Wealth taxes: The failed idea that refuses to die

Telegraph

16 hours ago

The Government's enforced U-turn on welfare reform comes at a cost. Every Minister is saying so, from the Chancellor down.
On Sunday Bridget Phillipson, the Education Secretary, joined the chorus with a warning to Labour backbenchers that plans to remove the two-child benefit cap may have to be abandoned as a consequence.
Why should we believe such threats when the Government caves in at the first sign of unease among its own MPs? If they want the cap removed, at a cost of around £3.4 billion a year, they are clearly able to force Sir Keir Starmer into doing their bidding.
There is no overarching narrative within which decisions are being taken to persuade backbenchers that stopping the rise in the welfare budget is an economic imperative. What they want to hear is that spending on benefits will continue to increase and the money will be found from Labour's preferred source, the so-called rich.
Neil Kinnock, the former party leader, made this very point yesterday. He said that the Chancellor should introduce a 2 per cent levy on assets above £6 or £7 million, something he claimed could raise upwards of £10 billion a year. Lord Kinnock added: 'It does two things. One is to secure resources, which is very important. But the second thing it does is say to the country, we are the government of equity.'
It is highly questionable whether a wealth tax would raise anything like the sums claimed by Lord Kinnick because the calculation assumes a static number of payees. But we know that around 16,000 wealthy people have already left the country taking their money with them as a result of decisions taken since Labour came to power.
We also know from the experience of some continental European countries with wealth taxes that they have had to be repealed to stop an outflow of rich taxpayers. High administrative costs, moreover, eat up much of the additional revenue.
Because it is constitutionally incapable of reining in welfare spending, Labour may now cause a further exodus of the very people who bankroll the system. But if this is done in the name of 'equity' it is something with which the party can feel happy with itself.
This is the authentic voice of the Labour Left, that what matters most is the perception of equality even if it means the impoverishment of all. It is why socialism has failed in the past, and always will.