male egos that tend to disrupt 'talent-led' firms such as WPP – which takes me neatly to my apology, for an episode long ago when Rose, newly arrived to work for a top London law firm, found herself among Englishmen behaving riotously at a dinner party that might have been a rejected scene from Laura Wade's play Posh. This being the pre-internet age, an exchange of barbed letters followed, mine on crudely faked US Supreme Court letterhead purporting to offer consoling advice from Justice Clarence Thomas. While I guffawed at my own ungallant wit, she evidently concluded that if this drunken 'peanut gallery' (I think that was her phrase) was the best an expensive British education could produce, she'd have no difficulty overtaking us to build a top-level corporate career on this side of the pond. As indeed she has: so not only is moral victory hers but I suspect our buffoonery hardened her ambition. And I'll happily offer her tea at the Ritz to celebrate that positive outcome. Korea from here? How do we achieve a revaluation not just of London-listed stocks but of the UK as a whole in the eyes of the world? The question came to mind twice this week. First, contemplating (but not actually ordering) a 'Korean Crunch Burger' on the room-service menu of a Premier Inn, I wondered how the austere industrial powerhouse of South Korea I knew in the 1980s became so fashionable in fast food, pop music and cinema that the prefix 'K-' will these days sell almost any gimmick. Next, enjoying pierogi and vodka at the Ognisko restaurant in South Kensington's Polish Hearth Club, I recalled the downbeat post-communist Poland of the early 1990s, now a rising star of European diplomacy, tourism and even Wimbledon tennis. In both cases, a generation-long release of creativity and animal spirits has wrought startling transformation. How do we get there from here? Certainly not by following the flickering torch of Reeves and our visionless Prime Minister. But still the question should be writ large on every Westminster whiteboard.
Yahoo
15-07-2025
- Business
- Yahoo
Enough with black-hole blaming, Reeves is ignoring low hanging fruit
Raising taxes and plugging black holes, Labour's discourse ignores proven (and easier) methods to boost productivity, says Paul Ormerod The Chancellor, Rachel Reeves, has a major financial problem. Much of this is of her own making. Her relentlessly negative narrative about the UK economy has in itself created a stagnant economy. The issue she faces is how to balance the books. Or, rather, how to create the semblance of balancing the books. The amounts spent on debt interest and welfare benefits alone mean that, without truly drastic measures, the government will run large fiscal deficits for the foreseeable future. The whole discourse in government is around which taxes to raise to try and plug the black holes which Reeves has created. Labour luminaries from the past have joined in the debate. The former Labour leader Neil Kinnock has called for a wealth tax. This, we might recall, is the same Neil Kinnock who contrived to lose the 1992 election despite the economy being in recession because the electorate at the time did not trust his economic competence. Ed Balls, a former shadow Chancellor, is a serious economist. His contribution is to argue for an increase in the rate at which employees pay National Insurance, a rise in income tax in all but name. This entire debate is framed around the question of how to pay for an already massive amount of public spending in a static economy. But Balls at least appreciates that the only sustainable way out of the dilemma is to reinvigorate growth in productivity and output. He advocates for this reason a capital gains tax-style cut for people growing their businesses. Yet this is merely to scratch the surface. There are measures available to Reeves which, at relatively little cost, could do a great deal to boost productivity growth. This is an absolute imperative, given that since 2019 it has grown by barely one per cent a year. The modern theory of economic growth was developed by the MIT academic Robert Solow in a paper published in 1956. It was a pathbreaking piece for which he subsequently received the Nobel prize. In essence, he formalised the way in which increases in both the capital stock and the labour force led to economic growth. There was a third factor in his model, which Solow described rather enigmatically as 'technical progress'. By this he meant not so much innovative new ideas, but the spread of both better technologies and better ways of working to existing firms. Shortly after the paper was published, economists began analysing data to see which of these three factors made the biggest contribution to growth in practice. For the developed economies, the answer came as something of a surprise. The most important contribution to economic growth was made by existing firms using existing knowledge to become more productive. In the UK today, there is plenty of low hanging fruit in this area. Data from the Office for National Statistics (ONS) shows that the differences in productivity within companies in the same industry is quite striking. Looking at firms at the very top and those at the bottom, the former can easily be four or five times more productive. And these are companies within the same industry, usually defined very narrowly. In manufacturing, for example, there is already a network of institutes which assist SMEs to improve productivity, such as the CPI in Sedgefield, the National Composite Centre in Bristol and the Royce and Graphene Institutes in Manchester. But their total budget is tiny in national terms, a mere £300m a year. Big infrastructure announcements generate a lot of publicity, which is why politicians of all parties like them when they are in power. But a set of policies which target raising productivity in SMEs will be much more effective. Paul Ormerod is an honorary professor at the Alliance Business School at the University of Manchester and an economist at Volterra Partners LLP
