204. Will a Wealth Tax Actually Fix Britain? (Dan Neidle)

11:03Dan Neidle:And Zahawi lied because his lawyers said that he wasn't being investigated and he was fully up to date with his tax at a time that he knew HMRC were investigating him and he was settling it with HMRC. So Sahawi lied, and that's what he was sacked for, ultimately.

11:16Rory Stewart:There's one other thing that she picks up here, which is that he was being investigated by HMRC, but then he becomes the Chancellor of the Exchequer. So, in effect, he's in charge of HMRC.

11:26Dan Neidle:Strictly, no. It's a non-ministerial department precisely for a separation. But, come on, real world, you wouldn't want to be an HMRC official

11:34Rory Stewart:negotiating with the Chancellor of the Exchequer. Any more than you want to be the US tax authorities negotiating with President Trump. It's a mad circumstance.

11:42Dan Neidle:and so his lawyers sent me letters that contained lies. I think that's a big deal and there should be consequences for people who instruct lawyers to do that and for lawyers that do that. The SRA, for whatever reason, didn't take that point. They went after his lawyer, a chap called Ashley Hurst, having, when he sent me the original threat, said that I shouldn't mention that threat to anyone or publish it and that there would be serious consequences if I did. It was an attempt to silence me. Peter Mandelson. Hmm. So that was another one where, did you stumble upon that? Because what I can't quite get my head around is why it took you, who is, you're not, quote, really a journalist.

12:17Dan Neidle:I'm a member of the chartered whatnot of journalists in the NUJ. Oh, yeah, okay, you are now, but you weren't always. No, I wasn't a journalist until the Zahawi thing. Okay. And then I won the investigation of the year and decided that probably meant I was a journalist. Right, but both, it seems to me that, why are journalists not digging up these stories? Is it because tax is really, really complicated and difficult? Well, the Mandelson thing was sheer luck. At the point that all the US documents were dumped. About Abstein. Yeah. I spotted there was this weirdness around an attempt by Mandelson to buy an apartment in Rio de Janeiro involving a structure using a Panama company, which was really, it's a really weird thing to do.

12:57Dan Neidle:And, you know, it was a nice little story. And to look into that story, I and my small team built some tech that let us go through the Mandelson emails extremely efficiently. and most journalists either can't do that or within an institution where you have someone else who's the IT guy and someone else is a journalist, someone else is making editorial decisions. But because we're just a teeny team, we could simultaneously write that stuff and use it. And so we then found the evidence that Mandelson had told the CEO of JP Morgan to mildly threaten the Chancellor of the Exchequer. If we hadn't done that, I'm certain someone else would have done probably within 48 hours.

13:34Dan Neidle:You think they would? Yeah, absolutely. So that, I guess I had an old-fashioned scoop, but it wasn't legitimately mine. I was just fast. Tell us about this Panama thing again,

13:46Rory Stewart:because, again, you keep coming back to this thing as this is weird. This seems to be your sort of catchphrase. Yeah, it's funny, isn't it? But it's a way of saying there's something dodgy going on, right? Yeah, I think, and you both know this,

13:57Dan Neidle:in areas you're familiar with, that you can see something and you can say, oh, that's odd, and you wouldn't then make definitive statements about it straight away. But your sense of oddness is what then makes you start looking at it. So it is really odd for a UK person to use a Panama company. Who uses Panama companies? Shipping companies use Panama. Flags of convenience, very famous. People in South America looking for a bank account. Because if you're Argentinian, you're really worried the government's going to just nick your bank account or your bank will fail. So you open a Panama bank account.

14:24Dan Neidle:It's a rational thing to do. But here, why would you open a Panamanian bank account? Jersey is nearer and a hell of a lot cleaner.

14:31Rory Stewart:It's suspicious. I mean, you know, without slandering, what are hypothetical reasons why somebody might do this? What benefits could accrue by doing this?

14:38Dan Neidle:It looked like it was an attempt to perhaps avoid tax in Brazil, perhaps avoid or even evade tax in the UK. I don't know. Madison initially sent me a sort of classic non-denial denier where we said he didn't recall it. But we then found the... I don't remember which country it was in. I think it was the Brazilian company that he'd set up. So he went as far as setting up a company to hold this property. I think he didn't then go ahead. I think he then didn't acquire the property and the Panama stuff didn't happen. Don't know for sure. And we have his signature setting up the company. We're going to come on to the whole wealth tax debate in a minute, but let me just ask this finally on this.

15:15Explain really simply what's the difference between tax avoidance and tax evasion and do big companies like Clifford Chance do both?

15:21Dan Neidle:Are you going to jail? Then it's tax evasion. It's the thickness of the prison wall. So tax evasion is really easy to define. If you are dishonest and a jury believes you were dishonest by the standards of ordinary people, then it's a criminal offence, you go to jail. So Rory not telling HMRC about a bunch of income he's received, or HMRC can prove that he knew he received it, can prove that he was dishonest, tax evasion, jail. And tax avoidance? Tax avoidance isn't really a defined term. There's lots of little tax avoidance things here and there in the tax code, but broadly it means exploiting a loophole.

15:53Dan Neidle:So Rory finds out that if he paints his front door pink, he can argue that council tax doesn't apply because of some obscure 17th century rule. He's found a loophole. If that succeeds, that's tax avoidance. If it fails, it's failed tax avoidance. But you honestly believed in the pink door crab. So you weren't dishonest.

16:11Rory Stewart:It's not tax evasion. Just before we get onto wealth tax, final thing. One of the things famously that people complain about in Britain is that we have this enormously complicated, huge tax code. And there's always been this dream. If you read kind of John Grisham novels, the president's always coming in and he's kind of ripping up the tax code. and I don't know whether it's Singapore or Hong Kong, but somebody's going to have this much shorter, simpler tax code. Is it right we should have a much simpler tax code? And why don't we have one?

