It’s time for the Liberal Democrats to embrace limitarianism

Ed Davey recently summed up the essence of liberalism: empowering those without power and holding the powerful to account. These words are not just a rallying cry—they are a blueprint for action. If the Liberal Democrats truly want to live up to this mission, we must embrace limitarianism as a core economic policy, and we must do it now.

Limitarianism is the idea that there should be an upper limit to personal wealth. Beyond a certain threshold, the accumulation of wealth ceases to serve individual well-being and begins to entrench inequality, distort democracy, and hoard resources that could benefit society as a whole. Elon Musk, the member of the US government who just performed a Nazi salute at the inauguration of the world’s most powerful politician, and incidentally, the richest man alive, earns the national median wage every single minute of every single day.

Limitarianism is not about penalising success but about acknowledging the rigged system that allows such grotesque inequality to prevail, and ensuring that no one has so much that their power undermines everyone else’s freedom.

For liberals, this principle resonates deeply. Excessive wealth in the hands of the few corrodes opportunity, stifles competition, and places an unacceptable level of control over public discourse and political decision-making. It entrenches privilege, creating a society where those with the deepest pockets call the shots while everyone else is left behind.

We’re living in an age of unprecedented inequality. Billionaires have amassed fortunes so vast that they wield more power than many governments. In the UK, inequality is fracturing communities, hollowing out public services, and undermining trust in democracy. While ordinary families struggle with the cost of living, the super-rich are buying influence in Westminster, dodging taxes, and stashing wealth offshore.

The Liberal Democrats cannot stand idly by. We must seize this moment to set ourselves apart with a bold, radical policy agenda that speaks to the values Ed Davey articulated. Limitarianism aligns perfectly with our commitment to fairness, freedom, and empowering the powerless.

Adopting limitarianism would mean championing policies that cap extreme wealth and redistribute resources to where they’re needed most. This could include:

• A progressive wealth cap, where earnings and assets beyond a reasonable threshold are subject to redistribution, perhaps the effective banning of billionaires.

• Windfall taxes on excessive profits, especially in industries like energy, where companies are exploiting global crises.

• Reinvestment in public services, funded by fair taxation on the wealthiest individuals and corporations.

• Strengthening democratic safeguards to prevent wealth from translating into disproportionate political influence by enforcing a cap on individual donations.

Most of the above aren’t unfamiliar territory for the Lib Dems, some are or have been party policy before but the moment has now arrived to communicate this package as part of a liberating manifesto.

This isn’t about punishing the wealthy; it’s about restoring balance. A society where no one is too rich to be accountable and no one is too poor to live with dignity is a society that embodies true liberal values.

By embracing limitarianism, the Liberal Democrats have the opportunity to speak to the millions of people disillusioned with the status quo. Labour dithers over wealth taxes, and the Conservatives are squarely on the side of the elite. We can position ourselves as the party that isn’t afraid to challenge concentrated wealth and power.

Limitarianism offers a compelling, values-driven narrative that cuts through the noise: the fight for fairness, freedom, and opportunity. It’s a policy that would resonate with young people, renters, small business owners, and anyone who feels locked out of the system, defeating the scourge of right-wing populism in the process.

The Liberal Democrats were founded on the idea that power should rest with the people, not concentrated in the hands of a few. Limitarianism is the modern expression of that ideal. It’s a bold, progressive policy that can energise our base, attract new supporters, and deliver real change for the people who need it most.

Ed Davey is right: liberalism is about empowering the powerless and holding the powerful to account. So let’s be honest about where power really lies, and be honest about what it will take to wrestle it back.

There is a sea change of anti-billionaire sentiment coming, and the Lib Dems need to ensure they are on the side of the many, not the elite few.

* Chris Whiting has recently rejoined the Liberal Democrats and is a former Communications Officer of the Young Liberals

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41 Comments

  • This article mixes up two things: Wealth and power.

    Preventing people from earning more than a certain amount is an awful, authoritarian, illiberal idea. I mean, what are you going to do? Tell rich people that if they work any more, their earnings will be confiscated? Aside from the affront to liberty implied by denying those people the freedom to continue to work and enjoy the fruits of their labours, the consequences of that will be either (a) those rich people stop working and therefore stop creating wealth in the UK, or (b) those rich people move abroad and create wealth for other countries instead. Look at someone like Bill Gates – incredibly wealthy and has quite legitimately earned every penny of that wealth by creating software that massively benefits every one of us.

