Economy  

Ex-Tory minister calls for wealth tax

Ex-Tory minister calls for wealth tax

The challenges of an ageing UK population and rising levels of inequality between young and old mean a tax on wealth is needed, according to David Willetts, a former Conservative government minister.

Mr Willetts was MP for Havant in Hampshire for 23 years and served as paymaster general and minister for universities and science in separate governments.

He is now executive chairman of the Resolution Foundation, a think tank which looks into social inequality. He is also a visiting professor at King’s College London.

Mr Willetts said younger people now are earning less than their counterparts ten or fifteen years ago, while changes to the welfare system in that time have benefitted the old more than the young.

He said it had been normal since the Second World War for each generation in the UK to be richer than the one which preceded it, but this is now “under threat.”

Mr Willetts said: “For 30 years Britain has enjoyed a time when our large baby boomer population were at their peak earning power. But we are now at a tipping point because the boomers are growing old. Politics is going to be very different as the baby boomers age. The age of tax cuts is over.

"Instead politics will be about who pays more and how much they pay. So far our attempts to address this challenge have been clumsy, and responses hysterical – we all remember the Mansion Tax in 2015 and the Dementia Tax in 2017. But we cannot avoid this issue.

"I do not believe we can just expect young people to pay higher income taxes, picking up the full bill for the costs facing the older generation ahead of them.”

Instead he said there is a need to create a tax on the wealth of older people.

The 61 year old Mr Willetts acknowledged he is one of the generation that have gained from the higher property prices and generous pension provisions that are impacting on the prospects for the younger generation.

He said: “We are going to have to make a contribution too. And when we look at how we should do this there is one obvious source – the wealth we are sitting on.

"It is hard to tax wealth as wealth. But we can tax it as it moves in and out. And that leads us to another area where tax is poorly designed, widely abused and under-utilised – inheritance.

"I know these taxes are unpopular. But the alternatives are far worse. Our belief in universal healthcare, free at the point of use, is cherished even more than our opposition to tax rises."

The Bank of England has previously stated that the policy it and other central banks have pursued since the financial crisis, quantitative easing (QE), benefits the top 5 per cent of the population and the older segments of the population.

This is because QE pushes up the value of most assets, and the rich tend to have more assets than the poor, and the old  have more assets than the young.