Polly Toynbee is right to highlight the capacity for a one-off wealth tax to raise serious money (How to save our precious public services? A windfall tax on those who got rich from Covid, 23 February). But she misquotes me to say that a 10% tax on UK wealth would yield £1tn.
At the Wealth Tax Commission we studied various options for a one-off tax. In our final report we noted that a wealth tax beginning below £500,000 would be a non-starter, given the difficulties that many individuals would have in paying it. A 10% tax on all wealth would certainly not be practical, and is not something that I would support. The International Monetary Fund recently adopted our proposal for a one-off tax on the top 1% of wealth holders: those with net wealth above £2m. If payable as 1% a year over five years this would raise £80bn over the lifetime of the tax.
This tax has three big things going for it. First, it is efficient. It doesn’t discourage work, unlike the rise in national insurance contributions. Second, it is fairer than alternatives. Like Margaret Thatcher’s one-off bank tax, it also offsets some of the side effects of monetary policy. In the 1980s, high rates boosted banks’ profits. Now, low rates have boosted house and stock prices. Third, it raises serious cash. But while £80bn is a lot, it is only 2% of government revenues over the lifetime of the tax. On its own it won’t “save our public services”.