In his summer economic update (8 July 2020) the Chancellor, Rishi Sunak, announced a package of measures that could cost the Treasury up to £30 billion. These ranged from a new ‘Kick Start Scheme’ to get young people into work, through to investment in green infrastructure and the opportunity for everyone in England to enjoy 50% off a meal in August (subject to a £10 per person limit at participating restaurants).
These measures were in addition to steps that the Government had already introduced to protect British businesses, jobs and specific sectors of the economy. In fact, according to the Office for Budget Responsibility, the final bill is likely to be more than £300 billion just for the current financial year (April 2020-21).
The Government argues that these measures are necessary in order to prevent the even greater losses that would occur if it did nothing. Nevertheless, they have resulted in increased speculation from pundits and the media in terms of how the country will repay the debt the government has accumulated.
One prediction is that a new tax will be levied on the most wealthy in society, although how and where is a much debated topic. Such a move would be highly controversial for a Conservative government, and indeed has recently been scotched by the Prime Minister. Nevertheless, there is increasing speculation, not least from influential former head of the civil service, Gus O’Donnell, that some form of wealth tax will be necessary and that the government is considering such a move.
A new wealth tax would be supported by the general public, according to a recent poll by You Gov. Sixty-one per cent of those recently surveyed said they would support a tax on those with assets in excess of £750,000 (excluding pensions and the value of their residential property). Only 14% of those polled said they would be against such a move.
According to the Guardian newspaper, a group of 83 of the world’s richest people have also come out in support of permanently increased taxes on them and other members of the wealthy elite to help pay for economic recovery from COVID19. They are quoted as saying: “We do have money, lots of it,” and urged world leaders gathering for a G20 finance minsters and central bank governors’ meeting to: “Address global inequality and acknowledge that tax increases on the wealthy … are essential for a viable long-term solution.”
Of course, we will probably know no more with any certainty until the Chancellor makes his next major scheduled economic update due to take place in the autumn. You can be sure we will be keeping a keen eye on developments, and will let clients know if there are any major changes afoot that are likely to affect their investments and financial planning.
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Source 1: https://www.bbc.co.uk/news/business-52663523 Source 2: https://citywire.co.uk/new-model-adviser/news/summer-statement-government-rules-out-wealth-tax/ Source 3: https://www.theguardian.com/news/2020/jul/13/super-rich-call-for-higher-taxes-on-wealthy-to-pay-for-covid-19-recovery