296. Gary Stevenson- how would a wealth tax help those on low incomes?

0:01I don't myself see how a 2 % wealth tax fixes any of that. I'm not saying that's not a problem. It is a problem. Put yourself back in my shoes 2011. You're trying to work out why the economy is weak. A bunch of rich people will just leave the UK. Presumably your view is let them leave the UK. No, no, no, no. No, listen, listen. I think we need to be really careful about doing this tax. These are dynasties that are being created, right? These are the new pharaohs. So have you got more than 10 million? Because they want to know. I'm not telling you, if you tax the rich, that suddenly we're going to be in Valhalla.

0:34But I am telling you, with absolute certainty, if we don't, it's going to be hell. Quite a lot of people like you who have just lost all hope. People listening out there who either want to help young people or indeed are those young people who think there's nothing out there for me. What do you say to those people? This episode is brought to you by Octopus Energy. Greg Jackson, the CEO, is with us now. Now, Greg, I want you to look into your crystal ball and tell me, what's your vision in terms of, let's say, 10 years for how the average UK house will be powered? As we build out more and more renewables on the grid, the underlying electricity system is much more volatile.

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1:44Let's hope that's right then, Greg. Thank you. Now on with today's episode. That's right. It's heating up, everyone. The Rest is Football is on Netflix for the world's biggest tournament, and we're officially in the business end. The knockouts are here, and don't worry, myself, Alan, and Micah are still here every day from New York City. All the debates from the biggest games, and a special guest or two for good measure. What a time we're having. Don't miss it. For adults with Crohn's disease or ulcerative colitis symptoms, every choice matters. Trimphia offers self-injection or intravenous infusion from the start.

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3:23Hello and welcome to The Rest is Money with me, Robert Perston. And with me, Steph McGovern. And back with us, Gary Stevenson, who is the economist campaigning to stop wealth inequality. He told us last time about how this became his obsession after a very successful career in the city, making loads of money and also in the academic world as well, studying economics. Now, though, we need to get to the nuts and bolts of his wealth tax and whether it will work or not. Just a little warning for you, though. What's about to follow contains some strongly argued points, which some of you may find distressing.

3:58I suppose just now, coming back to the campaign that you are very much fronting at the moment, which is a 2 % wealth tax on those with assets of 10 million or more. If you identify, which we talk a lot about on this podcast, is some of the big problems we face in this country, and actually it's not unique to this country, but young people finding it enormously difficult to accumulate any kind of wealth. can't get on the housing ladder. Pension savings are, you know, I would argue structured in a way that makes it, again, very hard compared to my generation of young people to, you know, accumulate a serious pot of money.

4:47So there's that set of issues. Then you've got 20 years or so of, certainly since the global financial crisis and particularly for those on average and below average incomes. You've got stagnating living standards. These are, you know, real significant problems and undermining of the idea that the economy works for the majority of people. And I think, you know, having read you and listened to you, that is an analysis you share. The bit that where I'm not 100 percent convinced by you is I struggle to see the transmission mechanism between a 2 percent wealth tax on those with 10 million quid or more and helping young people, you know, save more, get on the housing ladder.

5:49essentially changing the structure of employment in this country so that people are paid a salary on income much more closely related to the value of what they're producing rather than what the employer can get away with. Yeah, so let's get into transmission mechanism. I think that the primary thing to understand here is this increase in wealth inequality starts in the 80s essentially until the 80s or the late 70s perhaps we have these very high rates of tax on richer people and what this does is it prevents rich people from accumulating large amounts of passive income Thatcher and Reagan come in, they get rid of these taxes and suddenly what you have is rich people generating very large amounts of passive income It's important to recognise that when someone's very rich the passive income is very high So if you are a billionaire, if you're the world's the country's poorest billionaire £1 billion, conservatively making 5 % you know, Basim Hyde in the documentary says you won't take less than 15.

6:49If you're making 5 % on a billion pounds, you're making 50 million pounds a year. So one billionaire is making about a million pounds, maybe two or three million pounds a week passive income. Previous, before that, you were taxing that at high rates, but then we stopped taxing that. So suddenly you've got these guys making two, three million pounds a week passive income. Let me give you a thought experiment. Imagine you're making three million pounds a week passive income, Robert. Perhaps you are, I don't know. How much? Who wishes? Not today. How much money would you spend in an average week?