16:35Dan Neidle:I give you five slightly contradictory answers. So first one is we're not Singapore. We're not Hong Kong. We're not a city state. We are a complex country with lots of complex people doing lots of complex things. You're always going to have a much more complex tax code. We also have a much bigger state than Hong Kong or Singapore. So we're going to have more taxes to support that. If someone wants to believe that we can halve our spending as a portion of GDP and become Singapore, then, you know, fine, that seems to me a bit of a stretch. Then you could dramatically shrink it, but you can't. So what does that leave you with?

17:04Dan Neidle:There's a true attack on our tax code, which is that over time, like bedrooms, tax codes get messy. If I don't actually sit down and tidy it up, the bedroom will get messier. Socks will end up here, drawers end up spilling over. Tax codes are the same. And for, it's a slight exaggeration to say not since Nigel Lawson, but it's basically true. Not since Nigel Lawson has anyone gone, right, We need to sort out the socks. We need to clear out the taxes, which raise almost nothing but complicate life. We need to rationalise the ones that are there. So we just build up lots of little taxes that are politically convenient, lots of special rules, special exceptions, lots of anti-avoidance rules, often relics of tax avoidance strategies from 40, 50, 60 years ago, and they're still there.

17:45Dan Neidle:No one repeals them. So what governments could do, you could say, we are not going to become Singapore. We're in fact not going to lose a penny in tax, but we're going to see how far we can go to simplify and eliminate rules that aren't necessary anymore. And I think they could do that. Big pro-growth step. Well, it's a little pro-growth benefit. I don't know if I said it, but it's free. How many things in life are free? I've got to tell you, Dan, when Rory and I were doing a tour of places like the O2, it was at the O2, when Rory brought up one of your slides about what taxes, Labour were in opposition at the time, what taxes were available.

18:19And when the slide went down, and after we talked to your slide... In front of 13 ,000 people. Somebody shouted out, more, more. So there is some interest in tax, but you said, so

18:33Dan Neidle:for example, the Labour government did come in, as you say, I'm a Labour supporter, you're a Labour supporter, the government came in. You've described the national insurance change that they brought as the worst possible tax to have done. Why did you say that? I normally never try to make predictions about politics because I have no expertise and I clearly don't know anything. But I break my rule and I said that that would be such a stupid tax increase that they wouldn't do it. I'm not making that mistake again. Why is it bad? So if you increase income tax, you are slightly disincentivising work.

19:02Dan Neidle:We want income tax because otherwise we can't raise anything like the tax we need. So you accept that. VAT is quite a good tax to raise technically because it doesn't disincentivise work and only has a slight impact on consumption. Employer national insurance has some very complex effects. Over the long term, the burden is carried by employees. So if you're a highly paid employee, then if your employer is paying more employer national insurance, highly paid employees, or even just moderate paid employees, will get fewer pay rises. So over time, it bubbles through to them. In the short term, it affects low paid employees, because you can't pay them less because of the minimum wage.

19:37Dan Neidle:So there'll be fewer jobs created. So an increase in employer national insurance is a mess for employers. It damages employment for the low paid. And over time, it becomes paid by employees.

19:49Rory Stewart:The slide that I showed everyone in the O2 was you saying, listen, it's a bit mad for the Labour government to rule out rises to income tax, VAT, corporation tax, national insurance, because you've just taken out 70 % of the entire taxes the government can raise. Yeah. Explain that a little bit more.

20:09Dan Neidle:It is that chart. And should I plug the Tax Policy Studies website? Go to the Tax Policy Studies website. We have more charts. We'll also put it in our newsletter today. Don't worry about it.

20:17Rory Stewart:Explain the big points and the way the public can understand.

20:20Dan Neidle:It'll be really nice to think that we could just raise tax from a few very wealthy people. No one in the world does that because if you look at how much stuff they've got, even if you tax it at a very high rate, you raise way less than just putting income tax on everyone. And so the UK and every other developed country in the world raises most of its money from normal people. Income tax, national insurance and its equivalents abroad, VAT, corporation tax about half the size, but it's still pretty big. And those taxes make up about 75 % of the tax. The rest of it is sort of a mixture. You've got fuel duties.

20:54Dan Neidle:You've got council taxes pretty big, business rates. The government said they're not going to increase those. So you're getting smaller and smaller.

21:01Rory Stewart:And your point was, here comes a new Labour government saying, austerity has been terrible, we want to change Britain, but they've just ruled out 70 % of the ways in which they could raise revenue to pay for that.

21:12Dan Neidle:And probably more, when you get to the small taxes, they're not going to increase either. So you end up with irritating changes here and there. John Healy, new Chancellor, has got a budget in the near future. First of all, do you have a sense that taxes are going to get changed, raised? And if you were advising him, what are the best taxes to raise? bearing in mind the promises they've made? Or do you think those promises are now tying them to impossible options? You are going to know so much more about the political likelihood of them doing that than me. I've got no clue. If it was me, if I needed to raise tax, I would look for things that I could do which are good tax reforms and raise money.

21:50Dan Neidle:Top of my list would be capital gains tax, where I think you can equalise the rate with income tax in a way which is reducing the rate for long-term investment because you create an allowance for the normal return on investment, create a relief for entrepreneurs, and that raises so much money, probably about$12 billion, you could actually fund a cut in basic rate tax and raise$6 billion as well. Alongside it? I'd do that. I should say, if you handed me a lever now and say, pull this lever, you will turn the UK into Denmark with shiny public services, much higher tax than here, and everyone's broadly happy with what they get for the tax, I would pull that lever.

22:24Dan Neidle:But it's not where we are. We have a public which doesn't believe They're getting value from any of their existing taxes. The government should be looking for a way to cut tax to normal people if they can.

22:32Rory Stewart:One of the other points that you sometimes make, I think, is that in countries which have better funded public services, more tax is paid by ordinary people. And that actually Britain is a bit of an outlier in this. We imagine that the problem in Britain is that the super rich aren't paying tax and ordinary people are paying too much tax. But actually, compared to a lot of other European countries, Ordinary people in Britain are actually paying much less tax than their European equivalents.

