Millionaires 'leaving the UK' is a false narrative - it's time to introduce a wealth tax

The exodus of the rich, already purported to be in action, hasn’t occurred. Plus: Zoë Grünewald on Lucy Powell as Labour's beacon of hope.

The number of millionaires is rising – largely thanks to a boom in housing wealth. Pic: Unsplash

Another week, another cabinet split between those in government committed to the manifesto it was elected upon and those to the right of the party determined to chase Reform into their own oblivion.

This time, the subject of the division is wealth taxation.

With the country unable to fully fund its public services and growth stagnant, what would happen if Rachel Reeves found the confidence to introduce a mansion tax, or even more aggressive forms of taxation on privately held wealth?

Among the proposals under discussion for November’s Budget is a levy on properties worth at least £2m, leaving owners facing an annual charge of 1 per cent of value over that threshold – a £10,000-a-year fee for homes worth £3m. Many economists are calling on Reeves to go even further and undertake a full review of the UK’s property taxes, to bring them in line with reality. Billions of pounds of unearned wealth are held in private property, going largely untaxed while much of the country finds it a growing struggle to find a safe and affordable home for their families.

Anxious lobbyists are warning the chancellor and prime minister that adding to the tax burden of the wealthiest comes at great risk to the British economy. They claim millionaires are leaving London and the UK in record numbers: wealth tax policies may be well intentioned but they won’t boost overall tax income to the government, they say, because those due to pay them will simply get up and leave. They are a disincentive to growth and a cap on aspiration. One source hyperbolically told the Independent that the issue has descended into “patriotism versus prejudice”, claiming the mansion tax was designed by those with a “hatred of success and wealth”.

These claims are nonsense, of course. There is a well-observed general mobility among the highly wealthy that is a condition of wealth itself: with money comes choice, and the freedom to move around the world as suits your circumstances. Yet of the hyper-rich who have this freedom, few actually use it. Though the number of millionaires leaving the country has risen slightly, an analysis of millionaire mobility by the Tax Justice Network found the number leaving represents 0.3 per cent of the country’s more than three million millionaires. To put it another way, nearly 100 per cent of millionaires have not relocated to a new country since 2013. The flight of the rich, already purported to be in action, hasn’t occurred at all.

So what’s going on? The number of millionaires leaving is rising a little, but the proportion is negligible, because the number of millionaires living in this country is rising too – largely thanks to a boom in housing wealth.

In the last year, more than 3,127 properties in the UK tipped over the £1m mark meaning there are now a total of 702,580 homes valued at £1m or more across Great Britain, according to Savills – a 34 per cent increase on the last five years. To put it another way, one in every 42 homes is now valued at £1m or more. Around 160,000 are worth £2m are more.

While house prices in general are stagnating, homes in London and the South-East that were once of the mid-market are creating a whole new generation of millionaires and multi-millionaires. In once impoverished areas such as Hackney and Peckham, modest terraced and semi-detached houses now tip their residents into the category of the very well-off.

Most of these properties are not owned by highly-mobile people; they are ordinary families who happen to own homes that have grown rapidly in value, entrenching wealth at a dreadful cost to our wider society – and often to the life chances of their own family members. This is exactly why property wealth taxation is now so desperately needed.

The number of millionaires is rising, but as the Tax Justice Network demonstrated, the percentage likely to leave is so negligible it is tantamount to zero. Crucially, with the improvements granted to public services by one or more forms of wealth taxation in the budget, over time it is likely that millionaire mobility will become less than zero. With a growing economy and a stable public sector, we will attract wealth inward again too.

Reeves has all this information. She now needs to find the confidence to use it and stand up to the factions of her party being swayed by the anecdotes and the aggressive lobbying of those who wish to protect their unearned wealth to the detriment of the functioning of our society.

The Labour manifesto promised a fairer tax system. What is fairer than a tax on private assets that have inflated through the pure luck of time and place?■

About the author: Hannah Fearn is a freelance journalist specialising in social affairs. She was comment editor of The Independent for seven years, and has previously worked for The Guardian, Times Higher Education and Inside Housing. She has a special interest in inequality, poverty, housing, education and life chances.

---

The election of Lucy Powell as Labour’s deputy leader was more than just an internal reshuffle. Our Westminster Editor Zoë Grünewald explores why her appointment signals both a potential correction in the party’s trajectory and a warning bell:

Thanks for reading today’s newsletter, it’s great to have you with us. Looking ahead, this weekend The Lead will publish an investigation into the murky world of Facebook groups that are monetising the rhetoric of hate on social media. Sign up so you don’t miss it, and become a paid subscriber for exclusive access to a podcast episode with Westminster Editor Zoë Grünewald and our weekend’s reporter Katherine Denkinson.

Natalie, Luke, Zoë, Ella, Padraig, Ed & The Lead Team