    On the other hand there is a serious question of people who have become mega-rich then using that wealth to wield excessive political power, for example by financing politicians. Elon Musk is a good example. Can’t really complain about his wealth – he acquired it by setting up successful companies and innovating to make his customers’ lives better. But that he has used his wealth to buy a social media platform and use it to give himself outsized influence, potentially subverting democracy? THAT is an issue and is the kind of thing we need to address.

    We should to limit individual power, not individual wealth.

  • Craig Levene 21st Jan '25 - 2:28pm

    Globalisation makes that impossible to implement. Persons/Businesses/Finance just up sticks and moves. Need to concentrate on things we can change, & not on things that are unenforceable..

  • Nonconfomristradical 21st Jan '25 - 4:05pm

    @Simon R
    “Preventing people from earning more than a certain amount is an awful, authoritarian, illiberal idea”

    But…. suppose someone is earning a lot through criminal activities……?

  • Peter Martin 21st Jan '25 - 4:46pm

    “We should to limit individual power, not individual wealth.”

    How can you do one without the other? Elon Musk is powerful because he’s a billionaire. Take that away and he’s just like you and I.

    It’s not just individuals and who we need to restrain. Finance companies like Blackrock plan to buy all the land and real estate they can and rent it back to us. They’ll be lobbying like crazy for new PFI deals. They want us to rent what should be government buildings like schools and hospitals. We already rent our railway rolling stock this way.

    Liberals used to understand the danger of the rentiers at one time!

    PS Not sure why we need a new word like ‘limitarianism’. My spell checker isn’t familiar with it and has flagged it as a mistake. Why not use the word ‘socialism’?

  • Matthew Radmore 21st Jan '25 - 6:07pm

    Limitarianism is going to be a very hard-sell.

    It’s hard enough for the general public to understand that Liberalism isn’t anything wacky and was pretty mainstream during the UK transition to democracy.

    Wealth is not the problem per se. It is undue influence that is the problem, old and new media ownership, think-tanks, easily nobbled politicians, and a poor level of general and philosophical education.

    Western Democracy was founded on a tacit agreement that the wealthy would not be punished by governments, provided that they stay out of politics.

    It would be much better to strictly keep the wealthy out of politics rather than chasing after their assets. Although this could be a negotiating threat.

    I grew up in a bottom decile household in the 70s/80s, I’m not especially wealthy today, I don’t admire wealth, and I don’t chase it. But I still hang-out down the pub with everyday people, so I’m just being realistic about what is politically viable.

  • Steve Trevethan 21st Jan '25 - 6:18pm

    Might we start by energetically demonstrating that the recent and current, ubiquitous policy of Neoliberalism is considerably responsible for the actual rise to power of “Jackboot-Free Fascism”?

    According to Investopedia, Neoliberalism seeks and delivers:
    1) fiscal austerity
    2) Deregulation (Not least safety and financial eg, Grenfell)
    3) Reduced government spending (Which damages and destroys essential infrastructures)
    4)) Reduces the range and depth of government activities and involvements which are a mainstay of practical democracy (which could be so improved by having more a more democratic democracy eg. Not Ignoring the Jenkins Report.)
    4) Harms to workers rights (and pay)
    5)) Basing socio-economic policies and attitudes (and their absence) around “markets” which are not “free” because, without regulation, they are always dominated and manipulated by the rich/powerful/influential
    6) Gives increasing power lessening tax payments to corporations ( which have and do accelerate accelerating socio- economic and power inequality

    Neoliberalism has also drastically, probably intentionally, thé range of politico-social inputs and conversations,, official and unofficial. Maybe the dumping of those who expressed a difference of perception/opinion by Messrs. Johnson and Starmer are examples of such?
    ,
    4)

  • Daniel Stylianou 21st Jan '25 - 7:21pm

    @ Nonconfomristradical that would be a criminal offence, rather than a policy issue. Earning money through criminal activity is an offence under the Proceeds of Crime Act 2002. Completely separate issue and it doesn’t do to confuse the two.