22:59Dan Neidle:So some of the super rich are indeed not paying enough taxes. We should part that and come back to it. But thinking about just the normal deciles, where the top decile is not an oligarch or anything close to it, what the Tauris did is pretty astonishing, which is the Tauris redistributed tax in a very large way from the top decile to the lower deciles. Now, if you're in the bottom three or four deciles, that's more than made up for by welfare cuts. But if you're in the middle, you benefited from the Conservative and coalition government, and that benefit is still there, and you are paying less tax than you have historically in the UK, and less than your compatriots in other developed countries.

23:37Rory Stewart:So paradoxically, this Tory government ended up with the wealthier people actually paying slightly more tax and poorer people paying slightly less tax. Higher earning, yes.

23:46Dan Neidle:And there's a bit of a tacit conspiracy not to mention this. The Tories don't want to say we were a radically disputed government. And Labour doesn't want to say all those Tories they distributed very effectively from the top decile.

23:57Rory Stewart:And is there any way of illustrating the comparison and to give people a sort of sense of how much people are paying in terms of lower income people paying tax compared to Denmark or Sweden? Sure. I mean, it's the personal allowance is kind of everything that no other country has an equivalent to the personal allowance.

24:12Dan Neidle:If you look at the tax paid by someone earning the equivalent of£10 ,000 anywhere else in the world, you will see that they are paying 10, 20 percent of their income in tax. here you're paying nothing. And it's a really big change. We plug for the Tax Policy Associates website again, we have a chart showing the effective tax rate at different income levels across the world. And the UK is on the zero for the first 12 and a half grand and no one else is. And it's remarkable. There are people who worry about it and say, well, it's been anti-growth, the top decile is paying more tax. And I have not seen evidence for that.

24:44Dan Neidle:It may be true, it may not be true. It's a pretty impressive achievement. We've increased tax noticeably across the economy, but the medium voter hasn't directly felt that. And it's something else we can get into. People definitely feel they have.

25:03Dan Neidle:Are there any windfall taxes you can see on the horizon? Windfall taxes are funny things. So a windfall tax is economically a great tax because it doesn't distort behaviour if the subject of your windfall and everyone else thinks it was a one-off, not to be repeated. So the Tories had a windfall tax on banks in 1980 because, broadly speaking, interest rates had gone bananas, but the banks were not paying interest on very large numbers of deposits. And the Tories said, right, we're going to tax you and kind of claw that benefit back. Labour had a windfall tax in 97-98 on the privatised utilities, which said you were sold off at a ridiculous undervalue.

25:41Dan Neidle:We're going to claw that back. And both of them were accompanied by promises that would be a one-off, not repeated. And those promises were kept. They were good windfall taxes. Who believes that a windfall tax today on, say, I don't know, the banks or water companies or someone, who thinks that wouldn't be repeated? What would it be? What looks ripe for a windfall tax, though? You mentioned banks, you mentioned water companies, oil companies. Is there a possibility of a windfall? Because I'm trying to work out with your slide in mind where he goes for the sort of money he's going to have to raise.

26:12Dan Neidle:I'm not sure there's an obvious windfall. To me, an attractive option to look at, and it's convenient for me because it's outside my expertise, is the way the banks place deposits with the Bank of England and get interest on that. And whether you can tier it and not pay interest on some tiers is something some very smart people think could be done and could raise billions. Not the very large figure, I think, 30 billion that reform claimed you could raise. Not those communists at reform, I think, would cause serious difficulties to the financial system. But you could raise some serious money. Rachel Reeves was against that, whether that's because of her background in the Bank of England or otherwise.

26:46Dan Neidle:And I don't know enough to judge it, but it's something you should look at.

26:49Rory Stewart:Can we just get then to maybe the heart of the issue, which is this very weird thing that you've just said, that actually compared to other countries in Europe, higher earners are paying comparatively more tax and lower earners are paying zero tax up to other. And yet that's not how people feel. People in Britain feel it's an incredibly unjust system. they're paying far too much tax and that actually it's in a massively unequal society where the rich are getting away with murder.

27:14Dan Neidle:So explain what's going on here. If you look at the research that's been done on the tax paid by people on very high incomes, and there's some great stuff done by Andy Summers and Aaron Advani on this, you find that people earning millions of pounds, their average tax rate is about 30%, which is less than the average tax rate of someone earning£100 ,000. But that's deceptive because breaking that apart, a quarter of the people earning millions are paying the full 45 % and more. So say you're a banker. People think bankers avoid tax. Bollocks. If you're a banker receiving a bonus, almost no way these days that a sane bank is going to try and avoid tax on that.

27:53Dan Neidle:Huge amount of tax is being paid. So a quarter are paying 45%. Some are paying almost nothing. And the main reason for that is capital gains tax, the rate being so much lower. Now, it's gone up census work was done. So the effect is now a bit less. But still, if you can magic your income into a capital game, you are reducing your rate of tax from 45 % to 47 % down to 24%.

28:19Rory Stewart:So there you're saying, there you're making a point that there is a real thing to grumble about, which is the rich people not paying tax. But there's another issue, which is the sentiment amongst people that they're paying far too much tax when you're actually pointing out that ordinary people in Britain are paying significantly less tax than their European equivalents. So why do they feel that, contrary to the evidence?

28:38Dan Neidle:The only tax which essentially has gone up in the way is council tax, which has gone up quite significantly. And that's largely been driven by social care and also driven by central government cuts. So part of that low income tax was bought by slapping tax, slapping spending cuts on local authorities, forcing them to raise council tax. That's one reason. But I tend to think it's because of the cost of living going up, because of earnings not rising as they should have done, because of bad growth, because of housing. I think it's other stuff. So people notice the tax more. So let's get to the wealth tax.

29:08You appeared on Gary Stevenson's documentary. Yes. And I got a very, very strong sense you weren't terribly impressed by his ideas or his thinking about them. We interviewed him and we've also interviewed Gabriel Zutman.