Glasgow Times
13-07-2025
- Business
- Glasgow Times
Chancellor guided by ‘fairness', senior minister says of calls for wealth tax
Transport Secretary Heidi Alexander would not rule out tax rises in the budget as she toured the broadcast studios on Sunday morning. She also told Sky News's Sunday Morning With Trevor Phillips programme that Cabinet ministers did not 'directly' talk about the idea of a wealth tax – as advanced by unions and former Labour leader Lord Neil Kinnock – during an away day at the Prime Minister's Chequers country estate this week. Chancellor Rachel Reeves has refused to rule out tax rises at the budget since Labour MPs forced ministers to make a U-turn on welfare reforms, which the Government had hoped would save up to £5 billion a year. Fiscal watchdog the Office for Budget Responsibility (OBR) this week warned that the UK's state finances are on an 'unsustainable' path due to a raft of public spending promises the Government 'cannot afford' in the longer term. Meanwhile, economists have warned Ms Reeves on several occasions that her fiscal headroom – the leeway within the Government's self-imposed spending rules – could be eroded by unexpected economic turns. Ministers are committed to not raising income tax, national insurance and VAT – the three main taxes which affect working people – to pay for their plans. Former Labour leader Lord Neil Kinnock has expressed support for a wealth tax (Jane Barlow/PA) Lord Kinnock last week suggested a wealth tax could 'commend' the Government to the general public and help it bolster the public funds while not breaking its existing pledges. Union leaders, including Sharon Graham of Unite, are also pressuring ministers to consider the move. Asked by Sky News if such a tax had been discussed at the Cabinet away day on Friday, Ms Alexander said: 'Not directly at the away day.' Pressed on what she meant by not directly, the senior minister replied: 'I think your viewers would be surprised if we didn't recognise that, at the budget, the Chancellor will need to look at the OBR forecast that is given to her, and will make decisions in line with the fiscal rules that she has set out. 'We made a commitment in our manifesto not to be putting up taxes on people on modest incomes, working people. We have stuck to that.' Asked again if this meant there will be tax rises in the budget, Ms Alexander replied: 'So, the Chancellor will set her budget. I'm not going to sit in a TV studio today and speculate on what the contents of that budget might be. 'When it comes to taxation, fairness is going to be our guiding principle.'
Yahoo
13-07-2025
- Business
- Yahoo
Chancellor guided by ‘fairness', senior minister says of calls for wealth tax
The Government will be guided by 'fairness' on tax, a senior Cabinet minister said when asked if tax rises are coming in the autumn budget. Transport Secretary Heidi Alexander would not rule out tax rises in the budget as she toured the broadcast studios on Sunday morning. She also told Sky News's Sunday Morning With Trevor Phillips programme that Cabinet ministers did not 'directly' talk about the idea of a wealth tax – as advanced by unions and former Labour leader Lord Neil Kinnock – during an away day at the Prime Minister's Chequers country estate this week. Chancellor Rachel Reeves has refused to rule out tax rises at the budget since Labour MPs forced ministers to make a U-turn on welfare reforms, which the Government had hoped would save up to £5 billion a year. Fiscal watchdog the Office for Budget Responsibility (OBR) this week warned that the UK's state finances are on an 'unsustainable' path due to a raft of public spending promises the Government 'cannot afford' in the longer term. Meanwhile, economists have warned Ms Reeves on several occasions that her fiscal headroom – the leeway within the Government's self-imposed spending rules – could be eroded by unexpected economic turns. Ministers are committed to not raising income tax, national insurance and VAT – the three main taxes which affect working people – to pay for their plans. Lord Kinnock last week suggested a wealth tax could 'commend' the Government to the general public and help it bolster the public funds while not breaking its existing pledges. Union leaders, including Sharon Graham of Unite, are also pressuring ministers to consider the move. Asked by Sky News if such a tax had been discussed at the Cabinet away day on Friday, Ms Alexander said: 'Not directly at the away day.' Pressed on what she meant by not directly, the senior minister replied: 'I think your viewers would be surprised if we didn't recognise that, at the budget, the Chancellor will need to look at the OBR forecast that is given to her, and will make decisions in line with the fiscal rules that she has set out. 'We made a commitment in our manifesto not to be putting up taxes on people on modest incomes, working people. We have stuck to that.' Asked again if this meant there will be tax rises in the budget, Ms Alexander replied: 'So, the Chancellor will set her budget. I'm not going to sit in a TV studio today and speculate on what the contents of that budget might be. 'When it comes to taxation, fairness is going to be our guiding principle.' Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