7:17No, no, no. Obviously, we've talked a lot about the marginal repensity to consume. And obviously, when you boost the incomes of people on lower incomes, they tend to spend more and it's better for the economy. It's not about the poor, it's about the rich. If you allow the rich to have passive incomes of 3 million pounds, what they will do is they will... I don't in any sense dismiss the problem that when you have more and more people with wealth, they hoard, they don't spend... They don't just hoard, they buy it. They buy, Robert. It's not about debt, it's they buy. They buy, they increase, they buy.

7:47And they increase their asset ownership. Listen, in the last 20, 30 years... None of this analysis I disagree with, right? On the other hand, I don't myself see how a 2 % wealth tax fixes any of that. I'm not saying that's not a problem. It is a problem. Put yourself back in my shoes 2011. You're trying to work out why the economy is weak, okay? The theory is low interest rates and high government deficits and quantitative easing are supposed to get people spending and for three years that has failed. And you want to understand why are people not spending. So I had the radical idea of asking people, why do you not spend more?

8:24If you've never done it, I strongly recommend it. I suspect Steph knows what the answer this is going to be. If you go and ask people, why do you not spend more money? They're going to say, what on earth are you talking about? I spend everything that comes in. Totally. And then listen, I didn't take that face value. I look into their financial position. OK, this is 2011. What I saw when I looked at the financial position of my friends and their families and my family around me was a group of people my age whose parents had regular jobs and own property and they themselves have degrees and will never own property.

8:54What you see there is the loss of asset ownership of the middle class. Now, it doesn't make sense to turn around to a family whose wealth is on a long term trajectory from a positive number to zero and ask them, why do you not spend money? This is 2011. That's what's in my mind. Then I get called into a meeting by one of the top economists at CIVA. And he goes to the financial position of all of the world's major governments. Spain, Italy, Greece, Portugal, Ireland, but also the UK, Japan, US. What he says is, in every case, these governments are spending more than their incomes. They are accumulating debt.

9:27They are dis-saving their assets. This is the exact same position that my friends and their families are in long term. The middle class, the working class and the government cannot spend more money because they are aggressively disaving their assets and going into debt in the long term. Who has the assets now and who is the debt to? If you want to understand why the economy is weak, you need to understand why the consumer cannot spend. But your 2 % wealth tax isn't going to fix it. My only issue is not that any of your analysis is wrong. It is I don't see the connection between the 2 % wealth tax and fixing any of that.

9:59Do you think it matters whether ordinary people are ever able to accumulate wealth? Yes, of course. I've just said that repeatedly for the last five minutes. Do you think it is possible, simultaneously, for all of the wealth to be owned by the top 0.1 % and other people to also own significant amounts of wealth? Look, the question of how... Listen, Robert, listen, Robert. Be patient. No, no, hang on. I want to see some systemic understanding. You are the person with the proposal for the 2 % wealth tax. I may not actually disagree with having a wealth tax, but I'm asking you a very simple question, which you are not answering, which is what is the connection between your wealth tax and making sure that those people who currently are dis-saving and getting into debt improve their financial position?

10:46What is the connection? What is the transmission mechanism between the wealth tax and helping all those people on low incomes who are becoming more indebted to restore their position so that they have decent lives? I'm getting excited because I feel like you're really learning. Listen, I hope I am going to learn. I think I'm just going to referee. But I'm not at the moment. If you allow all of the wealth to be accumulated by the very rich, then what you are doing is you're changing economic power. Okay, ordinary people, as you know, spend their money on goods and services. Wealthy people, as you know, spend their money on assets.

11:21So if we transfer the economic power from ordinary people to wealthy people, what you will see is a big change in the relative price of assets relative to goods and services. And that's what we've seen in the last 20, 30 years. That will mean if inequality becomes very high, assets will become aggressively unaffordable to ordinary working people. And what you will see then is ordinary people will be incentivised to sell their assets. And just as we've seen, they will have no assets left and then they will not be able to spend any money. So I'm going to basically, you know, essentially put to you the point that Dan Needle put to you.

11:52OK. Right. You know, where he has this row with you about the fact that you're not going to you know, you're not going to raise enough of this money because all these people are basically either going to leave the UK. But what I want to ask you is basically, because this is the only transmission mechanism that I can see that would allow your wealth tax to have the economic impact that you want it to have. Because as far as I can see, the point of this wealth tax isn't actually to raise whether it's 15 billion or 24 billion. What I think you want is what they would call in the city a correction.