29:21Dan Neidle:Gabriel Zutman's a very serious figure. What I say about both of them is that they're not politicians, they're not Chancellor of the Exchequer. They're people who are trying to shift the political debate. They're trying to shift the dial on it. And yet I got the feeling that there was something in you that got really quite, and in Rory actually, that got quite offended by this idea that they think all you need to do is have a wealth tax. Why do you feel so viscerally that this idea is not really even worth contemplating? So Gary Stevenson was saying the other day, he didn't say this in my interviews, more recently, he was saying that if we don't introduce a wealth tax, then we are going to become so poor that our grandchildren will be homeless.

30:04Dan Neidle:That's not an indirect quote. That's a direct quote. So he's painting this apocalyptic picture and saying a wealth tax can fix it. Hang on. The wealth tax he's proposing, best case, less than 1 % of GDP. So something's really wrong. There is a gap between the apocalypse he's telling us is coming and the tool he's choosing to fix it. So immediately you should be going, hang on, what's going on here? And what's going on is that the wealth tax is a brilliant slogan. It plays great on a T-shirt and it becomes an alluring thing. And people get so wrapped up in that alluring thing, they forget to step back and say, actually, what are we achieving here?

30:39Dan Neidle:And what bothers me about a wealth tax? I think several things bother me. One is that the kind of inequality that I'm most concerned about is not touched by a wealth tax. and that the oxygen that the wealth tax is sucking out of a lot of people in progressive politics could be devoted to tax reforms that actually have a chance of happening and could make a difference. That's the main reason for my anger, and I will confess to anger about it. And yet, why did you seem to separate out Gary and Gabriel Zutman? Why do you think Gabriel Zutman is a more serious figure on this? Because he's arguing for much the same thing.

31:10Dan Neidle:Well, he's not. He's arguing for something slightly different. We should get into that. But Stevenson, I don't think, is a serious figure because of these ridiculous apocalyptic claims that he makes, because he's never thought about how wealth tax would work. I don't know if he did this to you, but when he interviewed me, he said on about six occasions that he was one of the leading inequality economists in the world. People who are leading anythings don't normally say that, certainly don't say it six times. And all of this made me think that he was someone who I was uncomfortable speaking to.

31:39What is Zuckman saying, then, that you think is the least respectable?

31:42Dan Neidle:Zuckman has done a lot of impressive work on inequality and economics. And so he's bought the right to be taken seriously in a way that I'm sorry, Gavin Stevenson has not. So I don't regard them as part of the same conversation. Zuckman is no longer calling for the wealth tax that most people on the left are calling for. They're calling for 2 % on everything over 10 million. There are many problems with that. But the problem that I think bothers Zuckman most is That's a really big, complicated tax. It will take three, four years to put in. You'd have to value vast 20 ,000 people's property will have to be valued every year.

32:20Dan Neidle:It's a huge undertaking. So he's now proposing something narrower. I think it's on a wealth of 100 million plus, only 1 ,000 people. And it raises much less. So you're looking at raising about 0.4 % of GDP.

32:32Rory Stewart:He's also got this idea that you could try to stop people leaving the country. Yes, you were particularly unimpressed at that, Rory. Yeah, I mean, but I wonder, can I just follow up with one thing that struck me that she said that was very interesting? You said this isn't addressing the type of inequality that you really want to address. Explain that.

32:50Dan Neidle:A lot of people on the left will say, inequality is going up. But that's not good enough. You've got to look at specifically what they mean. I should preface all this with I am not an expert on inequality. So take all of this with a pinch of salt. If you look at Genie, the thing you usually use to measure inequality, that's been kind of massive rise in inequality in the 80s, pretty static ever since. Within that, there's a lot of noise. There's a kind of noise that people like Stevenson worry about, which is billionaires. And Zuckman is recicised about this. The interview he did with you, he seemed to think he was in New York.

33:19Dan Neidle:All of his examples is all American billionaires. It's Musk buying political power. Jeff Bezos getting benefits. Yeah, it's a pet. I'm getting way away from tax. One of my pet hates in politics is people importing American controversies here.

33:31Rory Stewart:So one of your points there is actually very wealthy people in Britain do not follow the same rules as in America. So talking all the time about America doesn't really help you think about how to deal with people.

33:40Dan Neidle:We don't. I mean, I'm not saying there isn't a problem with rich people in politics in the UK, but it is nothing like the US. The amounts of money involved are incomparable. And Musk, who I regard as a pretty detestable and dangerous figure, there is nothing our tax system can do to stop him. So don't build a tax proposal on stopping Musk. OK, so let's get something. I think they have something like Bezos, for example, I think does have an impact upon our tax system because he is the owner of this huge Amazon thing which kind of takes so much out of our economy in different ways. Oh, corporate tax we can talk about.

34:14Dan Neidle:But the billionaires behind it, I think that is an American phenomenon. And the way in which... This is what I said, the Americans are never going to touch this. Yeah, I was speaking to the American the other day who disagrees and thinks it's possible you'd end up with a Democrat president and Democrat House and Senate. And they could have. I hadn't heard that before, but he was a serious guy. Who knows? Well, Bernie Sanders has been on this for a long time. He definitely has. But the other thing about America is it's very easy for billionaires to pay no tax. You'll have heard about the buy, borrow, die strategy.

34:40Dan Neidle:You make a fortune. You have all of your stock in what was your personal company is now listed. You own a huge chunk of it. You borrow against it. You don't pay tax. You don't take salary. There's no tax because American estate tax is so hilariously avoidable. Here, that is a shit strategy because you would have inheritance tax at 40%. The UK strategy is give it away, have a capital gain. So as long as we have a capital gains tax, which isn't leaky, and an inheritance tax that isn't leaky, we don't have the US problem. So now your question. Back to the inequality you're worried about in Britain and how you would address it.

35:14Dan Neidle:So the billionaires' inequality worries me less. A lot of it is people who are foreigners, come here for a bit, leave for a bit. It certainly creates a mathematical inequality. But does it harm people's day-to-day lives? I'm not sure it does. The inequality, which is a huge problem, is the generational inequality, which means that today the ratio between capital and income is twice what it was in the 90s. And that is because, to put it crudely, there are a lot of old people with incredibly valuable properties and there are young people who don't have property.

