One of Britain’s leading economists has warned a wealth tax would be almost impossible to implement, despite growing support for the policy in the wake of the benefits cuts unveiled by the government last week.
Paul Johnson, the director of the Institute for Fiscal Studies (IFS), warned that “no country in the world has ever successfully had a wealth tax that’s raised serious money”, saying the levy poses significant administrative problems.
It comes as new polling shows the British public overwhelmingly support such a tax, while a growing number of Labour MPs have urged the government to introduce it instead of making spending cuts.
Last week, Labour took an axe to the UK’s ballooning welfare bill, with an estimated million disabled people expected to lose their benefits.
And on Wednesday, the chancellor is expected to unveil further cuts to unprotected departments at the spring statement in order to balance the books amid tightening fiscal headroom.
Polling conducted by YouGov on behalf of Oxfam on the eve of the spring statement found more than three-quarters of people (77 per cent) would rather the government increase taxes on the very richest to improve public finances than see cuts to public spending.
A massive 78 per cent support introducing a 2 per cent wealth tax on net assets worth more than £10m, while 67 per cent think that the very richest people in the UK should pay more in tax.
Meanwhile, new analysis by Oxfam, Patriotic Millionaires UK and Tax Justice UK found the wealth of all UK billionaires soared by £11bn last year – the same amount the government has recently cut from the international aid and social security budgets combined.
The organisations are calling for a two per cent wealth tax on those with net assets of over £10m, which they claim could raise an estimated £24bn tax revenue each year.
While Mr Johnson said the tax could raise a “noticeable amount of money”, he told The Independent there would be major administrative issues which could be “extremely costly” for the government.
“You could certainly raise some billions by putting a 2 per cent tax on net assets worth more than £10m. Probably not £24bn – but it might raise you a noticeable amount of money,” he said.
But he added: “A lot of that money comes from the super-wealthy who can afford very good lawyers. And the question is, how do you determine their residence, where their assets sit… how would you value things?
“No country in the world has ever successfully had a wealth tax that’s raised serious money because of all those practical problems.”
Mr Johnson also warned that the policy would pose significant risks, as it impacts individuals who already contribute an “enormous amount of tax” to the British state and could result in them leaving.
Analysis published earlier this year showed that Britain lost 10,800 millionaires to foreign countries last year, more than double the number who left in 2023. Only China lost more wealthy residents in that period.
The study, conducted by the Adam Smith Institute, claimed the exodus was as damaging to Britain’s finances as the UK losing half a million taxpayers.
Despite concerns that such a tax could drive even more wealthy people out of the country and reduce overall tax revenue, there have been growing calls for it from within the Labour Party following last week’s welfare announcement.
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The Commons is expected to vote in favour of plans to slash benefits by the work and pensions secretary Liz Kendall, aimed at saving £5bn by 2030, much of which will fall on personal independence payment (PIP) by raising the threshold for qualification.
Responding to the polling, left-wing Labour MP Nadia Whittome – who is strongly opposed to the government’s welfare cuts – urged the government to “listen to the British public, rethink public spending cuts and ensure the very richest pay their fair share”.
“Cuts to public spending risk making some of the most vulnerable in society pay for the mess created by previous Conservative governments,” she told The Independent.
“But this polling shows that our new government could instead choose to invest in our public services and social safety net with a policy that is also hugely popular: taxing extreme wealth.”
Fellow Labour MP Brian Leishman added: “People need to see their living standards improve and my government should enact a 2 per cent wealth tax and generate billions that will do just that.
“There is an alternative to austerity and the race to the bottom it brings,” he told The Independent.
Last week, one of Labour’s veteran MPs, Diane Abbott also called for the tax, arguing that cutting welfare is “not a Labour thing to do”.
Defending the benefit cuts in the Commons, Sir Keir Starmer said: “I’ve lived with the impact of disability in our family through my mother and brother all my life, I do understand the human impact of this but the current system is morally and economically indefensible and we’re right to reform it.”
YouGov spoke to 2,257 adults between 17 and 18 March.
The Independent has approached the Treasury for comment.