Could a 2% wealth tax raise £24bn?
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Hello and welcome to More or Less. Wherever there's a top secret group chat about numbers, you can bet that we're lurking unobserved and taking notes. I'm Tim Harford.

This week, we resolve last week's low-jeopardy cliffhanger about why British houses are really old. We investigate claims that the Office for National Statistics have stuffed £2 trillion into a duffel bag and absconded to Brazil. We return to the increasingly recondite topic of how many days there are in Lent. But first, last week, the government announced changes to the disability benefits system, which included cuts aimed at saving £5 billion a year.

The move was met with dismay by some, including those on the left of the Labour Party, such as MP Diane Abbott. She appeared on Radio 4's Today programme and argued that there was another way to deal with the financial pressures of a rising disability benefits bill. I would introduce a wealth tax. If you brought in a wealth tax of just 2%,

on people with assets over £10 million, that would raise £24 billion a year. That's what I would do. Loyal listeners have been in touch asking us to look into this figure, so we tracked it down. It ultimately comes from the Wealth Tax Commission, an independent report written in 2020 by academics and experts led by Aaron Advani, Emma Chamberlain and Andy Summers. I wondered what had happened to him.

The report looked at whether a wealth tax would be a plausible way to pay for the one-off cost of responding to the pandemic. This £24bn figure is based on levying an annual tax of 2% on any wealth over £10m. The Wealth Tax Commission didn't argue for this rate or threshold, but the £24bn is a fair extrapolation from calculations the Commission made, so there is some proper maths behind it. But what do we mean by wealth?

Dr Aaron Advani was one of the commissioners of the report, as well as being an economist and the director of the Centre for the Analysis of Taxation. One of the things we said that was crucial if you were going to have a wealth tax was that you treat all assets equally. That means you are taxing houses, you are taxing pensions, you are taxing business wealth, if that's what you hold, you're taxing all of the full value of wealth. So the kind of wealth tax envisaged by Aaron Advani would encompass all forms of wealth, no exemptions.

And there is a reason for that. Exemptions are kryptonite for wealth taxes. The ultra-wealthy tend to be well advised. And if one kind of asset is excluded or taxed at a lower rate, then they will put all of their money into that.

Say that an exemption was made for farmland or forestry. All of a sudden, you'd see rich people buying forestry and farmland. We are looking at you, Mr Clarkson. Classic BBC there. Classic. Oh, yeah. Actually, this gratuitous celebrity reference is making a point. It sounds...

Easy not to have exemptions, but as the protests over farms and inheritance tax show, it isn't easy and this has consequences. So when you look at other countries where sometimes the revenue estimates have been a bit disappointing and the money that comes in is lower...

You can see that one of the biggest, or the biggest reason for that is that they all have ended up with gaps in their wealth tax, certain assets that aren't being taxed, and then people naturally shift over to those assets or find ways to value those assets creatively as ways of reducing the taxable wealth that they have. We see this in the real world. Many a wealth tax has been brought low by the addition of exemptions or special treatment.

Dan Needle is a former top tax lawyer who now runs a tax think tank, Tax Policy Associates. He thinks the international evidence shows us that wealth taxes are never as simple as the theory would have it. There's no wealth tax in the world that works like that. Why not? There have always been...

exemptions, limitations, restrictions, qualifications, as there are for all taxes. And is that because people always lobby? I'm sure it's partly because people always lobby. But is it because for some economic or legal reason, it's just impossible to levy a wealth tax like that? Well, there's two ways to put it, and you can pick the one you prefer. The first one is that there will be

economic inefficiency or even injustice if someone is taxed at a level that means they have to dispose of their business. The alternative way to view that is that people who own large businesses are in an excellent position to lobby and they create exemptions for themselves. Whichever one of those is true in a way doesn't matter much because the history has been that wealth taxes have bloody great exceptions and so the very wealthy have ended up not paying much

and the mere upper middle class, if you like, ends up paying it. The international evidence is indeed not hugely promising. Back in 1990, there were 12 OECD countries that levied annual wealth taxes. Today, it's just three. France, for example, introduced an annual wealth tax but exempted business assets. It ended up abolishing the tax in 2018.

I asked Arun Advani about the international evidence. I think one kind of advantage for us as a sort of second mover in this context is that other countries have built wealth taxes before and they've made mistakes before and we can see what the costs of those mistakes are. So we can say, look, Mr or Mrs Policymaker, if you are in a world in which you're going to go out there and build a wealth tax, this is going to be the cost of allowing some of those gaps in the wealth tax and at some point,

If you want one, you have to build it properly. And if you're not going to build it properly, it's not worth doing. But even if you did design it perfectly, would it bring in £24 billion a year? There would still be ways to avoid paying that tax, such as spending so little time in the UK that you are no longer eligible.

The Wealth Tax Commission did look at international evidence on how much revenue might be lost to avoidance. If the tax rate levered was 1%, they thought between 7% and 17% of the initial tax base would be lost. It is tricky though. International wealth taxes have tended to kick in at relatively low thresholds, certainly when compared to this proposed UK version.

Much of the recent discussion has centred around the idea of whether an annual wealth tax would work or not, but there are other options. The government could, for example, implement a one-off wealth tax, levied just the once.