12:26What you want to see is the price of assets falling so they become affordable again. Is that your transmission mechanism that if you start taxing assets like that, effectively, they're going to be forced down in value. And in general, is that what you're saying? I need to understand what is your transmission mechanism. I would like there to be an increase in the ratio of wages to asset prices. Right. Yeah. Would you not? Yeah. But what I'm asking you, are you agnostic between whether or not that is achieved initially? Yeah. Right. Because here's the question. There are two ways you can increase that ratio.

13:03Asset prices can remain where they are and wages can rise or asset prices can fall. And at that point, whatever your wage is, your asset becomes more affordable. So which of those would you like to see or do you not care? I would prefer to see asset prices stable and wages rising. OK, and how are you going to achieve that? That's my point. Yeah. So the aim is you stop the ability of the richest people to aggressively purchase assets. As you can see from my T-shirt, it's tax wealth, not work. We use that money to reduce tax on working people. But one point which you bring up, which is totally correct, is that 2 % is not enough to do that.

13:35Because, of course, billionaires make 5%, 10%, 15%. Yeah. So why only 2 %? Because at the moment, we do not have the infrastructure to tax these people, even if we wanted. So the situation we are in is the wealth of the country. And so I think it's important to recognise that these are real things. You know, these houses and land and buildings is really quite rapidly being reallocated away from a broad middle class and away from a government towards a small super rich elite at the moment we do not actually have the capacity to tax them and in fact we're not even measuring um how rich they are which is like kind of absurd um we need to fix that first you know we need first we need to build the the capacity to be able to tax them if we want um i think the sensible thing to do i know you had gabriel zuckman on a few weeks ago i think the sensible thing to do is to start with something moderate so you can see what the problems are you can see what maybe the mistakes are um i regardless what you might hear i don't think of myself as a radical i think it's like really obvious that we need to have the ability to tax the richest people in society especially when you recognize that they are increasingly owning a larger and larger share of national wealth um and i think you start with something moderate so that you can figure out what the problems are so you can build into it but ultimately you do need to tax them at much higher rates two cent isn't enough so i agree with you i totally think we need to tax people more i think but coming to it on a kind of micro level of you know housing supply and things like that if you're talking about if we if we you know tax rich people more then they maybe sell assets and things come down in value we that is going to it's going to take a long time before that filters down into like the problem we have with the lack of affordable housing like we need something like a hundred thousand affordable houses every year to be built in order to meet the current demand don't we and it's that's not happening you know we had lots of talk at the start of the labour government when they came in saying we're going to build these 1.5 million homes we're nowhere near that these affordable homes so what i am struggling with is not the kind of macro picture i get all that it's the more like how can we solve the the wealth the the service and access to inequality that we have is that going to come from this 24 billion and that's raised from the 2 % wealth tax because it's about distribution of that money as well because currently for a long time it's all been centred around Westminster.

15:49This is a reason. This is a great question. I think the best way to answer your question, do you know Mr Beast? You know Mr Beast? Yes. You know Mr Beast? We do. He's this big YouTuber and he does this thing where he makes all the money and he goes to Africa and he pays for blind kids to have eye surgery. And the eye surgery is not expensive and these kids get their eyesight back. And when I watch that, maybe when you watch that, I think, why can't these kids afford to get eye surgery? Why don't they get eye surgery? It's not expensive. It's massive. Changed their life. Why don't kids in Africa get cheap eye surgery when they're blind?

16:19Can you answer that question? No. Because they're poor. Well, yes. Apart from that. Why don't ordinary English working people get good housing? Because they're poor. Listen, capitalism gives goods and services to people who have economic power. And listen, have you been to India? No, I haven't. Yeah, yeah, of course. I've been to India. It's an incredibly unequal country. It's growing quickly, building tons and tons of houses. I stayed in a luxury hotel in Mumbai. Outside the hotel, there was a family sleeping, almost naked, on these flattened cardboard boxes. And if I'm totally honest, not trying to be disrespectful, they looked to my untrained eye like they were about to die.

