Blog: Wealth taxes could save the UK’s crumbling public services

This blog was written by Sara Hall, Deputy Director – External Affairs, Tax Justice UK

Tax Justice Scotland is seeking to promote a better conversation on tax policy. As such, the views expressed in this blog are those of the author and do not necessarily reflect the views of Tax Justice Scotland and its diverse supporters.

Watching from here in London, the recent launch of Tax Justice Scotland was brilliant to see – after all, we need all those in power across the UK to deliver a fairer tax system. 

While our focus is on driving UK-level change, we recognise the increasing importance of devolved and local tax powers to drive change too. These reforms are crucial not only for Scotland, but also to pressure the UK Government to better tax wealth. 

So, what more could the UK Government do to deliver tax justice?

The UK is rich, but deeply unequal

The UK is a very rich country. GDP per capita is higher than 85% of the rest of the world and the country is home to over 3m millionaires and 165 billionaires. 

Although rich, the UK is deeply unequal. The Equality Trust ranks the UK as the 9th most unequal country in the Organisation for Economic Co-operation and Development (OECD) – the grouping of 38 developed member countries. 

The UK’s wealth is concentrated in the hands of the rich – with 10% of the population owning 57% of the wealth. Furthermore, London is awash with dirty money. 

While wealth has concentrated in fewer and fewer hands, the UK tax system has failed to adapt. Not only does this serve to deprive the government of vital tax revenue for much needed public services, it can be exploited for the purposes of tax avoidance, evasion and money laundering. 

Tax Justice UK campaigns to change this and build a tax system that works to serve everyone. 

The UK fails to tax wealth properly

One of the key problems is that wealth is not taxed properly. Over many decades this has allowed a small number of people to acquire huge fortunes. 

Meanwhile, the cost of the state and public services – with an aging population and rising health and social care costs – is increasingly borne by working people.

The top rate of income tax for those that go out to work for a living – 45% in England and Wales, and 47% in Scotland – dwarfs the rates often paid by wealthy people on their income from stocks, shares and other assets.

For example, former Prime Minister Rishi Sunak earned £2.2 million in 2023. He paid an effective tax rate of 23% on it – that’s the same rate as the average teacher. 

He was able to do so because the majority of his income came from his financial investments which are subject to lower rates of tax.

Furthermore, the UK tax system is littered with hundreds upon hundreds of loopholes that in many instances enable the very rich and giant companies to shield and shift their wealth –  and reduce their tax bills.

Simply put, If you get your income from wealth and assets, the tax system disproportionately favours you over someone going out to work each day.

A two tier tax system

We have a two-tier tax system, where wealth is taxed at much lower rates than income from work. 

This isn’t just unfair, it is also depriving key services we all rely on – like the NHS, schools and the emergency services – of funding they desperately need.

Tax Justice UK research shows that were the UK government to introduce a minimal 2% tax on wealth, it could raise £24 billion a year. 

If Capital Gains Tax were levied at the same rate as income tax in England and Wales, a further £14bn a year could be raised.

Additionally, the removal of outdated and ineffectual loopholes, many of which simply benefit the rich and powerful, could raise billions of pounds more to be invested in public services.

This amount of money which could be raised for public services across the UK would be gamechanging. It could reverse the decline we see all around us and enable investment in healthcare, decarbonising the economy making it resilient to future shocks.

Tackling tax havens

Of course, taxing wealth more and challenging the power of the super rich in the UK needs to be complimented by action internationally. That’s why we’re part of a global movement for tax justice.

Right now, we’re focused on challenging tax havens in the British Crown Dependencies and Overseas Territories.

We’re also supporting global tax reform at the United Nations to establish a new Tax Convention. The Convention would create fairer international tax rules, including more transparency introduced into global tax reporting and greater tax cooperation. The UK government must change its stance and support the Convention.

This global fight for tax justice is just as essential as our campaigns within the UK.

Campaigning across borders

It is clear that in order to meet the challenges of the 21st century, tax has a significant role to play. The organisations backing the campaign in Scotland should take heart that they’re adding their voices to a growing chorus demanding action at UK and global levels too.

Governments, whether the devolved one in Scotland or the UK government in Westminster have sizable power to wield. They are able to use their respective powers to tax wealth fairly and make the tax system work to help ensure delivery of quality public services that benefit everyone.

In order for us to win the changes we need, pressure needs to be built in all areas of the UK and across the world. That we have energetic campaigns and dedicated organisations spread across Scotland and the wider UK fighting for fairer taxes gives us a fantastic foundation to build a fairer tax system for everyone.