The Taxing Wealth Report 2024 is published in its final, complete form, this morning. It seeks to answer the question that every journalist loves to ask of every politician, which is ‘how are you going to pay for it?', whatever 'it' might be.
What we know is that all our leading political parties, and Labour most especially, are acting as if they still believe Liam Byrne's claim, made in 2010, that ‘there is no money left'.
The Taxing Wealth Report shows that by making up to thirty relatively simple changes to existing UK taxes, up to £90 billion of new tax revenue could be raised a year, entirely from those who are well off or who are straightforwardly wealthy. Only those in the top 10% of income earners should be affected.
A summary of the proposals made in the report is available here.
Some of the suggestions made, and the amounts that they might raise in additional tax, are as follows:
1) Charging capital gains to tax at the same rate as income tax would raise £12 billion of extra tax per annum.
2) Restricting the rate of tax relief on pensions to the basic rate of income tax, whatever tax rate a person pays, would raise £14.5 billion of extra tax per annum.
3) Charging VAT on the supply of financial services, which are inevitably consumed by the best off, could raise £8.7 bn of extra tax per annum.
4) Charging an investment income surcharge of 15% on income earned from interest, dividends, rents, and other sources might raise £18 bn of extra tax per annum. Lower rates could, of course, be charged. This estimate assumes no such charge on the first £5,000 of such income a year, with a higher allowance for pensioners.
5) Charging national insurance at the same rate on all earned income, whatever its amount above the existing minimum, might raise up to £12.5 bn of extra tax per annum.
6) Investing £1 billion in HMRC so that it might collect all tax owing by the UK's 5 million or so companies when 30% of that sum goes unpaid at present might raise £12 billion per annum.
In addition, the report suggests that if the tax incentives for saving in ISAs and pensions were changed so that all new ISA funds and 25% of all new pension contributions were required to be saved in ways that might help fund new infrastructure projects in the UK, including those linked to climate change, then up to £100 billion of funds might be made available for that purpose a year.
The great fear amongst many people in the UK at present is that Labour might form a new government this year but will not change anything because of their commitment to harsh fiscal rules that appear to promise more austerity. The Taxing Wealth Report 2024 shows that this austerity is not necessary. The existing tax system only needs to be made a bit fairer and the funding required to transform our society would be available.
Download the report
The report is available in three lengths (click to download the version you want):
Links
Why wealth is seriously undertaxed in the UK
Summary of the proposals
The tax and savings impacts of the recommendations made in the Taxing Wealth Report 2024 are as follows:
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With large numbers flying around all over the place it is perhaps worth noting the scale of these suggestions. In aggregate the funds released (£197bn) exceed the entire budget for the NHS (£181bn)
Of course, changes in taxation will bring changes in behaviour and not every change suggested would be implemented but you clearly demonstrate that we could IF WE CHOSE TO have better public services.
I wonder, could we pick just one measure and pin politicians down and ask “why not”?. Why not start with No. 1 on the list.
So, Rachel Reeves, why DO you think it a good idea to give tax relief to higher rate tax payers to save in their pension?
The ones I highlight are the headliners
And you are right – this is a list to pick from. Not all are needed, as yet.
Out of curiosity
If we were to restrict tax relief on pensions to the standard rate of income tax and then use the money released to increase the State Pension what sort of increase would that produce?
You did suggest £5000 pa if all pension tax relief was abolished
Very quick back of the envelop figure is £1,000 per pensioner
And although it is not an exact like-for-like comparison,
The French retire at 62 at get twice the UK pension. Luxembourg, Belgium and Spain get 3x.
The amount is a political decision.
Can’t possibly imagine Starmer responding to a question on why the difference other than the country’s run out of money or can’t afford it! We need to crowd fund him a Johnson Fridge to hid in!
Congratulations on completing it Richard, compulsory reading for all MPs and political journalists!
This is a must-read by every political party and politician. There is no excuse for ignorance.
Well done Richard!
Thank you
It has been a mega effort – because I never realised the potential for change that exists until now
I see the Guardian’s trying to pump up Starmer this morning by saying he’s going to create lots of new homes. No mention of where the funding’s going to come from and why if he’s gone back on his word about urgently funding Milliband’s Green Deal because of lack of money he’ll not do the same for a much needed home building programme. The Guardian really needs to get on board with your Taxing Wealth Report to stop letting Starmer off the hook!
https://www.theguardian.com/commentisfree/2024/apr/05/labour-housing-plans-keir-starmer-houses#comments
Hopefully the links to your Taxing Wealth Report and video can be sent out to journalists especially the Guardian! Hopefully this will help to put paid to Starmer excuses!
Watch this space re the Guadian….
I have emailed my MP about your excellent report.
Thank you
“Restricting the rate of tax relief on pensions to the basic rate of income tax, whatever tax rate a person pays, would raise £14.5 billion of extra tax per annum.”
No it wouldn’t. As you’ve excluded employer contributions from the changes, employment contracts will change. Instead of (say) an employee earning being offered a contract of £75k and contributing £6k to his/her pension while the employer also contributes £6k, the employee will be offered a contract of £69k, contributing nothing to his/her pension while the employer contributes £12k.