35:44Rory Stewart:So the inequality is between the 60 % that own property and the 40 % who don't, which also corresponds largely with older people against younger people.

35:51Dan Neidle:I don't want to set people against each other in a way that implies I'm picking villains. And I don't quite buy the housing theory of everything. There's a fantastic paper on that that people should look up. But I think that the housing theory of quite a lot, I do buy that a lot of the disquiet among young people is caused by the fact that it is essentially impossible for them to get on the housing ladder. I'm going way away from expertise here, and no one should believe anything I say without checking all of this themselves. But I worry an awful lot about property inequality, which the wealth tax does not touch.

36:21Isn't there also a problem in our politics and the way that our media debate is as well? And I think that Mrs Thatcher, who is one of the most consequential figures of our lifetime, I think is largely responsible for this, and will be proud to be responsible for this, is that we don't really make the argument for tax. We always want to make the argument for not having tax, for not paying tax. You talk about Denmark, what the Nordics have always managed to do is to say tax is neither good nor bad, it's essential. And we seem to still be trapped in this debate that tax is bad. So, you know, maybe putting your Labour Party hat on as opposed to your tax iceberg, how do we get this politically into an easier space?

37:00Because I can see the Andy Burnham, John Healy government coming up against some of the same problems that Keir Starmer and Rachel Reeves did.

37:07Dan Neidle:Yeah, the left in this country is anti-tax. There is almost no one on the left who says, I want a welfare state like Denmark, and it should be paid like Denmark, but everyone paying more tax, which is the only way you get a welfare state like Denmark. But if you're not willing to do that, then you are admitting defeat on what should be the long-term aspirations of many people on the left. It drives me crazy. I don't think you can get there from here because of the attitude people currently have to tax, which is why I think we need a period, and again, I'm going way outside my tax roll, I think we need a period of government competence and we need a period of an actual tax cut that people feel and appreciate.

37:44Rory Stewart:Another thing that I was wondering about listening to you talk about Piketty or Gary Stevenson, these kind of things, is what is the objective that's happening? And just to lay my cards on the table, I mean, our producers, a lot of our listeners absolutely love Gary Stevenson, love Zuckman, love Yanis Varoufakis, a bit reluctant to get you on because you're not saying what they want to hear. What I'm trying to work out is what is the objective with these wealth taxes? Is it that they think this is the best way of growing the economy? Is it that they think this is the most efficient way of raising revenue in order to fund the NHS?

38:19Rory Stewart:Is it that they think this is going to reduce the Gini coefficient? Or is it just a way of bashing billionaires? I mean, what's the thing that's driving this? But it's none of those.

38:28Dan Neidle:Best case, it raises not enough money to fund the NHS for more than a couple of weeks. Pro-growth, absolutely not. There are reputable studies suggesting that a wealth tax, gentler than the one proposed here, would knock something like 3 % off GDP. It's anti-growth, anti-investment, a whole bunch of problems with it. It certainly wouldn't change Gini one bit because it's aimed differently. Would it make billionaires pay more tax? Sure, if they stuck around. My list of the many things that annoys me is the billionaires will leave argument. The billionaires won't leave because the billionaires are barely here.

39:00Dan Neidle:A billionaire will typically have houses in several countries, spend a few months here a year. If they decide they want to cease to be tax resident here, it is a small change in their itinerary.

39:10Rory Stewart:If that's all true, what do you think? I mean, Gary Linekin's just signed up for this.

39:14Dan Neidle:Because it sounds fucking great. It's a fantastic slogan. You remember the financial transaction tax post the financial crisis. All the NGOs, Oxfam and all the others, were pushing for financial transaction tax. And the nerds, and I was among them at the time, were saying, it just actually can't work. It's not a good idea. But they went ahead with it. Millions were spent advocating for it. The EU spent five years trying to do it and then concluded it can't work. And they didn't do it. And it's happening again. People are so overcome by their own eloquence and so drawn to this brilliant idea, which opinion polls so fantastically, they don't want to think about whether it actually works.

39:51Dan Neidle:Stevenson had never thought about that. I'm not sure if he's the editor of the New Statesman, but he's something of the New Statesman who published a piece yesterday which was essentially saying that the whole Stevenson be needled thing, Stevenson has political imagination. Full stop. That is all that matters, whether it works or not. It makes you a neoliberal for even thinking about it.

40:09Rory Stewart:Give us a chance for political imagination. Give us a chance. No.

40:13Dan Neidle:Political imagination, absent evidence, is a dangerous thing. It's populism. There are people who have political imagination and rationality. You work for one of them. Sunak, a bit lacking in the imagination. But to have someone who is pure imagination and no rationality is to have a populist. I still think there is a place for Gary Stevenson and definitely Gabriel Zuckman in this space, in this debate. because in a way, although Gabriel Zutman maybe sets himself up as the guy who will show you how this can work, there is a need, I think, for us to constantly have this debate about the reality of inequality.

40:49Rory Stewart:With inequality, because I always felt this in Cumbria when people were talking about inequality, what is really angering people? So the thing that really angers me is the conditions of probably the poorest, let's say, 5%, 10 % of people in the country, People who are homeless, the poor elderly, people who are genuinely living completely miserable, undignified lives. The thing that actually shocks me is the gap between the top 60 percent, kind of people I was out in the park run with in Cumbria, in Scotland, Cumbria, whose lives may be tricky but are still, by historical standards, pretty good.

41:27Rory Stewart:And the people right at the bottom, the bottom 10 percent. But that isn't usually what people are talking about when they're talking about inequality. They're not trying to help those people. The people who are grumbling are not the bottom 10 percent who often don't even vote, right? Homeless people aren't voting. Prisoners aren't voting. Prisoners can't vote. It's actually sort of 30%, 40 % of people angry with billionaires. I mean, it's not really about...

