Labour's ideological stubbornness risks Rachel Reeves making a catastrophic error that Britain will pay for - William Yarwood

Rachel Reeves has previously ruled out a recurring wealth tax, but pressure is mounting for a one-off raid to fill a so-called £30billion black hole. Proponents argue it is more efficient than traditional wealth taxes because it can’t easily be avoided. But the reality is clear, even a short-term levy would hit the economy, scare off investment, punish ordinary homeowners, and do nothing to tackle the structural deficit dragging Britain down.

And don’t be fooled by the “one-off” line. There is nothing so permanent as a temporary tax. Remember, income tax was once supposed to be temporary too. Once a government signals it is willing to confiscate wealth, markets and investors will assume it could happen again, creating a chilling effect on capital and enterprise. And once one raid happens, the likelihood of it happening again is high, even if the facts show that they will receive diminishing returns.

So why not just do a permanent wealth tax? Well, recent history shows us why we shouldn’t. France’s Impôt de solidarité sur la fortune (solidarity tax on wealth or ISF) taxed net wealth over €1.3million. Over 35 years, it raised barely two per cent of total revenue and prompted 60,000 millionaires to leave between 2000 and 2016. Emmanuel Macron eventually abolished it, recognising that taxing already-earned wealth punishes ambition, stifles growth, and fails to deliver meaningful revenue. Across Europe, the pattern is consistent. Twelve countries had wealth taxes in 1990, now only three remain. OECD research repeatedly highlights the pitfalls. Wealth taxes are administratively expensive, complex, and often hit the wrong people, particularly those who are asset-rich but cash-poor.

The UK is even less suited to such a tax, as we at the TaxPayers’ Alliance showed in our paper on wealth taxes. The British economy specialises in areas such as financial services and is therefore somewhat reliant on non-fixed assets, the impact of a wealth tax is likely to be more precarious, mainly due to capital flight. Furthermore, whether we like it or not, the UK’s economic performance is linked to the productivity of a relatively small number of high-earning professionals who are also likely to be affected by a wealth tax. While this is true, most notably in financial services, it would also affect other industries such as television and the law.

One thing that is also almost always missed is how politically toxic wealth taxes are. Norway is currently holding a general election, and the central issue of the election is whether to do away with its punitive wealth tax. It’s not just that the tax has made millionaires and billionaires leave the country, but is causing young entrepreneurs to go into ‘tax exile’ or preventing them from starting businesses in the first place. Norway is not seen as a place that is friendly to wealth or business.

Under Reeves, borrowing is soaring, the tax burden is rising, and growth forecasts are being downgraded. Yet the government seems willing to explore every option except the one that would genuinely improve public finances: cutting spending. Minor welfare tweaks, which have either failed or been reversed, do nothing to address the structural deficit.

If Labour truly cared about working families, the focus would be on growth and efficiency. Incentivising enterprise, reforming public services, and making government leaner would produce measurable improvements for everyday taxpayers. Revenue-raising through wealth taxes is a symptom of a government obsessed with extracting cash from the productive while leaving the bloated state untouched.

The lessons from history and contemporary research are unambiguous. Wealth taxes fail to generate meaningful revenue, drive away capital and talent, and punish those who have worked hardest. With UK debt approaching 100 per cent of GDP and the tax burden set to hit 37.7 per cent by 2027-28, pursuing a wealth tax would be reckless. Until Labour confronts its spending addiction, taxpayers will continue to bear the cost of policies designed to extract rather than deliver.

The conversation must shift from taxing more to spending less. Only by trimming waste, streamlining government, and incentivising enterprise can Britain escape the doom loop of high borrowing, rising taxes, and stagnant growth. Anything less is a recipe for decline, and hard-working families deserve better.