How wealth taxes could fund a fairer, greener Britain

Heading into the Spring Budget, the government and right-wing press are gushing over potential tax cuts.

Labour have also said that if they win the next election, they would not raise corporation tax, or the top rate of income tax, or increase capital gains tax (the tax you pay when you sell an ‘asset’ like stocks and shares, or property).

But these are all positive and popular options to raise money from where it is most plentiful – and they would raise billions. These billions are urgently needed to fund and upgrade all the stuff tax pays for – from clean air and water to health, education, transport, and much more.

Here’s how politicians up for election this year could tax wealth to fix the climate, and the other big problems the UK is facing.

Most UK millionaires and billionaires pay tax at lower rates than ordinary working people

The UK taxes income at a higher rate than it taxes wealth.

In our current tax system, the bottom 10% of earners have an effective tax rate of 44%A tax rate is a level at which the government imposes taxes. It's generally expressed as a percentage of the value of what's being taxed e.g. income, savings, profits., which is more than twice as high as those in the top 0.01% (21%).

For example, last year Prime Minister Rishi Sunak made £2.2 million in earnings. But he only paid 22% tax on it – the same rate as an average teacher.

This is because, as with most rich folks, the majority of his earnings came from his financial investments (£1.8 million). When you sell shares from these investments you pay capital gains tax – so it’s likely that the prime minister paid just 20% tax on these gains. Had Sunak made £1.8 million from working, he would have paid more like 45% in income tax.

This means that a billionaire, who got rich from investments or rising property values – i.e. not actually working for it – would pay a lower percentage of tax on their income than the secretary or cleaner in their office.

Taxing wealth more could help fix the cost of living and climate crises in the UK

We’re repeatedly told that money to fix the ongoing cost of living and climate crises just cannot be found.

Labour recently slashed its £28 billion per-year funding pledge to drive green growth in the UK. They reduced it it to the equivalent of around £5 billion per year – apparently due to the state of the UK economy..

Borrowing to boost growth through green infrastructure investments is sensible. These investments will pay for themselves over time. But another way to fund some of the green measures we urgently need is to use the money paid into the treasury as tax.

This could help fund things like reduced fares for public transport and green skills training for workers. It could also support communities in the Global South dealing with devastating floods and storms.

It’s only right that the richest individuals and the biggest corporate polluters are taxed more. This would allow everyone to benefit from the opportunities of the green transition, and be protected from the intensifying impacts of climate change.

Companies like BP and Shell are announcing sky-high profits, and the super-rich are richer than ever. But despite this, politicians across the spectrum seem to believe there’s no money to protect the poorest in our society.

Prime Minister Rishi Sunak said recently, in a speech in which he slashed some of the government’s plans to get the UK to net zero, that “it cannot be right for Westminster to impose such significant costs on working people especially those who are already struggling to make ends meet”.

We agree – so why not properly tax wealth, or even the corporations causing climate damage instead?

The next government could raise billions through a wealth tax

The next government could start by making capital gains tax (that’s the tax taken from the profit made when selling an asset… and who has all the assets?!) equal to income tax (the tax taken from your paycheque).

This could raise up to £15.2 billion per year. And this is just one example of how taxes could be increased on wealth in the UK.

So why don’t they? It’s a political choice.

Think back to the 2008 financial crisis: the Labour government stepped in to bail out the banks in order to save the global and UK economy. After the 2010 election, the coalition government and subsequent Conservative administrations used that intervention to justify 13 years of austerity politics. 

According to the Tories, the banks had failed, and the UK public would have to pick up the bill. A decade-and-a-half later, we are still told that we need to accept crumbling schools, record NHS waiting times, pensioners riding buses to keep warm and parents being forced to rely on foodbanks to feed and clothe their kids because, apparently, ”there is no money”.

But the combined wealth of Britain’s billionaires had skyrocketed from £53.9bn in 1990 to more than £653 billion in 2022.

So there is plenty of money. It just needs to be taxed, and invested back into the country.

The people want a wealth tax – and even the UK’s millionaires are asking to be taxed more

Last year Patriotic Millionaires (an organisation representing some of the richest folk in the UK) projected the words “tax our wealth” onto the Bank of England.

They were calling for a 2% tax increase on those with assets over £10 million, which could raise £22 billion per year. This would cover the average salary cost of more than 600,000 nurses a year.

Their call is a popular one. Recent polling from YouGov found that 78% of voters support an annual wealth tax on those with assets worth over £10 million, including 77% of Conservative voters and 86% of Labour voters. A further 62% supported equalisation of tax rates on income from work and income from wealth.

In fact, 64% of voters support keeping taxes as they are or increasing them, while just 16% say they want tax cuts if it means cutting public services.

Tax is a tool to create a more equal society and to help pay for things that benefit us all. A fairer tax system could mean better education, a properly funded NHS, clean streets, rivers and coastlines.

This is not utopian idealism, this is how economies operate in many countries already. Scandinavian countries see some of the highest tax rates in the world, and they consistently rank in the top 10 of the World Happiness Report.

Our country is deep in many crises – from the cost of living crisis to the costs of climate impacts. A fairer tax system is an important part of our route out of it.