  • Ken Westmoreland 22nd Jan '25 - 4:31am

    I’d never heard the term ‘limitarianism’ before – it seemed to have fallen out of use by the late 1960s, but has been recently revived by the Dutch political philosopher Ingrid Robeyns in her book Limitarianism: The Case Against Extreme Wealthhttps://guardianbookshop.com/limitarianism-9780241578193/

    Perhaps this is what Chris has been reading. I confess I’d initially misread it as ‘libertarianism’, not that I would accuse Chris of such a thing!

  • Mick Taylor 22nd Jan '25 - 7:07am

    An interesting piece. Back in my Young Liberal days, I argued the case for a maximum as well as a minimum wage, because I felt that ultra high incomes are, by their very nature, a major cause of inequality. Incidentally, the spread of incomes was far less then, because high incomes were subject to very high tax rates of up to 98% – and that was under a Tory Government. I also posed the question ‘why do people need such ultra high incomes?’ 55 years later, I still don’t know why such huge wage differentials can be justified. The other problem is that back then, most rich people grumbled about taxes but paid up. Now, the uber rich and their neoliberal allies seek every way, legal and illegal, not to pay tax and we are out of the EU largely because the same people poured billions into the Brexit campaign in order to avoid the tax directive of the EU that would have forced them to pay their fair share.
    People deserve to be paid well for what they do. During my lifetime what is demanded in wages has grown out of all proportion. How can anybody possibly justify being paid millions to run a Water Company or a power company? It’s time to change tack and consider that enough is enough and bring some sanity back into levels of income.

  • Peter Martin 22nd Jan '25 - 8:44am

    “Western Democracy was founded on a tacit agreement that the wealthy would not be punished by governments, provided that they stay out of politics”.

    This is news to me!

    Marxists would describe the ruling class as also being wealthy class. So the leading politicians of the day have always been drawn from the wealthy/ruling class or have had the approval of the this class. If you don’t have it, then any change in the power structure is going to be extremely difficult, to put it mildly.

    The ultimate sanction against any democratically elected government has to be the military coup. It has to be a last resort though. There are other options which will usually have the desired effect. It didn’t actually go as far as a coup under the Wilson government in the 70s but it was seriously discussed at high levels.

  • Matthew Radmore 22nd Jan '25 - 10:33am

    @Peter Martin

    “Western Democracy was founded on a tacit agreement that the wealthy would not be punished by governments, provided that they stay out of politics”.

    “This is news to me!”

    No, you have understood my broader point correctly. How about putting the same idea like this:

    1) Leave political discourse and politicians to make the decisions.
    2) Leave the democratic process alone.
    3) Not unbalance over influence day to day choices.
    4) Respect the laws of the land.

    Meanwhile the politicians are cautious not to overly interfere on the interests of the wealthy and powerful.

    ========================

    However, it does seem to me that the rich and powerful have broken their side of the bargin, the problem with this is that national politics is much less democratic than it was 50 years ago, the Prime Minister cannot replace the Monarchy and Aristocracy, or dislodge their descendants from owning most of the land and much of the capital. The ex-Imperial British Establishment is firmly in charge.

    Then what are we doing here? What is the point of being LibDems, other than speaking the truth? Perhaps we should all move to a more democratic country where our efforts have a chance?

  • Making the point of Government to ‘Limit’ or ‘Control’ people is what makes revolutions – after a lot of pain. It turns the masses against those with power.
    Beyond defence against enemies, I think Governments should enable with infrastructure, in the broad sense of the word, and provide laws to stop theft and harm. That includes fair market competition, breaking monopolies where possible. However, there can only be one water pipe into my house and only one reservoir etc.
    If an entrepreneur become LEGALLY very rich, then that is the way it is in a free society. We preserve and admire stately houses etc. built by the ultra rich. In the industrial age, the enlightened ultra-rich would re-invest in new inventions, industries and products increasing GDP.
    Historically, ALL governments, including liberal ones, have been influenced by very rich individuals who donate to the party on the stated/unstated understanding that their views will be listened to. Unfortunately, human nature seems to be that ‘we’ listen to those with wealth and fame. I remember an interview with Marlon Brando where he stated that he didn’t understand why the media would ask his opinion on some political matter just because he was famous. Political parties use endorsements from these celebrities to get some of their starduct and perhaps their message to the masses.
    There are societies, such as in Scandinavia, where the ultra rich exist but the culture demands humility from them. We need to modify our culture.

