A group of 30 cross-party MPs has called on Chancellor Rachel Reeves to introduce a wealth tax on the richest individuals in the UK in the upcoming budget. This move, they argue, could raise £24 billion annually and prevent cuts to public services that would disproportionately affect the poorest in society.
Wealth Tax to Tackle Budget Deficit
The MPs, including former Labour leader Jeremy Corbyn and former shadow chancellor John McDonnell, propose a 2% tax on wealth above £10 million. They argue that this could be a fair way to fill a significant £40 billion shortfall in government finances. The funds are needed to avoid a return to austerity and to meet Reeves’ fiscal rule of balancing day-to-day spending with tax revenue.
Reeves has pledged not to increase taxes on “working people” by raising income tax, national insurance, or VAT. She has also vowed to keep the corporation tax rate steady. However, she is looking at other ways to raise funds, including potential changes to inheritance and capital gains taxes.
Wealth Tax as a Fair Alternative
The MPs who signed the letter, which includes representatives from Labour, the Green Party, the Liberal Democrats, and several other parties, believe wealth in the UK is under-taxed. They argue that targeting the rich with a new levy could create a significant and sustainable stream of revenue.
The letter, organized by the campaign group Green New Deal Rising, states: “This imbalance is unfair and immoral, especially in an era of climate and economic crises where public funds are desperately needed. Taxes on extreme wealth have transformative potential, and public support for them is growing.”
Public Support for Wealth Taxes
Two recent polls suggest the British public backs wealth taxes. A survey by Opinium for the think tank Demos found that six in ten people believe the government should raise more money through inheritance tax reforms rather than cutting public spending. Even among Conservative voters, 53% supported reforming inheritance taxes.
Another poll, commissioned by the Trades Union Congress (TUC), showed that 62% of voters favor increasing taxes on the wealthy to ease the strain on public services like the NHS. Only 12% were opposed to higher taxes on the rich, even if it resulted in reduced services.
Paul Nowak, general secretary of the TUC, said: “The chancellor should be encouraged by the widespread public support for a fairer tax system, especially as our schools and hospitals are facing extreme pressure.”
Inheritance Tax Reforms Proposed
The Demos think tank has put forward proposals to reform inheritance tax, which could generate £16 billion over the course of this parliament. Among the changes is a suggestion to reduce the tax rate on estates under £1 million but increase it for those above £2 million. This would shift the burden onto the wealthiest individuals while providing relief for middle-class families.
Dan Goss, a senior researcher at Demos, said: “Our proposed package would make the tax system fairer while raising the necessary revenue. The research shows that the public supports these reforms, and the government could attract broad backing by implementing them.”
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