More or Less: Behind the Stats

Episode: "Could a 2% wealth tax raise £24bn?"

Date: March 26, 2025
Host: Tim Harford, BBC Radio 4

Episode Overview

This episode puts a spotlight on a claim made by Labour MP Diane Abbott that a 2% annual wealth tax on assets over £10 million could generate £24 billion a year for the UK. Tim Harford and the More or Less team investigate the validity of this statistic, delving into the math behind it, the practicalities and international context of wealth taxes, and the broader debate about taxing the wealthy. The episode also explores the challenges of implementing such a tax and discusses alternative taxation reforms. Other segments cover topics like the age of Britain's housing stock, ONS changes affecting national wealth statistics, and the surprisingly fluid calculation of the length of Lent.

Main Segment: Could a 2% Wealth Tax Raise £24bn?

(01:44–10:16)

1. Where Does the £24bn Figure Come From?

• Diane Abbott cited this figure on BBC Radio 4’s Today Programme, suggesting a 2% tax on wealth over £10 million would raise £24bn annually.
• The origin is a 2020 Wealth Tax Commission report, authored by Arun Advani, Emma Chamberlain, and Andy Summers.
• The £24bn estimate is an extrapolation based on an annual 2% tax on qualifying wealth. This calculation is grounded in serious research, though the commission did not specifically recommend such a tax.

Tim Harford (02:30): "The £24 billion is a fair extrapolation from calculations the commission made, so there is some proper maths behind it."

2. What Counts as Wealth?

• Dr. Arun Advani (03:49) emphasizes, for a wealth tax to work, all assets must be taxed equally: housing, pensions, business assets, etc., with no exemptions.

Dr. Arun Advani (03:49): "You are taxing houses, you are taxing pensions, you are taxing business wealth ... all of the full value of wealth."

• Exemptions are "kryptonite" for wealth taxes; the wealthy redirect resources into exempted assets, undermining tax revenue and fairness.

3. The Practical Challenge: Exemptions & International Evidence

• Exemptions and special treatment have consistently undermined wealth taxes internationally.
• Dan Needle, former lawyer and head of Tax Policy Associates, is skeptical that an exemption-free wealth tax is achievable.

Dan Needle (05:34): "There's no wealth tax in the world that works like that."

Tim Harford (05:37): "Why not?"

Dan Needle (05:38): "There have always been exemptions, limitations, restrictions ..."

• Politically, influential business owners frequently succeed in lobbying for exemptions, weakening the tax and shifting the burden onto the merely affluent.
• Cites France as an example: exempted business assets, resulting in less revenue; later abolished the tax (06:34).

4. Lessons from Other Countries

• Dr. Advani (06:58): UK as "second mover" can learn from global mistakes—mainly that exemptions or loopholes drastically reduce effectiveness.

Dr. Arun Advani (06:58): "At some point, if you want one, you have to build it properly. And if you're not going to build it properly, it's not worth doing."

5. Avoidance & Revenue Loss

• Even a well-designed tax would face avoidance, notably by the ultra-wealthy changing residency.
• Wealth Tax Commission estimated 7–17% of the tax base could be lost to avoidance at a 1% rate (07:22).

6. Annual vs. One-Off Wealth Tax

• A one-off wealth tax, implemented as a surprise, would face less avoidance than an annual levy—though it’s a one-time windfall.
• Dr. Advani and Dan Needle both agree a one-off is more effective post-shock (e.g. after COVID), but less suitable for ongoing funding (08:47).

Dr. Arun Advani (08:47): "The best solution ... would have been a one off wealth tax rather than either an annual wealth tax or rather than say a change in income tax or national insurance contributions."

• Annual taxes covering a large population are not favored; recommend fixing existing taxes on wealth (like capital gains) instead.

7. Alternatives: Improving Existing Wealth Taxes

• Dan Needle enumerates broken aspects of land taxes, stamp duty, capital gains conversions, and inheritance tax avoidance.
• Argues for political will to enforce existingwealth taxation rather than inventing a new tax.

