Tanya Park had an excellent article recently in LibDem Voice on the decline of The Telegraph and The Spectator, each displaying what she brilliantly describes as ‘permanent performative outrage’. But I’d like to suggest that occasionally an article comes along in The Spectator that is…. well, a bit radical!
Take the recent article by Michael Simmons, The Spectator’s Economics Editor, entitled ‘It’s a Faustian Pact: Rachel Reeves is giving bankers what they want’. It begins with Peter Mandelson’s advice to the Chief Executive of the investment bank JPMorgan in 2009, that if he was worried about a pending tax on bankers’ bonuses he should ‘mildly threaten’ the UK government.
Sixteen years on and in Simmons’ view nothing has changed. Last November Rachel Reeves was considering how to plug a gap in the public finances, and the then deputy leader, Angela Raynor, proposed a windfall tax on the banks. Nothing doing. It was small businesses that got taxed instead. Simmons concludes by saying that ‘Peter Mandelson may now be an outcast for this Labour government, but his spirit still haunts the Treasury.’
Why is Reeves so tied to Treasury thinking? Partly because Labour came to power deeply conscious of the Liz Truss debacle. It appeared sensible to keep financial institutions reassured so that they could send the right signals to international markets and ensure that the Labour Party had financial credibility. Otherwise, Reeves might end up as another lettuce, destined to wilt like her predecessor.
As a result the stamp of ‘official’ approval remains intact, but the room for manoeuvre is closed off. Reeves is trapped in her Treasury cage while the radical thinking comes from elsewhere. Think of Daisy Cooper’s proposal to replace the treasury with a growth department. ‘For too long political parties have allowed the Treasury tail to wag the political dog,’ she wrote. Cue howls of outrage from some within Labour, but this is precisely what Michael Simmons was saying. Think also of the Green resurgence. Yes, much of the ‘eco-populist’ blah-blah that comes from the Greens continues to annoy, but they have ceased focusing on their ‘core’ issues and have focused instead on increasing levels of inequality. The jibe of middle-class self-indulgence about the Greens ceased to resonate in the recent by-election. Hannah the Plumber managed to have an aura of authenticity that Keir the Toolmaker’s son could only dream of.
A couple of weeks ago, Tanya Park wrote an article for LibDem Voice on the new Gilded Age we were living in and made a case for radical reform to deal with extreme levels of wealth inequality. The progressive annual wealth tax she proposes would raise over £25 billion annually while impacting fewer than 1 in 1,000 UK residents. Of course, people will question these figures. Won’t the wealthy simply leave rather than pay? If they do, there’ll be an exit levy modelled on comparable arrangements in that well-known socialist hotspot, the United States. But surely the wealthy will be able to hide their wealth away. Really? We never seem to say that about dodgy benefit claimants. The article proposes a mandatory national wealth register to counter this.
The debate about a wealth tax will continue and we must respect the fact there are different opinions about it. What seems clear is that we cannot go on in the economic situation we find ourselves in now. Otherwise, we will end up letting power slip into the arms of the disgruntled and a Reform government that will find scapegoats rather than solutions. ‘You want a better health service? Throw all your green initiatives into the bin.’ This nonsense worked ten years ago when Farage in his big red bus said we could fund the health service by leaving the EU.
He’ll try it again when it comes to finding three billion pounds to stop the fuel tax hike. Rachel Reeves needs a lot more than that for urgent spending in areas as diverse as defence and care services. Why is it so hard to suggest that a few tens of billions could come from the growing numbers of billionaires and the tiny percentage of the population with immense levels of wealth? Would this really be a terrible explosion of confiscatory socialism? If even Michael Simmons can see that the rich know how to wrap Rachel Reeves round their little finger, there are surely enough of us willing to support a more radical economic strategy than this Chancellor is capable of.
* Mark Corner is a UK national, who teaches economic history and philosophy at the University of Leuven, is married to a Czech EU official and lives in Brussels. He has just published A Tale of Two Unions suggesting that Brexit may damage the British Union unless the UK becomes more positive about the way the European Union is structured.
