The Blog

I Agree With Nick: The Case for an Emergency Wealth Tax is Irresistible

I agree with Nick. It's been a while since I've done so but, on the subject of a wealth tax, I cannot disagree with the Deputy Prime Minister.

I agree with Nick. It's been a while since I've done so but, on the subject of a wealth tax, I cannot disagree with the Deputy Prime Minister.

In his interview with today's Guardian, the Lib Dem leader calls for an "emergency tax on Britain's wealthiest" (to quote from the paper's headline) that goes beyond the party's current policy for a mansion tax.

"If we want to remain cohesive and prosperous as a society, people of very considerable personal wealth have got to make a bit of an extra contribution," Clegg tells the Guardian's Nick Watt. "In addition to our standing policy on things like the mansion tax, is there a time-limited contribution you can ask in some way or another from people of considerable wealth so they feel they are making a contribution to the national effort?"

"Tax is the fiscal elephant in the room. Senior politicians of all stripes daren't refer to the T-word in public...Meanwhile, apologists for austerity loudly claim that cutting spending is the best way to reduce the deficit; that taxes are too high already; and that tax increases would be unpopular with voters."

"Only 10% did not approve, and agreement was spread right through social groups, with those of the highest income being slightly more supportive than the lower. The strongest support came from those over the age of 55, with 77% in favour (47% strongly). This is an extraordinary result given that there has been no public discussion of this proposal and that the very negative consequences of the alternatives are only just beginning to emerge."

The details behind Clegg's particular wealth tax are, admittedly, sketchy. Sources close to the DPM suggest their boss will put meat on the bones of his "time-limited" proposal at the party conference in Brighton next month. Regardless, if it is to be treated as anything other than a rhetorical or populist gimmick, he'll have to say something of substance on the issue before the Chancellor's autumn statement in November.

Remember: the level of wealth inequality in the UK is even worse than the level of income inequality. Here are the facts from the Office for National Statistics (ONS):

• In 2008/10, aggregate total wealth (including private pension wealth but excluding state pension wealth) of all private households in Great Britain was £10.3 trillion

• The wealthiest 10% of households were 4.3 times wealthier than the bottom 50% of households combined

• The wealthiest 20% of households owned 62% of total aggregate household wealth

• In 2008/10, the least wealthy 10% of households still demonstrated negative values for both net financial wealth and net property wealth.

We should be outraged by such stark inequality of wealth in 21st century Britain - and we should thus welcome any and every proposal that might go some way towards reducing it.

Within a couple of hours of the Clegg interview appearing on the Guardian website last night, however, Labour's Chris Leslie had fired off an email to hacks dismissing the Lib Dem leader's proposed tax. "Nick Clegg is once again taking the British people for fools. He talks about a tax on the wealthiest, but he voted for the tax cut for millionaires in George Osborne's Budget," declared the shadow Treasury minister.

That's true. Clegg - who has marched his troops into the division lobbies behind a reduction in the top rate of income tax, cuts to tax credits and disability benefits and the closure of SureStart centres - has indeed showed himself to be opportunistic and even hypocritical. Then again, so what? Which politicians are free from such sins? Wasn't Ed Miliband guilty of opportunism and, some would say, hypocrisy for advocating a £6,000 cap on tuition fees having earlier pledged to replace such fees with a graduate tax?

And should we be surprised that the leader of the Liberal Democrats, a party that has been shedding support since the morning of 7 May 2010 and could be wiped out come May 2015, wants to differentiate himself from his Conservative coalition partners? The only real surprise is that it's taken Clegg and co so long to formulate and execute a "differentiation strategy". As YouGov chairman Peter Kellner observes in the new issue of Prospect magazine: "Most people - and a huge majority of Lib Dem deserters - say they don't know what the party stands for, and think it has broken its promises."

Whether or not the voters - especially Labour voters - agree, Clegg still sees himself as a progressive. And he leads a party that under Asquith and Lloyd George was defined by its historic and radical measures to redistribute wealth from rich to poor and challenge vested interests. So, perhaps I'm going soft, but I'm going to give Clegg the benefit of the doubt this time. Oh, and if the Lib Dem leader can convince even a small chunk of the public that his party will try and implement a radically progressive tax policy to tackle the yawning gap between rich and poor in this country (and soften the impact of George Osborne's regressive tax cuts for millionaires in the process), then he might - might! - just have a chance of saving the Liberal Democrats from electoral armageddon at the next general election.

The Labour response to Clegg's Guardian interview is, in my view, pretty bizarre; not just small-minded but self-defeating. Rather than trying to undermine, discredit or mock the DPM on this particular issue, the Labour leadership should be reaching out to Clegg, Cable and other senior Lib Dems to try and find common ground on the logistics of an emergency wealth tax - especially as Ed Miliband's new BFF, French president Francois Hollande, called for a big, one-off increase in France's own wealth tax in his campaign for the presidency earlier this year plus, as I reported in the Independent in February, his chief of staff Tim Livesey is said to be enthusiastic about the case for a wealth tax on the so-called One Per Cent.

It is also the ideal opportunity for the opposition, as the new political season kicks off, to drive a new wedge between the two governing parties which, lest we forget, came to blows over Lords reform just a few weeks ago. Despite the conservative case for a wealth tax, Tories - especially those Tory MPs "whose safe seats are dotted with fancy real estate" - aren't keen on wealth taxes - or "gesture taxes", to quote former Cabinet minister John Redwood.

"Wealth inequality is very much greater than income inequality, and widening. The bottom third of households hold just three per cent of the nation's wealth. The top third hold three-quarters of it. This inequality of wealth then cascades down the generations, potentially widening the opportunity gap."

Nick, I concur. Now, do something about it.