  • Margot Wilson 22nd Jan '25 - 1:01pm

    The point is if you have enough money to invest, you don’t need to work. Wealth IS the problemr per se. We need to tax it because gross and increasing inequality harms everyone. I agree with Mick Taylor.
    I have just finished reading Gary Stevenson’s memoir ‘The Trading Game’ as someone interested in fairy tales it really resonates with me. My grandsons and I love his videos, which explain the dangers we are in.
    Gary voted Green at the last election. We are often in competition with the Greens.
    We need to tax wealth and the super rich, an idea which goes down well on the doorstep, if we are to achieve our Liberal aims.

  • Matt (Bristol) 22nd Jan '25 - 3:02pm

    Part of me would like to see a serious revival of a more robustly redistributive taxation system, which would go some way to achieving the aim you set out, although not the letter of the policy.

    But in terms of its electoral impact, I’m sorry, but I can’t help but re-summarise the headline of this article as ‘It’s Time To Adopt An Easily Misunderstood Policy Associated With Communist Dictatorships, Says Member Of What Is Widely Perceived As A Centrist Party That Is Keen To Attract Former Conservative Voters’.

  • @ Mohammed Amin. “frankly, the proposals in this article are nonsense”.

    They might be, Mohammed, but given that you left the Conservative Party fairly recently could I gently suggest that you show a bit more tolerance of debate in you new party.

  • In all the debates one element seems to get forgotten, the country is broke. We are in a debt spiral, virtually out of control. But it gets pushed under the table and instead it is spend, spend, spend. If Trump succeed’s in his “beautiful dream” and he might, we may end up having to borrow from the States and Canada once again, but at what rate of interest?

  • Chris Moore 22nd Jan '25 - 6:35pm

    Come on, David, Mohamed is not stopping debate: he’s putting HIS view.

    We will only make headway by winning over voters and even better members of other parties.

  • Nonconformistradical 22nd Jan '25 - 8:03pm

    “Mohamed is not stopping debate: he’s putting HIS view.”

    Maybe but is he implying that he can do exactly what he likes, irrespective of its impact – however damaging – on other people?

    Not what I would call liberalism. Some form of libertarianism maybe….

  • >” witness India’s miserable economic progress from 1947 until the Manmohan Singh reforms of 1993.”
    Shame the economic benefits seem to have benefited the few and not the many; It can and probably should be argued, economic progress is only of real value to a society if it benefits the majority of the members of that society.

  • Peter Davies 22nd Jan '25 - 8:18pm

    @Roland Absolute poverty in India has dramatically declined since 1993. A new rich and a large middle class has emerged but the poor are better off too.

  • Chris Whiting 23rd Jan '25 - 9:36am

    Hi all,

    Thanks for your feedback, both for and against, I appreciate all of your perspectives.

    However, I would argue that I haven’t mixed up anything. The undeniable fact is that wealth is power — this is the very heart of the issue.

    While you’re right to distinguish between wealth and political power, the two are deeply intertwined. Wealth enables individuals to accumulate significant power in many forms, from political influence to shaping public opinion, buying media, and securing access to policymakers. In essence, extreme concentrations of wealth allow individuals to exert influence that far exceeds the impact of their labour or contributions to society, undermining the democratic principle of equal political voice.

    In a society where a few individuals or corporations control vast resources, the democratic ideal of equal representation simply does not exist.

    Just look at the other comments on this thread critiquing the efficacy of such a policy. How have we allowed ourselves to become beholden to a clutch of billionaires who we daren’t effectively tax for fear they will leave? While, I reject this hypothesis as a twin of the ‘trickle down’ fallacy, the fact that that fear rules us is already an exertion of this unequal power.

    The notion of limitarianism — setting a limit on the amount of wealth any individual can accumulate — is not authoritarian. Rather, it is fully within the tradition of social liberalism.

    In fact, it is a key aspect of promoting a fair and functioning democracy. Limiting extreme wealth would ensure that power is not unduly concentrated, allowing for more equitable participation in both the economy and the political system. This doesn’t mean taking away the ability to work or earn, but rather ensuring that no one has such an overwhelming stake in the system that they can tip the scales in their favour at the expense of others.