Dan Needle (09:48): "If there was the political will to tax wealth more effectively, we could do it. But you don't need a wealth tax to do that."

Key Quotes & Timestamps

| Time | Speaker | Quote | |---------|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------| | 02:30 | Tim Harford | "The £24 billion is a fair extrapolation... so there is some proper maths behind it." | | 03:49 | Dr. Arun Advani | "You are taxing houses, you are taxing pensions, you are taxing business wealth ... all of the full value of wealth." | | 05:34 | Dan Needle | "There's no wealth tax in the world that works like that." | | 06:58 | Dr. Arun Advani | "At some point, if you want one, you have to build it properly. And if you're not going to build it properly, it's not worth doing." | | 08:47 | Dr. Arun Advani | "...the best solution ... would have been a one off wealth tax rather than either an annual wealth tax or... a change in income tax or national insurance." | | 09:48 | Dan Needle | "If there was the political will to tax wealth more effectively, we could do it. But you don't need a wealth tax to do that." |

Additional Content

Britain's Old Housing Stock

(12:24–18:07)

Key Points

• The UK has the oldest housing stock in Europe: 38% of homes built before 1946 (EU average: 22%).
• Historical context: Industrial Revolution saw a boom in terraced housing, most still standing today.
• Post-war building surge (semi-detached houses), but house building rates have dropped dramatically since the 1970s.
• Why it matters: Older housing is less energy-efficient and difficult to retrofit; old stock is a symptom of not building enough new homes.

Notable Quotes

Jane Goddard (14:41): "If you wanted to pull down a street of terraces ... you would have to get permission from every single person in that street."

Jane Goddard (17:49): "1.5 million homes is a relatively small increase ... as we already have something in the order of 80% of the housing stock that will still be here in 2050."

ONS, Flawed Accounting, and Missing £2 Trillion

(19:58–25:05)

Key Points

• Media claim: ONS made the UK £2 trillion poorer through accounting changes.
• Reality: No one lost wealth; the ONS revised its method for valuing pension wealth, reducing the official number.
• IFS economist Stuart Adam says the new method undervalues pensions by using GDP growth instead of market interest rates.
• Takeaway: Wealth statistics are volatile and methods matter, but actual pensions haven’t changed.

Stuart Adam (22:04): "They estimate that pension wealth is over a third lower than they previously thought."

The Length of Lent: 40 Days, 46 Days, or Something Else?

(26:35–30:41)

Key Points

• The period of Lent varies historically and denominationally: 40, 46, or even 55 days.
• Sundays are often not counted in fasting, causing confusion.
• The number 40 is symbolic in biblical tradition, not always literal.
• Expert Prof. Alison Salverson links "40" to major biblical events, e.g., Moses on Sinai.

Professor Alison Salverson (29:19): "40 is not a literal number ... It takes on a kind of symbolic and elusive value."

Memorable Moments

• Tim Harford’s dry humor surfaces when discussing celebrity farmland buying and Jeremy Clarkson (04:20), and again in referencing the Council of Elrond while discussing Lent (27:32).
• The recurring motif that practical implementation always falls short of neat academic theory, especially for wealth taxes and national accounting.

Timestamps — Main Segments

• 01:44 – 10:16: Wealth tax discussion: origin, feasibility, and alternatives
• 12:24 – 18:07: Why are British houses so old?
• 19:58 – 25:05: ONS, accounting changes, and the £2 trillion wealth debate
• 26:35 – 30:41: How long is Lent, really? Biblical numeracy and symbolism

Conclusion

The £24bn figure for a 2% wealth tax is plausible as a mathematical extrapolation only if the tax applies without exemptions — a scenario not observed in any real-world example. Enacting such a tax is fraught with political and practical challenges, and history shows the very wealthy often escape the bite. The show ultimately points toward reforming existing wealth taxes and closing known loopholes as more effective and politically feasible routes for the UK. The episode also reinforces that both statistical measures and religious traditions are more about convention and symbolism than hard, unchangeable facts.