With respect, that is simp;ly not going to happen
No employer is goinmg to do that – because it would, of course, be barred. That would be easu to do with a targeted anti-avoidance rule
Oh really? How many employers will be prepared to wholly fund an employee’s pension, in either public or private sector?
David is living in his own little fantasy world
Richard,
It is a triumph just to arrive here. And the fact is, through your Blog, Twitter and your currency in news media: you have an audience. That is leverage. The rest can be worked on.
John
I really appreciate that
Thanks
Richard
“all new ISA funds… were required to be saved in ways that might help fund new infrastructure projects in the UK”
What happens when people want to withdraw their ISA savings? In 2019, for example, while £43bn was invested in cash ISAs, £47bn was withdrawn. What happens if that happens in, say, 2030? That’s £0 available to invest in new projects and the Government having to find £4bn cash, which presumably it won’t have if it has invested previous funds in infrastructure.
Your claim is not supprted by the ISA data
That is because you ignore that most funds withdrawn from ISAs go straight back into new ISAs, simnply subject to different rates of interest
I use the HMRC ISA data
What data are you using?
And why not try to get things right?
I wonder if you polled ISA holders and asked them as to whether they are happy restricting their choice to just investing into State projects i wonder what the response would be? And of course whether this would force a significant change in behaviour? You have penciled in £100bn into your figures from this so it is central to whether your numbers work.
If they got a decent market rate and a 100% guarantee of repayment they would be more than happy
Tell me why they wouldn’t be when lending to banks is so risky that government guarantees are already required?
The real question is why do people want to lend to anyone else?
“most funds withdrawn from ISAs go straight back into new ISAs”
Then that’s not new funds to invest is it? You’ve claimed there would be £70bn to invest every year. If much of what is invested in ISAs is simply recycled ISA investments, it’s not new. Seems like there’s a massive hole in your claim of £70bn new funds to invest each year.
The rule would apply to all new accounts
I acknowldege the piint you make in what I have written and what I propose is unaffected by it
You really are not very good at this stuff and are wasting my time
Richard – congratulations – and as already said – it should be compulsory reading for all politicans and journalists/commentators.
It cuts right across the BBC/Tory/Labour/MSM daily mantra that ‘there is no money’, so it would be a miracle for it to be headlined , or given the prominence it deserves.
Hopefully as awareness ( and links) spread, it will permeate the zeitgeist and will be addressed and discussed.
In 1984 terms the Taxing Wealth Report is a Thought Crime. To say ‘there is money’ is a Thought Crime and should not be uttered.
BBC interviewing Labour always encourage them to say what they will do – about housing, NHS, etc. – as a lead in to the killer ‘but there is no money’ challenge.
BBC Editorial Guidelines say they are ‘to inform’ and ‘not to mislead’, which means that they ought to show at least some curiousity as to whether there may actually be money after all.
Congratulations again – go forth young man!
Thanks
Brilliant report Richard, it’s great to have a resource like this that answers the inevitable question “where is the money coming from” for any public spending proposal aiming to improve public services.
On a different but related issue, I wonder if you saw the FT piece today by Soumaya Keynes on Jamaica’s government debt reduction “success”. Jamaica “halved its government debt-to-gross domestic product ratio from 144 per cent between 2012 and 2023” the article says, and looks at whether there are lessons there for other countries, referring to a couple of papers by economists. Keynes isn’t convinced, but the glaring omission from the article for me was any reference to the profile of Jamaica’s public debt profile. From what I can discover, a significant proportion is US$ denominated, presumably IMF and World Bank loans, rather than local currency. This crucial consideration seems to be missing from the analyses. Reducing foreign debt, which may well be odious debt, is a very different matter from cutting sovereign “debt”, aka the money supply / savings opportunities. Why on earth wouldn’t economists distinguish the two? Makes you wonder whether they even know the difference!
I read it and thought about using it here, buit this week has been diminated by the Taxing Wealth Report 2024.
I agree, most of the debt is dollars.
I think she should read another ouece in the FT this week by Martin Sandbu where he says our obession with repaying debt is misguided.
Sent a copy to my local (Conservative) MP suggesting that he use it as a bludgeoning tool when in opposition.
🙂
Hi Richard, this is a genuine question and something that confuses me about two strands of your blogging/posting etc. On the one hand you draw on ( a version of) MMT and argue governments don’t need tax to spend. They can generate the money themselves to invest and pay for a range of public services. Tax, if my understanding is correct, is used to manage inflation. Yet on the other hand you produce reports like this which show us where the money can come from to pay for investment and public services etc. This report, whether intentionally or not, gives weight to the idea that spending must be costed and paid for, which seems the opposite of your posts on MMT and where money comes from. I wonder if you can comment on this apparent contradiction.
Might you try this?
https://taxingwealth.uk/2023/09/08/the-taxing-wealth-report-2024-and-modern-monetary-theory/
The reality is that MMT requires that if we say the government must spend more it must find more ways to reclaim that money from the economy.