  • Chris Whiting 23rd Jan '25 - 9:37am

    As mentioned, individuals like Bill Gates have certainly contributed to society through their innovations, but we must also recognise that wealth can be used in ways that undermine the public good. And, better yet, what democratic right does Bill Gates have to dictate the research spending budget equivalent to a medium size nation?

    Limitarianism, as proposed in the social liberal tradition, aims to curtail the ability of individuals to wield disproportionate power, ensuring that their wealth does not give them a power that erodes the very democratic freedoms we seek to protect.

    Thus, the goal is not to punish or penalise wealth creation, but to ensure that it serves the public good rather than undermining the equality and liberty of all citizens.

    Limiting wealth concentration is a necessary measure to preserve the health of our democracies and ensure that no one person or group can hold too much power over the rest of us.

    If we look merely look at the scales of which we are talking, which I believe are generally poorly understood. A million seconds is 12 days, a billion seconds is 32 years. Yet, we allow people to have hundreds of billions of pounds or dollars and pull the levers of democratic governance.

    We have all sorts of limits in society that are not considered ‘illiberal’ or ‘authoritarian’ – speed limits, drinking ages and the like – the idea of a maximum income is, in my view, essential to prevent society’s drift in to post-democracy.

    On the point of chasing Conservative voters, I think the scales above show that the vast vast majority of even very rich people would have little to worry about with my proposals above, but even so there would clearly need to be a discussion on how these ideas are best communicated to voters. That said, I have long argued that the endless pursuit of small c conservative voters is the wrong choice for this party, unless we intend to become conservatives ourselves.

  • Chris Moore 23rd Jan '25 - 9:57am

    We offer a liberal approach, that can appeal to many who have voted Conservative.

    We try to persuade them that liberalism is more in their and society’s interest than conservatism. We did this pretty successfully at the last GE.

    We will get nowhere by going back into the comfort zone and having policies that only appeal to LD activists.

  • Peter Martin 23rd Jan '25 - 10:23am

    If very wealthy people somehow ceased to exist, and I mean only in the financial sense, would the rest of us be better or worse off?

    In other words, do we really need the money of the wealthy? Rachel Reeves clearly thinks we do. This is why she is chasing the private sector for money to build what should be publicly owned infrastructure. Others would argue that if we have workers and steel and other necessary resources we can build bridges, railways etc. Money, which is effectively a creation of government in any case, isn’t the limiting factor.

    Of course from the POV of the wealthy who would like to see a guaranteed high return on their ‘investment’, it makes good sense to lend to Government. It’s risk free. So if it is risk free why can’t Government use their own money?

  • @Chris Whiting – thanks – it’s nice to see the author of an article engaging with the comments. A couple of points in reply:

    What right has Bill Gates have to determine a research spending budget? I’m assuming you’re referring to the money donated by the Bill and Melinda Gates Foundation. My answer would be, he has, through his own innovation, created a huge amount of wealth – so of course he has the right to spend his earnings from that created wealth in whatever legal manner he wishes. It’s the job of Governments to make sure that what is legal matches what is ethical/not harmful to society/not damaging to democracy. I’d argue that latter point is where many countries need to improve.

    For authoritarianism: Take an entrepreneur who has set up a hugely successful company and earned enough to reach the maximum permitted limitarianist wealth. Limiting wealth means you have to tell that person that they are now not allowed to earn any more money, and if they do any more work all their further earnings will be confiscated. How is that not authoritarian? The irony is, people who are so good at wealth creation that they manage to earn that much money are exactly the people who we’d want to encourage to work more, so they create more wealth for the country.

  • Chris Whiting 23rd Jan '25 - 2:45pm

    @Simon R – thank you, Simon – I’m glad to see people engaging constructively with the ideas.

    I think the crux of the issue is that I’m talking about obscene levels of wealth, and the super rich. I’m talking about the undue influence of billionaires not millionaires or even multi-billionaires.

    To highlight scale again, if every person in the world was as tall as their income, the median person in the world would stand at 5 foot 6. The poorest would be just under 2 feet tall. The top 1% would be 70 feet tall, the richest 0.01% would be 1.4 miles tall, Elon Musk would be 390 miles tall.