41:52Dan Neidle:Yeah, if you read Angus Deaton and his report on inequality, his recommendations about inequality, only a small amount of it is about tax. It's about geography. It's about opportunities. It's about education. It's about training. But wealth tax is a good slogan. When I think of inequality and what I think most of the people kind of in my sort of mindset think of inequality is that there is such a phenomenal gap now between an accepted level of wealth and an accepted level of power related to that wealth. And it's got further and further away from people who have no sense of even what that life might be like.

42:28And that's what is leading to a sort of sense almost of societal breakdown. I think it's more complicated than you were saying. I think it's actually that people do care about the very, very poor. But there's something about the gap between those three strata of society that politics doesn't seem to be able to bring together. So it becomes easier for people who are reasonably well off to say, well, my life's not as good as I want it to be, therefore I can blame people who, you know, the really rich bastard who we know doesn't pay any tax at all. and where you're also right I think is it means often the people at the bottom get literally completely forgotten does that make sense no that that is plausible this is where I'm with you I actually I actually and you know I understand politically having been part of campaigns that have done exactly the same thing in the past why Keir Starmer and Rachel Reeves put it in their manifesto we're not going to raise this we're not going to raise this because Because we're still trapped in this Thatcherite taxes bad debate.

43:32So I want somebody, I think Andy Burnham might be the guy, to come along and actually say, look, if we want the sort of public services that we all think the Scandys have, then we can't just pretend that a bit of tinkering here and a bit of tinkering.

43:43Rory Stewart:There the answer seems to be, if you want the kind of public services the Scandys have, ordinary people are going to have to pay more income tax. If you want to raise that kind of money. It is the only way to do it.

43:52Dan Neidle:Income tax raises over 200 billion. The most ambitious wealth taxpayers will think they'll raise£24 billion if they're lucky.

43:59Rory Stewart:So if you want to get up to Scandinavian levels of spending, 52%, 53 % of revenue spending, everybody's tax has got to go. You're not going to be able to get it from the very rich. So there are two different things. One of them is the inequality point, which is we don't like the fact that there are these very rich people who aren't paying tax. We'd like to get them as a moral thing. But then get them.

44:18Dan Neidle:Get them with inheritance tax. Get them with capital gains tax. Yeah. This goes back to the Thatcher thing. There are still people right across our society who think that people who are poor either choose to be poor or deserve to be poor. OK, whereas the very, very wealthy, they're unbelievably clever. They're incredibly smart. And that's how they become wealthy in the way they have. And often it's not the case. When you talk about inequality, a lot of it's about inequality of background. It's inequality within education. It's inequality in housing. So I think we've got to we've got to break out of this Thatcherite tax bad tax always bad debate.

44:51and we've got to be honest about the trade-offs between the sort of country that we all keep telling ourselves we deserve and what actually we would have to put in to have that.

45:01Rory Stewart:And I also think maybe we want to not always get fixated with this phrase inequality because there's something always dishonest about it. I felt it when I was in the House of Commons when Labour was saying we're against inequality. What do they really mean? I mean, did they actually mean literally they want full equality of opportunity? They want a slightly more equal society, right? But there are so many other things that you also want. You want growth. You want good public services. And then there's the inequality nobody's talking about, which is sub-Saharan Africa, where people are living on$1.50,$2 a day.

45:34Rory Stewart:They're dying at$40. So if people really morally cared about inequality, we'd be talking about international development. We'd be talking about – so I don't buy this idea that we morally care about it because I don't think we're looking after the bottom 10 % of Britain. and I don't think we're looking at the poor. I think a lot of this is resentment against the perception that there are these very rich people at the top and people don't like it. But the tax things being proposed on wealth are not making, I don't think, likely to make the country better. I suppose that's why I get wind up about it.

46:09I get the idea it's kind of let's have a go at this lot

46:13Rory Stewart:and it's going to make everything better. The Gary Stevens debate, the Zuckman debate, la la. No, but I think you can, look, it's possible to, I see, I don't see inequalities. We've all got to be, you know, measured in the same way. I don't see it like that at all. But I think where you have very large sections of, you know, a sizable minority in this country who literally are denied the sorts of opportunities that we completely take for granted for ourselves and for our kids. I just think that... But then we should fix that. Yes, I agree. That's the big question. And that requires you to raise money, and part of that is tax from all of us.

46:52So what I'd like to do is see tax from up here go up and down here disappear.

46:58Rory Stewart:No, no, no, no, no, no. What Dan's saying, you see, this is what we're not listening to. What Dan's saying is that if we actually want to fix problems for people down at the bottom, they have to pay more tax. It's not that the rich need to pay more tax. It's a pyramid like this. You're not going to get the money by just taxing the top. That's not a dance. So you're saying that in Britain, one of the weird things is that people under 12 ,500 don't pay tax. If you want to generate the tax that you have in Scandinavia, even people under 12 ,500 have to pay 10, 20%. It's a different benefit system.

47:30Rory Stewart:Hold on. Then work becomes literally pointless because you can get more on benefits. You have to change benefits as well.

47:36Dan Neidle:Exactly. When you get to the bottom three deciles, you have to be very careful just looking at tax in isolation because the effect of the benefit system becomes very important. I'm not a benefit specialist. But certainly, if we wanted to become a little bit scandi, people on median incomes would need to pay more tax. There is no other way to do it. I don't think currently that there is a mood in the UK that makes that politically possible. I could be wrong.

48:01Rory Stewart:No, no, exactly, because I think, Alistair, your instinct is that you could get more revenue by taxing just the top of the pyramid rather than getting the median incomes harder. No, I'm not actually saying that. I think you really... Look, Gordon Brown, when he was chancellor, I think he did everything he could on all the tax loopholes and avoidance.

48:19Dan Neidle:And he really tried to do that. There was a dramatic change in avoidance. My claim that bankers don't avoid tax and bonuses, I'm sure lots of listeners won't believe, but they're wrong and I'm right. Yeah, exactly. In the 90s, totally different. And Gordon Brown utterly changed that landscape. Exactly. So that's one place where you can do it. But we've kind of let go of that again. And I think it's all, it's back to this point about, we kind of think there's something of it. Look at Trump. there's something smart about getting away with we're not paying your tax we've got to make a moral case for taxation and i think if you did that we could start to win an argument for the sort of redistribution that actually i think you believe in i believe in and i think most people in the labour party believe in but we've locked ourselves in with this these promises that we keep making and we made them as well for political reasons but if you don't make them political reasons you never make the political argument you need to make right and if you only ever put up tax on the top decile, then...