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12 Comments
Thank you, Mark. That’s a very generous reading of both pieces, and I’m glad the argument is landing.
This is precisely why these ideas need to be claimed as liberal ones. A progressive wealth levy is the logical extension of a liberal commitment to genuine freedom, fair opportunity, and a democracy where political voice isn’t a function of personal wealth. The convergence you’ve identified, from the Spectator to the Greens to our own party, tells us the political space is opening. Liberals should be leading this conversation, not arriving late to it.
There are very good reasons to ensure Britain can pay its debts, and Rachel Reeves is to right to do so and right to budget accordingly.
If lenders think they won’t be repaid their money in full, they will call for it back and won’t lend any more. That would not be pretty .
The arguments about wealth taxes and windfall taxes are totally different.
“Won’t the wealthy simply leave rather than pay? If they do, there’ll be an exit levy modelled on comparable arrangements in that well-known socialist hotspot, the United States.”
An exit levy would capture money within the UK, but if imposed you can be quite sure no more international money would arrive.
The US is a different place: it is a way bigger and deeper market, comparable to the Single Market. My guess is because the US is so deeply committed to capitalism, entrepreneurs are (*) perfectly happy to seek other opportunities within the US, and that there are plenty available. After all the US just keeps growing and people keep making money.
(*) We are seeing some European (including UK) citizens people leaving the US because of Trump. it seems that if the situation gets bad enough people will remove their money despite exit levies, and I would expect that to apply to the UK too if the environment for entrepreneurs becomes excessively difficult compared to other locations.
It’s right for Rachel Reeves (or any other chancellor) to ensure tha the fincial
Unfortunately the Spector artciel is behind a paywall
“You want a better health service? Throw all your green initiatives into the bin.’ ”
When money is limited (as it is) you have to make choices.
To oversimplify, of the two I’d go for stabilising the global environment as the urgent priority. Without growth you can’t have both.
Redistribution of income from the ultra wealthy will simply not produce enough money to deliver everything demanded (defence, health, environment, education and on and on); and redistribution of capital to fund income expenditure is simply unsustainable.
An Exit Tax strikes me as a good idea in itself, and lots of countries have one. Apparently Labour are seriously considering it. It doesn’t seem fair or reasonable that you can avoid a large capital gains tax bill by simply moving somewhere warm and sunny for a few years before selling valuable assets (and then come back again, if you want).
“redistribution of capital to fund income expenditure is simply unsustainable”
There’s a case for redistribution of capital from the ultra rich to give some capital to everyone else but:
1 you’d have to ensure so far as possible that everyone’s stock of capital is not depleted; and
2 many might find this a bit too close to a middle class property owning democracy to be palatable.
I think there have been some studies of this kind of thing in Kenya around universal basic income: https://www.socialsciencespace.com/2024/05/tavneet-suri-on-universal-basic-income/
We do need a more radical strategy, IMO, but we need to be aware of the potential consequences.
First of all the govt can always repay its debts expressed as £ sterling. Anyone who has bought Premium bonds has lent money to the UK govt. I’ve bought a few recently and Rachel Reeves didn’t ring me to say that she was a bit short that month and to ask if I could possibly help her out. The UK govt is essentially a bank and lending money to it is putting money into the bank.
We all know we’ll get our money back. This is guaranteed. What isn’t guaranteed is the amount of real things we can buy with it in the shops.
The higher the interest rates the more savings the govt/bank is likely to attract and the more its debt grows. So, if the government wants to reduce its debt it should reduce the amount of interest it pays out.
If it does this then the pound will fall in value and prices will rise. We’ll be able to afford fewer imports and our exports will be more competitive. If we want balanced trade and lower debts, this is what we need to do.
But there’s an obvious cost. If we are prepared to accept it, then fine. If not we’ll just carry on, muddling through, as we are at the moment.
