Here’s how Britain can woo back the world’s wealthy
Britain has the lowest number of millionaires since the financial crash but Andy Burnham seems to have plans to stem the tide. Here’s what he should do, according to James Hodgkinson
The sad truth is that Britain is getting poorer. Last year saw the number of UK millionaires reach just 442,000. A grim milestone, and the lowest level recorded since the devastation of the 2008 financial crash.
In reality, it’s no surprise. A stagnant property market has dragged down asset values, and the rising cost of living hit household savings hard. But the most concerning trend is the wealth exodus. Successful, hardworking and entrepreneurial Brits are fleeing our shores for pastures new. The reason? Punitive taxes and reams of red tape have made building and scaling a successful business feel like a losing battle.
Of course, this does not happen in insolation. Economic growth has flatlined, workforce productivity is stuck in the doldrums, and unemployment has spiked once again. This is hardly the hallmark of a successful economic settlement, and it has put distinct pressures on the rest of our financial system.
Take Britain’s ballooning welfare bill. Across the last decade, spending on working-age sickness benefits have risen by nearly 50 per cent, while the government’s total welfare spend has increased by over £100bn. Unfortunately for all of us, someone has to pick up the tab.
And in the wake of the government’s manifesto pledge not to increase taxes on so-called “working people”, that burden is falling on an ever-shrinking group. Now, it is the business owners and wealth creators who form the essence of the British economy that have come into the sights of the taxman.
It goes without saying that this direction of travel is not new. After all, it was a Conservative government that announced the end of the non-dom regime, forcing hundreds of investors to flee to countries where their wealth was welcomed, like Italy, Greece, Malta and Ireland.
An assault on enterprise
But the last two years have seen a sinister increase in the pace of change. Britain’s domestic tax burden is at its highest level since the second world war, changes to inheritance tax on farmland threatens centuries-old rural traditions, and red-tape on small businesses – such as the £680m cost imposed by trade union access provisions Employment Rights Act – threatens to strangle home-grown enterprise before it has the chance to get off the ground. And as HMRC officers are instructed to invade the privacy of family homes to gather data for the new ‘mansion tax’, hostility to aspiration has moved from tough rhetoric to concrete actions.
So far, the results of the assault on enterprise have been as expected. Catastrophic. From Ian Livingstone to Mark Makepeace, Britain’s brightest business brains have beaten a hasty retreat. But this exodus is not the only warning sign. For many ordinary Brits, these taxes mean starting a business is no longer worth the risk. Last year, the rate of business creation reached its lowest level since 2017, a frankly embarrassing record for any government that claims to support social mobility and economic growth.
And as Andy Burnham comes to the House of Commons as our Prime Minister, uncertainty prevails. After weeks of spending pledges that have felt like a pre-election bonanza (only without the election), one important question remains. Who will pay for this expanded government agenda?
So far, the only thing which appears to be certain is uncertainty itself. After repeated questioning on whether the new administration will increase taxes in the October budget, government ministers remain tight-lipped. But with the allure of future government handouts, accompanied by the shrill cries of Gary Stevenson and his band of so-called “patriotic millionaires”, it is a move that Treasury officials may find hard to resist. Needless to say, it would be a grave misstep.
But despite the rather bleak outlook, there is cause for optimism. Unlike much of our political class, the public grasp the scale of the crisis. According to new polling from Adam Smith Insights, more than half of Brits believe that the UK has become increasingly hostile to wealth and economic success. And in the context of those mooted tax hikes, there is another silver lining. Seven in ten believe that the wealthiest already pay their fair share of taxes, while only 20 per cent believe the wealthiest pay too little.
Maybe it is morality, ideology, or generosity that underpins this opinion. But I think not. Instead, it is the fact that nearly two thirds of the population acknowledge that taxes on ordinary folk would rise if large numbers of wealthy people left the country. It seems that the ordinary Brit has a better grasp of these ‘second-order’ consequences than those sent to parliament to pass legislation on their behalf.
In truth, the issue of wealth is one we cannot afford to ignore. We must be unabashed in celebrating those who create it and determined to provide the conditions for them to do so. For too long, a narrative of ‘us versus them’ has been allowed to prevail. Instead, Britain needs to think in terms of ‘them and us’. That means cutting red tape to allow businesses to flourish, making our tax system genuinely competitive, and cutting inheritance tax to ensure everyone can pass the fruits of their labour onto the next generation. That way, Britain can return to being the first choice destination for the world’s wealthy.
James Hodgkinson is research associate at the Adam Smith Institute