9th August 2020
Chancellor Rishi Sunak – is a wealth taxing budget likely?
The UK economy is tanking, there is no two ways about it. Redundancies in the past week alone include Hays Travel, DW Sports, Pizza Express, Currys PC World and WH Smith. Many others have only been hanging on due to the coronavirus furlough scheme which is now being phased out as employers have to contribute to pension and national insurance costs. By October, wage subsidies in any shape or form will be over, leaving businesses to make their own way without government support.
The virus is not a crisis of the government’s making but the response to it, being too slow to lockdown, too slow to provide adequate testing and too slow to deliver personal protective equipment, is certainly at the door of the government.
The package of measures introduced by the government to mitigate the crisis is likely to cost upwards of £300bn in additional borrowing in this financial year. Even so, an estimated 25% was wiped off national output in March and April alone. The prospect of 4 million unemployed by the end of the year is not an unrealistic one.
Chancellor Rishi Sunak is preparing for an Autumn Budget in October when it is widely expected that measures to set out who ‘pays’ for the cost of the pandemic will be articulated. The traditional Tory approach in these circumstances has been to punish the poor. The outcome of the 2008 banking crisis was ten years of austerity, in which job prospects, wage levels and local services were suppressed in order to pay off the banker’s gambling debts.
The fact of thousands being furloughed and millions potentially facing the prospect of job loss is a clear indication of who is already paying for the crisis. Redundancies may be on the rise everywhere else but the 15 best paid executives in the technology sector alone have a combined income of more than $83bn.
Older, highly educated and highly paid workers, many working from home through the crisis, have been able to save money. Bank of England data suggests that household deposits in bank accounts have increased by almost £70bn since the onset of the pandemic.
At the other end of the spectrum it is inevitably a different story. In poorer households, especially where there have been job losses, savings are a dream. It is estimated that up to £6bn will be owed in unpaid Council Tax, utility and credit cards bills.
The cost to local authorities, always the area to assist the poorest in our communities, runs into the millions for each local authority, with choices to either cut jobs, services or both inevitably looming. Rent arrears from Council house tenants are mounting, while homelessness is likely to increase once again as temporary support measures are withdrawn.
The obscenity of capitalism’s disparities is further compounded by the most recent figures for UK wealth, measured by financial and property wealth, which stands at a record £14.6 trillion on latest official figures. The top 10% richest people control almost half of this wealth; the poorest 30% control as little as 2% of all wealth.
The case for systemic change, which brings control over wealth and power into the hands of those who genuinely create or support that wealth creation, could not be clearer. While asking workers to make the leap from resisting the pandemic to supporting the case for social revolution may be a step too far for some, there will be many for whom the iniquities of the system have become all too real in recent months and will be open to such conversations.
Sadly, this is not a path down which the current Labour Party leadership is likely to go. Kier Starmer’s most recent priority has been to pay off Labour HQ staff, who worked systematically to undermine the leadership of Jeremy Corbyn. Opinion polls still put the Tories in a strong position, in spite of the mishandling of the pandemic and mismanagement of the economy. So far Starmer’s strategy, even with its limited objective of getting Labour back into office, is not working.
The very least that should be expected from Labour in the current circumstances is the demand for a wealth tax, hitting at least the top 1% richest people in Britain, to help alleviate the impact of the crisis upon the poorest communities. These are not uncommon in other capitalist economies including, Portugal, Belgium, the Netherlands, Norway and Switzerland.
Spain imposes taxes on assets above €700,000 while France raises €2bn a year from wealth taxes paid by the 150,000 richest households.
A recent YouGov poll found 61% of the public supported a tax on those with assets in excess of £750,000, excluding pensions and the value of their residential property, with only 14% against such a tax. City University’s tax reform advocate Richard Murphy has argued a wealth tax could raise as much £174bn, which could go towards paying down record levels of borrowing.
As measures to address the impact of the crisis go, even a wealth tax would be a limited one. However, it would genuinely raise finance and symbolically it would shift the emphasis of who pays to those who can afford to, those who have been least affected by the pandemic and those who do not earn or deserve the wealth in which they revel.
At the very least, Labour need to take up the cause and make it clear that they are on the side of the many, not the few.