In the run-up to his elevation to prime minister, it would be safe to say that Andy Burnham did not have a great reputation among investors. Last year he declared he didn’t want to be in ‘hock to the bond markets’. He also had many plans to spend billions nationalising the utility companies and reducing the cost of living. Securing Lord Jim O’Neil, a former adviser to Gordon Brown and once a senior economist at Goldman Sachs, as part of his team was meant to be a great help. And yet today we learned that O’Neil may decide against joining Team Andy after all. Why? Because, among other things, he opposes a wealth tax – and he is completely right to do so.
The new government was planning on hiring a trio of heavyweight economic thinkers, with O’Neil working alongside Andy Haldane, a former chief economist at the Bank of England, and Richard Hughes, who used to run the Office for Budget Responsibility. Now it looks like there will be only two advisers joining Burnham’s top team, and perhaps none at all. Negotiations with O’Neil stalled on the issue of a wealth tax. He doesn’t want any part of it.
Plenty of issues are open to debate in economics, but on wealth taxes the verdict is clear
Lord O’Neill is, of course, completely right about that. In the wake of the nom-dom fiasco, which imposed a huge increase in taxes for wealthy foreigners, the last thing the British economy needs right now is yet another levy that will drive away entrepreneurs and investors. But that, of course, is exactly what a wealth tax would do. An estimated 42,000 millionaires left France in the years after the Socialist former president Francoise Hollande imposed a ‘supertax’ on the rich. After Norway increased its wealth tax in 2022, an estimated 30 billionaires and multi-millionaires left the country, and that was with a relatively minor 1.1 per cent levy. Meanwhile, countries such as Ireland, Germany, France, Sweden and Finland have all tried wealth taxes and then scrapped them. Presumably that was not because they were a huge success.
Plenty of issues are open to debate in economics, but on wealth taxes the verdict is clear. They crush investment, and they raise far less money than forecast.
The worrying point is this. It would have been very easy for the Prime Minister to bring O’Neil on board by simply promising to rule out a wealth tax. After all, his experience, policy expertise, and knowledge of the markets would have been very valuable. The fact Burnham wasn’t willing to do that speaks volumes.
It might be a beefed up version of the planned mansion tax, it might be an increase in capital gains taxes, or it could be a straightforward annual levy on assets worth more than £10 million. We will have to wait and see. But it is starting to look as if a wealth tax is at least being considered – and it may be too late for even Lord O’Neil to stop it now.
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