49:13Dan Neidle:You won't get the money you need. You won't get it, but also you're teaching people that tax is something paid by other people. Count Binface's best policy by far, I think his first policy is, I will cut your tax and increase tax on everyone else. Yeah. And that's great for him. Other political parties should not have as their slogan. But they all bloody do. It's a great joke. Well, there we go. Who should we have on next to talk about tax? Dan, thank you very much indeed. Thank you very much. So come on, Roy. I mean, this is just getting a bit strange. You're normally a very calm, measured, but honestly, sitting alongside you, I can feel this Vesuvius rage building within you whenever we get on to talking about inequality.

49:58What have you got against addressing inequality? What's going on?

50:02Rory Stewart:Look, I mean, I was up half the night worrying about this. So we're recording this wrap up the day after the Dan Needle conversation. And you're right.

50:09Dan Neidle:We did a really lovely main podcast in Question Time when we were very calm the day before.

50:15Rory Stewart:And then somehow I've got back into this Zuckman thing. So let me try to, this is what I thought at three in the morning. So firstly, obviously, I come from a privileged background. So there's a problem about my discussing this stuff because I'm at the wrong end of the inequality. In my defense, I also spent 10 years as a civil servant, 10 years as a minister. And I've worked on extreme poverty in Afghanistan and I give directly in Africa, etc. What I think I care most about, whether I'm in Cumbria or in Afghanistan, is the people who are really suffering, who are the very worst off in society.

50:52Rory Stewart:And I talked about homeless and poor elderly. I probably would have added people with severe mental health conditions. I mean, the sort of people who, when I was walking around my constituency, I knock on a door and they open it. And I'm shocked that people like that are living in those conditions in Britain. Which means, I think, that I care deeply about revenue. Where do we get the money to look after those people and prioritise those people? Which brings me to the countries I admire most, which are Scandinavia. And the point about Sweden is that it's abolished its wealth taxes. It doesn't have inheritance tax.

51:25Rory Stewart:It taxes capital very lightly. What it does instead is it taxes people on median incomes heavily. and that's uncomfortable for you and me and most of the listeners to the show because it means professionals in Sweden pay much more tax than we do so I would like a system which was more Swedish where you and I pay more income tax and not just you and I but actually people on median incomes pay more income tax so that we can look after the worse off and I'm terrified that we are driven by an idea that if we just put a wealth tax on the super wealthy that would solve problems when I think actually it's going to make us poorer there'll be less money for the government to spend and the people at the bottom of society are going to end up being worse off but the final thing I thought a little night is your strongest point is about the way in which wealth translates into power and that what I'm not thinking about enough is the way that privilege and wealth isn't just a question of how you raise revenue or look after the worst off it's about how the wealthy dominate politics dominate media entrench uh privilege for their kids etc um so that that was my best attempt okay over to you i think there's a lot going on here so for example the reason why i still feel there's something in what gary stevenson and gabrielle zuckman and it was interesting how dan wanted to separate them and he'd obviously had a very bad experience with gary stevenson clearly doesn't like him.

52:57So you and I probably think that Gary Stephenson and Gabriel Zucman in different ways are arguing for the same thing. Let's tax extreme wealth, if there can be such a thing as extreme wealth, which I think they can. You said recently, we were talking about Elon Musk when he became a trillionaire. You were saying, you know, why does he want to be a trillionaire? Why does he need all this money? What's he going to do with it? The other day on the podcast, when I read out Sadio Mane, the Liverpool footballer, who was explaining why he doesn't want a Ferrari, He doesn't want a fancy watch. He just wants to give money to people who don't have money.

53:28And you were sort of moved by that. And you thought that's exactly right. You've got lots of money. Give it away. I look at somebody like Musk and all of these people. OK, they've got foundations and, you know, Jeff Bezos, his ex-wife, is one of the biggest philanthropists in the world. It's almost like we're supposed to respect them because they've beaten the system. right whereas what we should be doing is saying we're all part of the system we shall contribute to the system and I do think it was I found Dan very interesting because I think that he's not just to kind of you know a lot of people think that the problem with Gary Stevens and Dan Needle is that they both think they're absolutely right all the time and they've got a very clear vision of how this thing should work but actually I thought it was interesting about him he is clearly quite left-wing and yet I think he's just wanting us all to understand that tax is complicated most people find it very very boring but we can't live without it so then the question is what are the choices we're going to make about tax so what I think all three of us feel is for political reasons which we all understand the last Labour in opposition made certain promises on tax which have made their life more difficult since coming in Andy Burnham the day we were doing the Daniel Needle interview Andy Burnham was talking about social care and he was talking about the need to you know political capital what he means by that is making difficult decisions that will probably involve tax but we're so trapped in this debate that says if you put taxes up on anything somehow it's a terrible thing so that's when the whole stealth tax thing comes in a little bit here a little bit there so where i'm with dan needle is i think we've just got to occasionally bite some very big bullets and say if we want scandinavian type public services we're going to have to pay for them and if we pay for them as a society that's largely going to be

55:12Rory Stewart:done through taxation then i suppose maybe there are two other things that are interesting here um one is that there's a real i i share your kind of the fact there's something really disturbing about the way in particular american tech billionaires behave and and also the way the united states is structured in terms of the kind of power that someone like musk has i suppose within Britain, we have to be asking ourselves, what is it that we in Britain can actually do about Bezos or Musk? You had points about Amazon corporations.

55:44Dan Neidle:And who are British billionaires?

55:46Rory Stewart:And what are they doing? So Dan had two different sort of points there. One is that there's been research that as people get wealthier, their effective rate of tax decreases to about 33%. So you do capture much more than in the United States, the wealth of billionaires through inheritance tax and capital gains tax. They can't get around that, but the capital gains tax is still lower than income tax. So I think he'd be a believer in putting that capital gains tax up. The second thing is this difficult point that he's making that 70 % of the revenue of the government comes from things like income tax and national insurance.