@ Peter Martin
“First of all the govt can always repay its debts expressed as £ sterling”
Government can print money to repay debt, but that (as you rightly say) means those who are repaid get back £s that are worth much less. If I am going to lend money on this basis I am going to want a lot more interest to compensate me for taking the risk of not getting back so much capital.
“The higher the interest rates the more savings the govt/bank is likely to attract and the more its debt grows”
Why does the debt have to grow? Government doesn’t HAVE to borrow money. And IF a government is a bank it may find lenders are unwilling to make deposits because of fears they will not get their money back at full value or at all. See Northern Rock a few years ago.
@Tristan Two things worth separating out here.
An exit levy on individuals changing tax residence is not the same thing as deterring international investment. Foreign capital flows into countries based on market opportunity, infrastructure, rule of law, and workforce quality, not on whether wealthy residents face a personal wealth tax. Switzerland has had cantonal wealth taxes for decades and manages to attract international capital just fine. The US comparison is relevant precisely because it shows exit charges are compatible with a dynamic investment environment. The mechanism matters more than the headline.
On whether redistribution from the ultra-wealthy can produce enough: you’re right that it can’t fund everything, and nobody is claiming it should. The wealth levy is one pillar within a broader fiscal architecture that includes reformed property taxation, a digital services tax, and changes to how we fund care and early years provision. The question isn’t “can this single instrument solve all public spending pressures?” It’s “should extreme wealth concentration contribute to the shared foundations that make prosperity possible?” The answer to that seems fairly straightforward.
On your third point about capital redistribution being sustainable only if the stock isn’t depleted: the annual wealth levy actually passes that test. Wealth at these levels typically grows at 5-7% a year. A levy below this rate of growth slows the rate of compounding. It doesn’t erode the base. That’s redistribution of returns, not confiscation of capital.
Finally, a tip for you…use http://www.removepaywall.com to view paywalled articles. 🙂
Thank you Michael Corner for highlighting Tanya Park’s articles.
British media on the right sees a massive opportunity in the US to grow audiences and revenues. This has absolutely coloured the tone of their coverage.
On wealth taxes,we are faced by twin challenges in Britain, we are poor and rely on foreign investors to fund day to day government spending and debt. Add the Liz Truss spectre and you have a Labour Chancellor who lacks the ambition to rip up her plans in the face of the Ukraine war and Trump tariffs exacerbated by the Iran conflict and likely UK recession.
Wealth doesn’t simply sit with the few, 40 years of unearned house price inflation has arguably had a far greater impact. We must confront the challenge that we control seats where these unearned windfalls are at their highest.
We should be reducing entrepreneurs taxes, those who create new businesses and employment,sell and reinvest. Surely we want to encourage this ! We can further tax the extraction of rents but this is more likely to fall upon pension plans. An exit tax is not a good idea.
Our focus, a better resourced HMRC,hire outgoing accountancy firms partners who focus on tax avoidance,pay them commission on the taxes they raise.It is easy to say the rich should pay, the rallying call should be those with unproductive investment in the economy should pay. This is a far larger group and raises tough questions for our party and others.
@ Tristan,
Northern Rock was a currency user so could go bust. The govt is a currency issuer so cannot.
You’re right. The Govt doesn’t have to borrow money but it must want to. Otherwise why would it offer interest to depositors?
@Pter Martin
“Northern Rock was a currency user so could go bust. The govt is a currency issuer so cannot”.
Yes, but this does not address the question of why any of the government’s (potential) creditors would accept the risk of being repaid in debased currency without being compensated for the risk of having to accept debased currency.
@ Tristan,
It’s not a question of whether they should. They obviously do. If the Govt wants everyone to save more so they can borrow more they raise interest rates. If they reduce interest rates everyone will save less.
The inflow in the capital account which compensates for the outflow in the current account will fall. The two have to balance so the outflow in the current account will fall too. So will the pound’s value as I was saying earlier.
Therefore the reason for paying out interest is to keep the value of the pound up. Which is what I was saying earlier. If we want to balance trade and have a lower debt we have to lower interest rates.