Finance

How to save our precious public services? A windfall tax on those who got rich from Covid | Polly Toynbee

Windfall-tax the rich, Rowan Williams, former archbishop of Canterbury proclaims. Start with a one-off seizure from the top 1% and then bring in a 1% wealth tax that could yield at least £70bn a year. Time at last for the poor to inherit the earth—or at least a little sliver of it.

The last two Covid years have seen tidal waves of wealth wash into the pockets of those already possessing it, just as the cost-of-living disaster drains funds from low- and middle-income households. The pandemic should open our eyes to an already grossly unequal country suddenly engulfed in extra unearned excess.

Williams’ forceful words are actually moderate in the context of what’s happening right now: property prices are rising at the fastest rate on record and the stock market is rocketing, while low earners fall into debt. “Spiralling inequality,” he says, is “deeply damaging to our collective morale and trust.” The super-rich with “vastly disproportionate rewards” should welcome a windfall tax not as a burden but as an “opportunity to build a sustainable economy that works for everyone”. That’s optimistic. But if the rich don’t see his commendable plea in that light, surely the top 1% can be ignored electorally? There are only 250,000 households in this bracket, owning a minimum of £3.6m (although many are worth vastly more). And squeezing the very rich is electorally popular: Denis Healey denied saying he’d squeeze them “until the pips squeak”, though he did it.

Yet the electoral power of plutocrats is not in their puny voter numbers but in the command they hold of the ears of Tory ministers – especially those hyper-donors who allegedly buy their way into Boris Johnson’s secret “advisory board”. Keir Starmer, in the Observer, asks why nothing is done to clean up London as the “money-laundering capital of the world”? He suggests “Perhaps the answer can be found in the Tory party’s accounts”.

The Tories operate in a world of extreme money, bolstered by Conservative party co-chairman Ben Elliot, whose luxury concierge service, Quintessentially, has helped him bring in a stack of mega-rich – and at times questionable – donors since Johnson appointed him in 2019

Meanwhile, the government turns a blind eye to the extraordinary winnings made by some in the Covid years. What will voters think of six companies alone making £16bn in excess profit from Covid? Rio Tinto, recently in the news for blowing up two ancient Aboriginal caves in Western Australia, is handing out a $16.5bn (£12bn) dividend. FTSE mining companies have made £42bn in extra profits. The big four banks are expected to announce annual profits exceeding £34bn – and pay £4bn in bonuses. Shares in the manufacturer Premier Foods, home to Mr Kipling, have risen by 237% during the pandemic. Gambling profits have soared. These are just a few examples.

As everyone knows, while energy bills scorch households, oil and gas profits are rocketing, putting $38bn in profits into share buybacks for investors, not green investments. Labour’s last windfall tax, highly popular in its 1997 manifesto, recouped £5.2bn from privatized utilities sold off too cheaply in the 1980s . That shows what can be done if backed by public opinion.

In this explosion of asset values, Williams is calling for a windfall tax on wealth of a much greater magnitude. He is right that extraordinary times call for radical remedies. National debts are stretching towards second world war proportions – and yet unlike in wartime, the government is making no call on private wealth contributions. In wartime, wealth was conscripted, so why not now? Covid greatly widened the wealth gap, the Resolution Foundation tells me, which will have profound consequences for social mobility and income inequality in the future.

Instead, Tory MPs clamour for tax cuts, ignoring knit public services. NHS waiting lists will rise for years. Despite urgent skill shortages, further education funding will still be far behind 2010 levels by 2025. Teachers and nurses are paid less in real terms than in 2010. Pupils have 9% less spent on them in real terms than in 2010, their music, arts , sport and drama devastated. Early years are perilously neglected. “We don’t promise the moon on a stick,” the chancellor, Rishi Sunak, said recently, boasting of his prudence. Indeed he doesn’t. To him, “build back better” is all moonbeams.

A one-off windfall tax of 10% on UK wealth would yield £1tn, says Prof Arun Advani of Warwick University. That’s how relatively little taken from relatively few, just once, could fund the regeneration of everything around us that matters. But that’s probably only useful as a thought experiment in this most tax-averse country, where we are taxed less than our EU neighbours. Ed Miliband’s modest mansion tax was a lesson in how reasonable steps are blown away by lobbyists and think tanks funded by the rich. Take inheritance tax, the fairest and most hated: only one in 20 estates pays, mostly those worth more than £1m – yet the rich and their newspapers scare ordinary homeowners that it’s coming for them. Would they do that to something branded a “wealth windfall tax” on individuals?

Follow the dictum of Jean-Baptiste Colbert, Louis XIV’s finance minister: pluck maximum feathers from the goose with minimum hissing. The Institute for Fiscal Studies’ deputy director, Helen Miller, lists less hiss-inducing tax reforms with her elegant TaxLab showing how taxes are raised, with grotesque anomalies. Council tax revaluation would see bills in the north of England fall by 20%, because southerners pay a fraction of their true property values. Leveling up capital gains and rents so that all unearned income pays the same tax and national insurance would stop plutocrats disguising their income.

Basic fairness is the first step, but a loud shout from a former archbishop for windfalling the wealthy is welcome. Deliberate misinformation means too few knowing about undertaxed riches cascading into the pockets of the few, bolstering the life chances of their heirs.

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