Wealth that escapes tax

The New Year’s honours l i st i s meant to be an inspiring tribute to the nation’s ingenuity and selfless public service. We can all applaud the many pandemic heroes on the 2021 list but there are good reasons to question some of the most prominent names.

It should be axiomatic that those receiving honours live and pay their taxes in Britain.

For all his achievements behind the wheel of Formula 1 cars, propelled by great British engineering, Lewis hamilton does not meet that test.

Moreover, at a time when corporations in the UK and around the world are under pressure to do the right thing, not just for shareholders but for employees, suppliers, the environment and society, the knighthood to this paper’s good friend Dave Lewis, the former chief executive of Tesco, also raises difficult questions.

The pandemic year has been enormously costly. In supporting jobs through the furlough and similar schemes for the selfemployed who have kept proper financial records, the Chancellor Rishi Sunak has done a sterling job. Similarly, no one is going to cavil over the surge in public spending on local authority care and grants to local enterprises, cash for the NhS or the large sums expended on ensuring the UK has an adequate supply chain of vaccine.

We can deplore the wastage, as the National Audit Office has done, but in a national emergency big mistakes will be made. The legacy of the health crisis is startling with a forecast of £394bn public borrowing, or 19pc of output, in 2020-21, lifting the national debt well above £2trillion.

The scale of this deficit and debt mountain has given life to the public debate about wealth taxes. The proposals of the Wealth Tax Commission for a one-off tax of 5pc covering all UK residents and applying to all net assets above £500,000, including main residences and pensions, has gained traction not just because it would raise up to £260bn but because it fits with Boris Johnson’s ‘levelling up’ agenda.

This is not just about ‘Red Wall’ seats in the North of england but about the interregional and inter-generational disparities at the core of the 2019 election campaign.

Those, like this writer, who have risen up the housing ladder have acquired windfall gains, which make it far more difficult for millennials and future generations to do the same.

MYCONCeRN about the wealth tax, however, is that it will clobber the wrong people. What makes it politically alluring is the idea that it will be paid by the super-rich who can afford it, and with very little difference to their lavish lifestyles.

The reality is that many in this group, including the new Sir Lewis hamilton, voted with their feet long ago by basing themselves in Monaco or other tax havens.

Among them is Ineos billionaire Sir Jim Ratcliffe. he plasters the Ineos brand over sporting events such as cycling and was a supporter of leaving the european Union.

But when it came to reviving the distinctive Land Rover Defender vehicle he abandoned a pledge to Bridgend in Wales and chose hambach, on the French- German border instead.

Now we learn that the tax-exiled chemical industry boss is among those named for being a ‘rogue employer’ by paying staff in his 55pc-owned home Grown hotels group below the minimum wage.

In this he has something in common with newly-knighted Tesco boss Lewis. As a result of an administrative error, subsequently corrected, some 78,000 Tesco staff were paid below the minimum wage for part of 2017 – a year when Lewis earned £4.9m.

To his credit, Lewis has done a terrific job in restoring Tesco’s reputation and he created tens of thousands of jobs in the pandemic. Nevertheless, the contrast between his pay of £6.7m, in his final year at Tesco, and lower-paid employees is stark. It illustrates a divorce between pay at the top and on the shop floor.

We should not be under any illusion that the proposed wealth tax will see Ratcliffe, hamilton et al making their proper contribution to society and public welfare, They already have made the great escape.

But we should expect executives in boardrooms of Britain’s biggest companies to level up by curbing their own pay and making sure that the lowest-paid employees are properly rewarded.

That would be a fitting start to 2021.