    These scales are simply unsustainable in a democracy, for good (which you may argue in Gates’s case) or bad, no private citizen should have that disproportionate level of influence.

    Secondly, as much as wealth creation is important, the arguments do seem (at least partly) allegorical with trickle-down models, which we know are largely discredited. Billionaires may create wealth for others to a point, but they cannot do it to the scale they do a) morally, or b) without reliance on public systems which regular people fund.

    Billionaires actually pay a lower effective tax rate than those on median incomes because much of their extreme wealth is tied up in assets or sitting idle in a bank account whilst others go without the basic essentials.

  • @ Peter Davies – “Absolute poverty in India has dramatically declined since 1993. A new rich and a large middle class has emerged but the poor are better off too.”

    I wonder what the wealth pyramid looks like and how it compares with other countries.
    The challenge is stopping the wealth from being used to consolidate ownership and control which as we have repeatedly seen in many countries (Indian, Pakistan, Bangladesh and others) lead to families regarding themselves as some form of “royalty” and thus a small step to political corruption.

  • Zachary Adam Barker 24th Jan '25 - 2:14pm

    My instincts are to vote against embracing limitarianism.

    My own perspective on being a liberal is that we accept there are those who will earn a lot more than others. But with the caveat that those at the lower end are able to live fulfilling lives.

    Attempt to make limitarianist economies have normally been functionally an illusion, since those with political connections can normally get out of them, like the Nomenklatura class in Communist Countries.

    I have no problem with a free market provided there is genuine competent regulation, decent wages, effective laws against monopolies and a genuine consequences for gambling with other peoples money.

  • Mick Taylor 25th Jan '25 - 3:50pm

    Far too many people on this thread just don’t get it. People with extreme wealth and income can buy social media platforms, buy politicians, buy political parties and even buy some governments and wreck democracy. They are changing the terms of political debate by suppressing dissent.
    Just because Keir Starmer and his red Tories can’t see that doesn’t mean that Liberal Democrats should go along with this attempted takeover and destruction of our democracy
    Limiting people’s income and wealth is vital if we are to continue to have a functioing democracy. The way we do that is through taxation, penal if necessary. Ideally, we should do this with cooperation of other countries, especially the EU.
    What must be done, immediately, is to control who can give money to political parties in the UK and how much. I suggest that donations be limited to payments per year of a maximum of £50,000 and that no payments be made by any business without the full agreement of their shareholders nor by any trades union without the full approval of their members. No person not on the electoral role in the UK should be able to donate money at all.
    We must then work out a tax system that is progressive and taxes people more the higher their income and wealth.
    Please remember that evil can only flourish if good people do nothing.

  • @Mick I think we do get it. For my part, I’m perfectly well aware of the problems with misinformation on – for example, X. But the solution to that is better regulation of social media to prevent misinformation spreading, no matter who owns the social media platform. The solution to the risk of buying politicians is open and transparent obligatory registers of interest etc. And so on. None of that requires illiberal restrictions on people’s ability to earn money. Indeed you demonstrate that yourself by (rightly) arguing for restrictions on donations to political parties: A solution that likewise requires no restrictions on anyone’s income.

  • Mick Taylor 25th Jan '25 - 8:35pm

    SimonR. Research has shown that the higher the disparities of income and wealth, the worse the social cohesion and equality and the greater social unrest and extremism in politics. Today’s huge disparities we now have dwarf any in my lifetime and they have got steadily worse since Mrs Thatcher in 1979.
    From WW2 till 1979 there was a cross-party consensus that high taxation of high incomes was both necessary and desirable in order that people paid according to their ability for public services. Post Thatcher we now see an increased unwillingness for the rich to pay anything like a fair share and increasing extremism in our politics.
    No-one expects utilitarian equality of income and wealth, but there is no justification for the levels of incomes now paid to captains of industry, top people in the privatised utilities, bankers, people in technology and spivs in the city. Doctors, dentists, even Prime Ministers earn much less. It is not right or acceptable for some people to be paid millions whilst many pensioners eke out a poverty filled existence on £12,000 or less. So, yes, it is both necessary and desirable for incomes to be capped and wealth to be redistributed. Trickle-down economics, the theory that justified high incomes and wealth, because they benefitted the poor as well have long been proved to be a chimera.
    We Liberals used to stand for affair and equal society and believed in progressive taxation. It’s time to do so again.

