Neil Collins’ Notebook – Best of luck trying a wealth tax

According to The Sunday Times, 44 per cent of its readers are broadly in favour of a wealth tax. Support fell with increasing income, but the most interesting finding is the survey’s failure to reflect the generally held view that we’re in favour of a wealth tax providing only those wealthier than we are actually have to pay it.

Still, the cynicism was there. Yup, tax the shares, second homes and stashed assets of the rich, but leave our houses out of it, said 89 per cent of the 2000 people asked. Those nine out of ten readers were not asked whether they had any other significant assets which might qualify as “wealth”, but unless it was a very odd sample, their wealth would have been overwhelmingly in what chancellors always call “the family home.”

This asset already has some protection from the impact of inheritance tax. It would be a brave chancellor who acknowledged that housing wealth was mostly luck, and that it was time that luck was shared with the less lucky. Well, not so much brave as politically suicidal, for him and his party.

Still, a wealth tax presents an attractive target. An analysis by the Resolution Foundation concludes that official estimates are about £800bn short of reality, and that the wealthiest 1 per cent own 23 per cent of the UK total.

Yet nowhere in the world has a wealth tax been successfully established. Those countries which have tried it have either abandoned it, or watered it down to the point where the tax yield is irrelevant. They have discovered that the practical difficulties are overwhelming, even if the super-rich can be persuaded to stick around long enough to keep paying it.

Even measuring wealth is almost impossible, despite Resolution’s efforts. What, for example, is the value of an index-linked pension to a former government employee? While she is alive, it is a guaranteed stream of income, but becomes worthless when she dies. A collection of pictures may be valuable, but it produces no income, and the only way to establish capital value beyond the guesswork of an expert is to sell it. A family business recovering from Covid-inflicted damage may have long-term value, but may be in no financial state to pay a new tax.

For many, if not most people, home is where the wealth is, and may be their only asset which is possible to value with any degree of accuracy, which might explain the survey respondents’ view that it should be left out of the calculation. That would guarantee a complex, arbitrary new tax which raised irrelevant sums. Haven’t we got enough of those already?

Midland Bank revisited

Bank shares have taken some tentative steps off their sickbed, as the prospect of negative interest rates recedes. Yet as one problem departs, another arrives, not least for HSBC, a UK bank with most of its business in China and Hong Kong. Doing what the authorities tell you there amounts to rather more than not paying a dividend.

Those authorities are clearly determined to wipe out what’s left of freedom and democracy in the former colony, regardless of the 1997 settlement with the UK. The banks have no choice but to take their lumps or lose their licence, but kowtowing promises to be especially awkward for HSBC, thanks to its position as one of the UK’s big four.

Like most other UK companies, HSBC has paid lip service to the ESG lobby, but as conditions in Hong Kong and the UK diverge, it will be increasingly difficult to go along with the dictatorial authorities in China while avoiding damage to its business here. Its consumer lending offshoot First Direct is particularly vulnerable to calls for a boycott.

Fortunately, HSBC UK is an attractive business in its own right, so a (relatively) simple solution presents itself: HSBC could admit reality and become a Chinese-compliant bank, while giving the UK business to its shareholders. It could be called Midland Bank.

An expensive short-circuit

We have stopped buying new cars during the pandemic. Well, not quite stopped, but sales last year were the lowest since 1992, and down by 30 per cent on 2019. It is not hard to see why. We are to be banned from buying new petrol cars in just nine years’ time, while the war on diesel, so soon after we were urged to switch to it, has destroyed confidence in any consistent policy.

So rather than splash out on a new motor, we are buying newish second-hand. Increased reliability and rust-proofing is helping, while the likes of Cazoo are upending the image of the dodgy dealer in used motors. Whistling to stay cheerful, the Society of Motor Manufacturers and Traders pointed to the growth in electric car sales, which have crept up to 7 per cent of the diminished total.

Like almost every other industry, the motor trade has its hand out. It is arguing that we do not have range anxiety over electric vehicles, and we would rush for them if only there were more charging points. This could be rectified, said Mike Hawes of the SMMT, for a mere £16bn of government investment. He has noticed that half the nation’s car owners lack an off-road space for a domestic charger, a systemic problem that putting charging points into lamp-posts will not fix.

Today’s buyers of electric cars get a £3,000 government bung and escape many of the costs heaped on other vehicles, but we still don’t like them. Forcing up fuel duties to pay for electric subsidies looks inevitable and will be highly unpopular. The tedium of charging and the painful cost of running out of juice mean that electric cars are an innovation that makes life worse rather than better. No wonder the second-hand market is booming.

A tiny light in the green madness this week: the government is refusing to stop the development of a coal mine in Cumbria. The usual suspects are appalled, but as so often, miss the point. Coal from the Copeland mine will not be shovelled into power stations (if there are any left) but into steel-making. Coking coal is a key ingredient and would otherwise have to be imported. Then there is the little matter of creating 500 jobs in an area which badly needs them, which is why the local council had already granted planning permission.