17:00And taxis came up and wealthy people came out and stepped over this family and went into the luxury hotel. Do you think we're going to fix that by building houses in India? Listen, the distribution matters Listen, my grandma was born 100 years ago In this country, in this city, in London Which was at the time the richest city In the richest country In the history of the entire world And three of her siblings died of tuberculosis A preventable disease of poverty You can grow as much as you like You can build as much as you like My grandma was born at the end of The fastest period of economic growth In the entirety of human history And three of her siblings die Of tuberculosis a disease of poverty and listen I'm not telling you if you tax the rich that suddenly we're going to be in Valhalla but I am telling you with absolute certainty if we don't it's going to be hell yeah well because the other thing that I noticed from watching your documentary and listening to you now is the emphasis you put on education you know you've mentioned several times there about which university you went to there is a lot of people where and I think this is a real societal problem people who listen to this podcast will know I go on about this all the time this the fact that we put so much emphasis on university educations and it feels like people like you know when you talk about you talk about the smartest people and you're referring to people who went to university always but yeah there's a lot of particularly young people i work with those and needs and things like that who didn't have the structure at home to be able to do well academically like they are smart they are great at assessing risk they are resilient they're all these other things but they're not going to necessarily get a university degree because they haven't fit the societal norm of being able to do these exams well and the structure isn't there for them to do that and they are left behind essentially they're often the reason why we've got a growing number of meets is because this problem is getting bigger we divide people at a young age we decide they're smart or they're thick simply based on gcse's let's face it and even earlier than that you're told because of all the different tests you do now that's part of the problem too isn't it it's that social mobility issue so and you know it i get the sense from you you think clever people went to uni no no no trust me you should read my book no listen no no no i know that you was two years at oxford it was uh drove me yeah drove me up the wall i know drug dealers smarter than that yeah well that's what i mean it's not just about the wealth tax it's we have these structural problems in education where we do not analyze and and and work with and tell people what they have got we constantly tell people what they haven't got yeah and we don't give hope or optimism or opportunity no and i totally agree with you and i'm not i'm not standing here saying the whole problem is the world tax i'm not i think i think we need to stop thinking about the economy as if it's like some magic potion that we're going to find and fix everything i think we need to start looking at the economy a little bit more like we think about like medicine you know like you know you've got a problem with your lungs you go to a lung doctor you've got a problem with your heart you go to a heart doctor you know i mean you've got a problem with your eyes you go to an eye doctor.

19:58Listen, I'm the inequality doctor. I can tell you right now, if you don't deal with inequality, it's going to be a disaster. And it doesn't mean... It already is for loads of people. I see those kids who can't even afford shower gel, who literally don't have any food apart from what they get at school. It's already a massive problem. Yeah, it doesn't mean that I don't think we need to deal with regional equality. Of course we do. It doesn't mean I don't think we need to build more houses. Of course we do. One thing that's interesting about people like Dan Eadol is, I've never once criticised his work.

20:22The guy never stops talking about me. You know what I mean? Why can we not accept that the economy has a variety of different problems and experts should be allowed to talk with and propose solutions for the problem in which they're an expert. He just doesn't think you're going to raise anything like 24 billion. It's not about raising money. It's not about raising money. It's about stopping inequality from increasing and protecting the middle class and the working class and the government's ability to own wealth. And so when, you know, whether it's a down or, you know, many other people, particularly among your former colleagues, say if you do this a bunch of rich people will just leave the UK presumably your view is let them leave the UK no no no no no listen listen I think we need to be really careful about doing this tax I think there's risks 100 % there's risks and I just wish I could come on shows like this and talk to politicians and you know I spoke to Dan Needle and he says you know he called me whatever bloody poppycock or whatever he called me he says that by a lot of people it's not just you by the way and listen Dan is a tax expert right and I'm an inequality economics expert and I'm not a tax expert I've done a lot of research in the last few years I've become quite knowledgeable about it but you know I haven't worked in it the amount of time that Dan has and what I know is my god we better do something on this inequality and we need to figure out how to do it and I can't see any way to do it other than tax and I think if you really want to actually move the dial on it you have to be taxing wealth not just income because otherwise you don't hit the very rich you know Gabriel Zucman would have said the same thing.

21:50So it's really the only taxes that can really do that are wealth taxes or inheritance taxes, the only ones that really hit the stock of wealth. And I say that to Dan and he says, oh, your proposed solution is, what is it, populist clap chat. And I was sad they didn't put this bit in the documentary because what I said to him then was, help me. Help me. You're the guy on tax. I'm the guy on inequality. I understand inequality. Well, he listens to our podcast so maybe he'll listen to you and he'll come and talk to you. Listen, I've never opposed any of Dan's proposed solutions on tax because I think they're good.