And MMT does not say we should be indifferent to the distributional failings can address.
I am genuinely baffled that those who think they understand MMT do not get this
“The reality is that MMT requires that if we say the government must spend more it must find more ways to reclaim that money from the economy.”
I still think there’s an issue here of defining “real resources” to include the fact they can be made more productive requiring less automatic taxation matching. This of course in a way is Adam Smith’s old “division of labour” argument except “labour” today includes automated machinery, computers, software and dare I say it AI. I’m arguing that we don’t know the taxation requirement because of uncertainty in productivity and therefore must accept we fly taxation as a society by the seat of our pants.
OK perhaps slightly off topic.
Would abolishing NI contributions and incorporating into Income Tax make the system simpler and avoid all the avoidance of people trying not to pay any NI contributions.
If we have a spare ten years to manage the transition – maybe
BUT that puts us out of line with international norms, not least on tax rates, and causes lots of problems with pensioners and the idea of contributory benefits like the OAP
So, yes, maybe. But I wanted things that can be done now.
I read your blog every day and have read your books and articles over the years.
Many thanks for all the work you been putting into this, but I have a question; if taxes do not fund spending, how will raising taxes help the funding crisis? Is the proposal that taxes raised in your report will be hypothecated?
I clearly have to address this issue – and will
But the simple reality is that taxes may not fund spending but unless if you spend more you tax more then you get inflation very quickly
The issue is addressed in chapter 16 of the report – 8n some detail, and in more than one sub-section. But hypothecation is not needed, except re capital. Instead tax is needed to keep the economy in balance.
I will do blogs and videos on this next week, I promise
Many thanks for that. One of the difficulties I have is the when I say to someone that taxes don’t fund spending but taxes are required to balance the economy, the response is a shrug as if it makes no difference if taxes come after spending or as Thatcherism would have it, before.
The difference is that the real constants, could if managed properly, allow better investment and better mobilisation of the resources we need.
Not unconstrained spending, but better spending.
But I always come across the response that says; “So, what you’re saying is that (sentences that start this way always go onto to assert the opposite of what you have actually said) government can spend without limit…printing money…Weimar etc” and I have to unpick all the things I have not said!
It feels like the “there is no money” trope is deep seated and we need a similar 4 word slogan to dismantle it.
I have printed off your tax report for reading and scribbling on and will pay particular attention to ch 16
Thanks Keith
I agree with the difficulty
I will do more to address this
Ch.16.1, p.369: “The principle of horizontal tax equity requires that all increases in the financial well-being accruing to people in equivalent circumstances within a population be taxed in equal amount whatever the origin of that increase in financial well-being might be.
To put this in context, it should not matter whether this increase in financial well-being arises from employment, self-employment, a rent, a return on savings in whatever form paid, a capital gain or, maybe, a gift. Each of these activities increases the financial well-being of the recipient and in that case if a tax system is to be equitable there should be no discrimination in the amount of tax paid by persons in equivalent circumstances if they are to enjoy an increase in their financial well-being for any of these reasons”.
There is another way I wish to develop the point Mr Slater makes, albeit more tenuously. Think of the passing of a law by Westminster. I pick the Criminal Justice Bill (CJB), not to debate the most controversial issue of rough sleeping, but to make a more general point. The CJB contains new powers for police/local authorities to stop so-called ‘nuisance rough sleeping’ in England and Wales. Three major contentious issues have been raised about the CJB: new powers and offences created to stop ‘rough sleeping’ and ‘nuisance begging’ (clause 49); transfer of international prisoners (Clause 29); and detention following on powers to Amend 2022 Proceeds of Crime Act (Schedule 4).
Westminster likes to huff and puff about what government can afford (both Government and Opposition), but then passes new Acts of Parliament, giving no thought at all to the issue. My argument is essentially that all new Acts of Parliament should be required to provide a specific and detailed Schedule as a condition of being passed; containing the resources required to to implement the provisions of the Act. The assumption that the resources already exist is untenable. If Parliament does not believe new resources are required, they must identify precisely what it is that the police and local authorities will no longer be doing, in order to provide the resources to implement the provisions of the new Act. This alone would require Government to discuss the resource issue in detail with police and local authorities; ex-ante the Act. Currently it doesn’t do either.
For example, in the case of the CJB, it is the police and local authorities that will be required to implement it. What resources have been allocated and directly provided to the police and local authorities to implement the new Acts new provisions? What detailed discussions have taken place with police and local authorities to identify the new resources to be applied; or what activities will be sacrificed? I will hazard the answer: none.
The new Act will merely throw new demands on police and local authorities, without any new resources. The effect? It will make outcomes even worse, and create new divisions. It will add to the anger and stirring up of resentment, and create new culture wars; by criminalising rough sleeping and begging (much of it attributable to failures of government) and making people angry by failing to implement the law – gratuitously adding to the unsupported problems of police and local authorities.
This begins to look like the deliberate creation of chaos, rather than good government. Parliament itself requires a complete overhaul.
Now that is an idea…….
Why not?
Hi Richard,
Will you be releasing audio versions of the reports?
No
But I will cover most of the recommendations