  • Mick Taylor 25th Jan '25 - 8:37pm

    Oops. a fair and equal society!

  • @Mick: Does the research distinguish inequality at the top of the income scale or at the bottom? It’s very plausible that inequality at the bottom of the scale could lead to lack of social cohesion, if it means that people can’t afford essentials that they see others around them buying, and I would imagine that is what the research is showing up. But capping incomes will do nothing to address that problem. Capping incomes will mean something like that some millionaires will (depending how high the cap is) only have say £50 M instead of £100 M, and since those people will already be living very different lives from most of the population, that will make next to no difference to social cohesion. But it will suppress enterprise and innovation, thereby harming GDP, as well as sending a chilling and utterly illiberal message that if you are successful in business, then the Government won’t let you work, innovate, etc. and enjoy the fruits of your labours.

  • Mick Taylor 26th Jan '25 - 8:14am

    The research shows that if the gap between rich and poor widens – as it has in spades since the advent of Thatcher – then there are problems. It also refers to something called the geni coefficient, that is a measure of inequality. This has been getting steadily higher as we become a more unequal society.
    I disagree fundamentally with your assertion that limiting income through taxes stifles innovation and enterprise. I met many innovators during my time as a venture capital manager and whilst most innovators want to be successful, they don’t expect to make a fortune (and most of them don’t). Their interest is focussed almost exclusively on innovation and the thrill of creating something new. Your assertion has been a false narrative put about by neoliberals and their bedfellows (like Laffer for example) to try and persuade people that tax is a bad thing and not the lever for decent public services.

  • Peter Davies 26th Jan '25 - 8:59am

    The UK Gini index for disposable income is broadly where it was at the start of John Major’s premiership after a sharp rise under Thatcher. In the absence of sharp changes in government policy, it goes up when the economy is doing well and down when it is not. The financial crisis that brought the previous Labour government down reduced inequality more than any of their policies. While Gini is a good measure of inequality in general, Simon is right that inequality between the poor and the comfortable is probably more relevant to social cohesion.

    Some posters appear confused between income and salaries. It is possible (if not sensible) to cap salaries but capping gross income is impossible. Since investment income and capital gains are the main sources of income for the rich, taxing those is the most effective way of reducing inequality without a war, revolution of financial crash.

  • @Mick, please don’t confuse tax with capping incomes. I’m not arguing that tax is a bad thing – I’m arguing against capping incomes/wealth. Tax (just like many things in life) is a very good thing up to a point, but becomes bad if done too much – and you can argue about where the crossover is. Personally I’d get uncomfortable at any marginal direct tax rate above 50%, because of the psychological impact that at that point the Government is taking more of your income than you are being allowed to keep. But capping incomes (or equivalently, taxing at 100%) is definitely way beyond the point at which excessive tax will be doing more harm than good.

    I’m not sure why you claim the laffer curve is a false narrative, since the principle is definitely (and rather obviously) correct: The tax rate at which you maximise revenue must be less than 100% because 100% on everyone will literally kill all economic activity. It’s just that it’s debatable where the maximum actually lies.

  • Peter Martin 27th Jan '25 - 7:04pm

    @ SimonR,

    “….. the laffer curve…. (in) principle is definitely (and rather obviously) correct: The tax rate at which you maximise revenue must be less than 100% because 100% on everyone will literally kill all economic activity. It’s just that it’s debatable where the maximum actually lies.”

    Not really. There isn’t really a maximum when all taxes are aggregated. It’s the total that matters, from macroeconomic perspective, rather than the individual components. The Government creates money by spending it into the economy and destroys it by collecting it in taxation.

    The more money that is created the more is removed as it is collected in taxation. The rates of taxation determines how fast it is removed.

    If its removed too quickly we have a recession. Too slowly and we have high inflation.

  • Peter Hirst 3rd Feb '25 - 1:22pm

    Could lmitarianism be expanded to include excess power? Recent events have shown that we cannot rely on our leaders to use power wisely. Only a codified constitution will allow future citizens to sleep soundly knowing that we have rules in place to prevent excess use of political power.

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