22:23But they are not going to deal with top 1%. I know he wants to equalise income tax and capital gains, probably a good change, but it doesn't affect the richest because that is a tax applied on sale and the richest never sell. We do need to do something about top 0.1%. So I guess, I mean, if you look at so many of the drivers of this extreme wealth inequality over the last, let's say, 30-odd years, So some of it, if you look at the kind of, you know, the Elon Musks of the world, is simply that we have now technologies which are of a sort of winner takes all nature. They're completely under regulated these essentially digital technologies so that, you know, if you are, you know, just this is now going back to older technology.

23:11But if you are the search engine of choice, Google, that is just a license to print money. And, you know, if you happen to be an early backer of Google or a founder, you are, you know, a multi, multi, multi billionaire accumulating sums of money that, you know, you're unable to spend your descendants going. You know, these are dynasties that are being created, right? These are the new pharaohs of the world. and frankly, you know, I don't believe that a 2 % wealth tax is going to have any impact on an Elon Musk. We had, as you pointed out, you know, and you were totally right about this. I remember, you know, talking about it in 2008, 2009, 2010, the problem with quantitative easing is it just massively inflates the value of assets and at a stroke just widens those fundamental wealth inequalities and that rolled all the way on until essentially we had the great unwinding after COVID.

24:16But those inequalities are still extreme and there. And so I suppose part of my critique is not quite the right way of putting it, although actually it probably is a critique, is that I slightly feel that the 2 % wealth tax is a... It addresses a symptom, but it doesn't actually get us into a debate about the causes. You know, we are about to... We are now in the midst of this artificial intelligence economic and social revolution, where again, we are getting this winner-takes-all bonanza for the founders and the financiers of these industries. And just the most incredible amount of power transferring to a limited number of people.

25:03And again, I'm afraid to say a 2 % wealth tax isn't going to address any of that. This requires much more... This requires really significant government intervention of a sort that no government in the world is either talking about or has the courage to do. Can I ask you a question, Robert? Touch where this never happened to you. If you had an incurable cancer and someone came up to you and said, I've got something which is not going to cure your cancer immediately, but it's going to slow down the rate of growth and it's going to give us the chance to cure it in the long term. Would you say no?

25:33I'm not saying no to your wealth tax, by the way. It sounds a bit like you're saying no, Robert. No, no. I'm saying that if you really want to be leading a, you know, a really constructive debate here and reallocating power, you've got to go further than what you're talking about because there is a genuine risk that what happens with this kind of thing is, you know, we all wear the badge, we're doing the wealth tax, we all feel better about ourselves, a few rich people complain. And what you don't have is the kind of debate which we need to have about how you shift power. I wish we could have that debate.

26:10I wish, and if you want to have me on, we can have that debate. I wish, listen, I'll be honest, I'm sick of being the guy that turns up and says, hey, I'm the inequality guy, in my area of the ship, there's a hole in the bottom of the ship, come help me fix this hole. and people say, oh, but your specific method of hole fixing is not really my favourite method, so fuck off. Sorry, I'm not saying that to you, by the way. Listen, I've got to be honest. If you want to have that debate, I'm here. If you want to have a proper, sensible, intelligent debate, I'm here. I've been thinking about these things for 12 years, Robert.

26:38Right, let's bring things down a sec. Have a quick break. We'll be back with you in a couple of minutes.

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28:23It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required, compatibility and availability varies 18+. So, again, this sounds like I'm making it all about me. I'm not trying to but as a again you tell us about the North we need it but also as a woman like there is a huge gender disparity here as well and I noticed that in your documentary everyone you talk to is rich apart from one person is a man and the only one who says they're for your wealth tax a rich woman and that and it's like Julia Davis she's great yeah and so I'm not I'm not saying but that is that's fair to say that's probably it's majority men there's and then I'm watching two men fighting you're getting this yeah but there is how do we tackle that as well like I'd just be dead interested to know what you think about how do we as someone who's like me being in the media and political bubble as well as being in business and everything else and coming from where we come from how does that power dynamic change yeah okay we've got your wealth tax but how do we change that as well I am incredibly passionate about representation in all dimensions obviously I'm a working class man but you know I recognise that we don't have enough voices from the north we don't have enough women in this space we don't have enough people who are non-white in this space talking about these things we need more of them we need more of that and you know one thing which people don't realise that I do is I spend a lot of time trying to support and grow other up and coming influencers listen so you probably know you know I did my undergrad went to the city then I left and I was two years at Oxford and I found it incredibly frustrating incredibly incredibly frustrating So you're doing your bit but my question is how do you change that in society so you know You've got great ideas on inequality in terms of wealth, but how do we change that inequality in terms of power?