Neil Bennett | City A.M. Notebook

The Notebook: Who’s afraid of a wealth tax?

How to get out of the fiscal black hole

It may the imminence of a new Labour Government, but tax and spend has been coming up again and again recently. More specifically I have been discussing with political and policy friends how the new Labour Government might possibly dig Britain out of the fiscal hole it is in and somehow find enough to invest in our crumbling public services.

So far Rachel Reeves, the Shadow Chancellor, has been long on rhetoric and short on policy, presumably to avoid scaring us all off. But if a new government is going to have anything to show at the end of five years, it needs to find significant sums to invest in schools, defence and of course the NHS. Simply imposing VAT on private tuition isn’t going to cut it.

The fact is that with government debt at £2.7 trillion, the public sector is broke. Local authorities are literally going broke. And additional borrowing risks sending the gilts market into another spiral.

One area that they could look to is personal wealth. Contrary to the doom-laden outpourings of the BBC, Britain’s ageing population is increasingly wealthy. These are all big numbers so I will approximate.

The net value of private housing (after deducting outstanding mortgages) has reached £7 trillion, more than 2.5 times national GDP. Private pension funds are now worth around £3 trillion. And even total ISAs are worth around £1 trillion.

Add in some other investments, deposits, etc, and collectively we have a net wealth of more than £12 trillion, because as individuals we have been as thrifty as our elected representatives have been profligate.

It is hard however to impose a tax on housing wealth since few people have access to ready cash to pay it, and it would be deeply unpopular. You could though remove or partly remove tax relief on the sale of first homes (bad luck, Angela Rayner), which could raise a substantial annual sum.

More significant though is the wealth locked in pensions and ISAs. Imagine if the new Government was to announce a one-off 2% tax on all ISAs and pensions. That would raise around £80bn in one go, and it would be easy to collect. £80bn goes a long way, even in government terms.

Now a 2% investment tax wouldn’t be welcome, but it only represents 1-2 years of an annual management charge of those funds and could be quickly replenished with a rise in markets. Personally, I would be irritated rather than outraged, like many I suspect.

Sir Keir Starmer could present this as a new ‘National Renewal Fund’ that would go to rebuilding schools, hospitals and rebuilding our armed forces, believing that would quieten opposition. And make clear this was a one-off, just as Gordon Brown did when he imposed a windfall tax on the privatised utilities in 1997.

This is radical thinking and Labour will probably be too timorous to do it. But we need radical thinking to dig public finances out of the deep hole they’re in. Better ideas currently appear thin on the ground.

Glastonbury for history buffs

If history is the new Rock and Roll, as some claim, then it needs its own Glastonbury. And it has one in Chalke, which has grown from a modest start in 2011 into a vast extravaganza of the past. This year promises to be the biggest and extravagant of the lot.

Every hot historian I’ve ever heard of is doing a talk this year, from Antony Beevor and Max Hastings to Tom Holland & Dominic Sandbrook, and there are a few wild cards such as Michael Palin and James May, on the history of the car.

Day tickets go on sale on April 22nd – and at £20 are a lot cheaper than Glasto too.

ONS: OOO

Apparently civil servants at the Office for National Statistics are threatening to strike after being told to work in the office at least two days a week. Hard cheese frankly. Remember these are the people that tried to sneak through a radical revision in our GDP numbers last year which showed we had never been the European laggard, as they had claimed for years. If they came into the office more often, perhaps their numbers would add up better.