56:25Rory Stewart:And that if you want to increase that, most of that is going to have to come from the middle of the pyramid, not from the top of the pyramid. That's where the real numbers are. And my final thing, I don't know why I get so wound up about this, but my final thing is that we should probably get back to describing the kind of societies that we want to live in. And I think they are quite Scandinavian. I think probably you and I would agree that maybe inequality isn't quite capturing everything, because there are a lot of billionaires in Sweden. It's a more equal society, but there are a lot of billionaires.

56:57Rory Stewart:Sweden's got more of them than Britain has. I think what we're trying to do is work out how do we get, they're not perfect societies, but how do we become a bit more like Sweden or Denmark or Finland or Iceland? And if we set that as our goal, then look quite closely at what they actually do rather than inventing some other solution, which often, like wealth taxes, they've actually tried and rejected. And don't forget, we shouldn't run away with the idea that there's some kind of nirvana there. There isn't. that all these countries have got problems. And, you know, we talk a lot about the right-wing populism.

57:34Right-wing populism exists in these countries as well. When we were in Finland, for example, a couple of things that really struck me. The first was they trust their leaders and they trust their institutions. The fact that we trust our leaders and our institutions less and less. Now, in some cases, we can point at Truss, we can point at Johnson, and we can say, well, that's because they're the leaders that we had. But we chose those leaders, right? The institutions that we keep decrying, why do we trust them less than we did? Is that about them or is it about us? The BBC, for all its faults, is still an amazing institution.

58:11The NHS, for all its challenges, it's an amazing institution. You know, your friends, the monarchy, it's an amazing institution. Why are these other countries able to trust their institutions and their leaders much more than we do? And I'm afraid I think a lot of it is about the media. It was very interesting watching Andy Burnham talking about social care. And he wasn't whinging, he wasn't whining, but he was basically saying, listen, I'm trying to start a really big debate here about something that we have to do as a country. Is it possible we can have this debate without exaggeration, misrepresentation, screaming headlines that say things that aren't true to try to kind of drive us all apart?

58:54But what you have in Finland that I sensed within the debate, and you've got big debates going on, but you had a sense that they were all desiring to have outcomes that would benefit everybody. And they were believing that was possible. The thing that most impressed me was the fact that they've now got 900 ,000 Finns as military reservists. Now, what does that say? That says they all get the state of the world, and they feel they've all got a responsibility, not just the government. Whereas, you know, here we just, we don't have that mindset.

59:33Rory Stewart:Well, there's something you've put together there, isn't it? These are more equal societies. They're societies with better public services. They're societies with more trust in government and they're societies where actually citizens are prepared to sign up for national service and risk their lives defending their country. And these things connect. So I wonder whether part of it isn't that they're taxed more, they spend more on public services, but they get a better quality of public service. So my idea might be there's a threshold that until you're getting public services of a certain quality, actually you're not really prepared to pay tax or trust your government.

1:00:08Rory Stewart:And that maybe we're in the worst of all possible worlds, which is that we've kept our tax so low and our public services so under strain that we're always crossed with our public services and crossed with our government and therefore not prepared to give more tax. that you either do it properly or you sort of don't do it at all. Our problem is that we're stuck in this. I mean, it's a horrible cliche, but we're stuck in wanting American levels of taxation and Swedish levels of services. Yeah, you have to make a choice. But I go back to my point about Thatcher. She won this massive argument about what sort of country we should be.

1:00:42And part of that vision for this country is low tax is a good thing. now low tax is fine but if i would argue that that approach and that mindset is what has led to our economy not being as strong as it is because these other countries also have pretty well performing economies now norway is an exception because of the you know but again that was classic what did what did we do with the oil money thatcher gave these huge tax cuts to people who were already pretty well off what did the norwegians do they put it into a sovereign and well-funded, they're now one of the richest countries in the world.

1:01:16I just think that what we're grappling with is we want to tell ourselves, we still do, the Labour Party does this, you know, we're so proud of the NHS, it's the greatest achievement, the Labour Party's greatest achievement in history. That sense of nostalgia about it sometimes makes us overlook some of the things we need to do to reform it, to make it deliver better for people who most of this population who weren't around when we were all celebrating the birth of the National Health

1:01:50Dan Neidle:Service. So in all of these debates, it's always like we're having phony debates. And one of them is tax is bad. And the other is our public services are great. Neither of those things are true.

1:02:02Rory Stewart:And then my final contribution is priorities. What is it we're trying to do here? And I think what we're trying to do here is address extreme poverty and suffering in Britain and get good public services. In order to do that, we need to generate economic growth, we need to have good businesses, we need to simplify the tax law, we need to keep entrepreneurs here, we need to invest, and we need to tax people. And I think that's a more sensible way of thinking about it than just getting stuck on the word equality, inequality, which I think can lead you in seven or eight quite different directions with quite different choices if you're not clear about what the priority is because I think you you could have very few billionaires yeah but a poorer country where the poorest are worse off you could have as Sweden does billionaires but actually people looked after properly and public services operating and and this is why I think I guess Dan Needle and I are probably a little bit kind of new labor on this I think we're sort of hoping that you can preserve quite a loss of the, what used to be called a capitalist system, if you manage it in a way that helps the worst off in society and builds good public services.

1:03:13Well, we'll have to keep coming back to it, because, you know, as your therapist, Rory, I think we've really got to drill down on, there's not much that gets you, look, I'm quite a big guy, and I can sort of look after myself, but there were times when I was thinking, God, if he suddenly decided I'm the person in his sights and I need to hit somebody, it felt quite...

1:03:40Rory Stewart:And it's not pleasant for the listeners either. I'm going to have to get a grip on this. Anyway, thank you very much. And thank you, Dan Needle, for joining us. All right, bye-bye. Bye-bye. Yeah, see you soon.

1:04:01Thank you.