Both Aaron Advani and Dan Needle agree that that would face fewer of the difficulties around avoidance that an annual wealth tax would. As long as it takes people by surprise, the super-rich wouldn't be able to change their behaviour. Though, of course, this wouldn't give you an ongoing source of income, and the super-rich might not believe the tax would be a one-off and start thinking of avoidance strategies anyway.

Aaron spent a long time looking at the evidence on wealth taxes. So what did he and his colleagues end up recommending? So what we said at the end of the work that we did, given that it was in the context of COVID, was that to pay for that one-off shock that we'd had, the best solution, both in the context of wealth taxes, but also in the context of taxes more generally, would have been a one-off wealth tax rather than either an annual wealth tax or rather than, say, a change in income tax or national insurance contributions.

We separately said that if you're in the space of thinking about annual wealth taxes, certainly we would not recommend an annual wealth tax starting at a low threshold, meaning covering a large share of the population. We have other taxes on wealth in this country, like capital gains tax, that don't work very well. And we thought it'd be much easier and much more sensible to fix those. But we also said if you have a desire to get revenue specifically from the very wealthiest, if that was your political goal,

then you could operate an annual wealth tax. It is possible to make it work. You should be aware that it's not trivial, but it is doable. Rather than a new wealth tax, Dan Needle is in favour of reforming the taxes the government already levers on wealth. So yes, we could fix all our rather broken land taxes, stamp duty, council tax, business rates. We could stop people converting income, taxed at 45% at the top rate, into capital gains, taxed at 24%.

we could stop the widespread avoidance of inheritance tax by the very wealthy. These problems are known, and if there was the political will to tax wealth more effectively, we could do it. But you don't need a quote-unquote wealth tax to do that. Our thanks to Dr Aaron Advani and Dan Needle. Dan is presenting a new series on Radio 4 called Untaxing, about how tax has shaped the world around us. It's on at 1.45 every day next week.

You're listening to More or Less. Cometh the hour, cometh the man. Last week, Keir Starmer was defending the government's economic record at Prime Minister's Questions, which, as you might expect, included a fair bit of attacking the Conservatives' record. That's after only eight months, after 14 years of absolute failure. What do they do? Interest rates 11%. Interest rates at 11%?

Keir Starmer has fallen into a time slip and found himself in the early 90s. That is right, kids. Crack out that fancy new CD player in your Ford Fiesta. We are going back to 1991, the last time interest rates were at that level. So unless Keir has a long-standing grudge against John Major, we presume that he meant to say inflation –

at 11%, which it did hit in October 2022. Now, we might have let this one go as a slip of the tongue. Except the Labour minister, Seema Malhotra, tweeted this clip and repeated the claim that interest rates had hit 11% under the recent Conservative government, which of course they didn't. Previously on More or Less. The question is, what is old?

Is the word old being used in a pejorative sense? Old houses can be better than new ones. Last week, loyal listener Colin wanted us to investigate the claim that the UK has the oldest housing stock in Europe and to explain whether that was actually a bad thing. Great question, but we only had time for the lowest jeopardy cliffhanger in broadcasting history. But now we are back with a full answer for Colin. Yes, we do have the oldest housing stock in Europe –

And we know that because almost 50 years we've been monitoring the housing stock across the country. This is Jane Goddard, the Managing Director of the Building Performance Services part of BRE, that is the Building Research Establishment, which conducts the housing survey for England. They're also involved with surveys in Wales, Scotland and Northern Ireland. And helpfully, there are similar surveys carried out across Europe. The results are in.

the proportion of homes built before 1946, so more than 80 years ago. United Kingdom, 38%. EU average, 22%. The two countries in the EU whose housing is similarly old are Belgium and Denmark.

The lowest on the table are Greece at 8% and Cyprus at 3%. And France, Germany and Italy are all between 20 and 30%. So why is the UK's housing stock so much older? Principally, it was the Industrial Revolution.

which saw a lot of people moving from rural areas to urban areas. And that's why we see so many Victorian houses and we see so many terraced houses, workers' cottages. And that was really the proliferation of housing in this country.

The Industrial Revolution got underway sooner in the UK than in other European countries. And this proliferation of terraced houses accounts for much of our oldest housing stock today. Cue classic BBC documentary. The bylaws made the terrace Britain's new model home. And over the course of the 19th century, a staggering five million were built.

There are around 750,000 homes today which were built before 1850, but they make up only about 3% of the UK's 25 million homes. It was the rows and rows of terraced houses which continued to be built into the 20th century which form a big chunk of the homes which are over a century old. The vast majority are still with us today. It's hard to get consensus to replace them.

If you wanted to pull down a street of terraces, for example, and I myself live in a terraced house, you would have to get permission from every single person in that street in order to bring that down and do something different with the housing. Anyway, even if we could get consensus, that consensus might well be, let's keep them. Well, terraces were popular and still are, and we are very attached to our terraced housing.

After the First World War, Britain embarked on a new wave of building. This was the era of the semi-detached house. New accommodation under ideal conditions has already been provided for about 6,000 slum dwellers, taken from slum properties like these to semi-detached houses like these. The semi-detached house and the terraced house are the most common property types in the UK. Would you believe that these houses are only a mile or two from the centre of Birmingham? No wonder the workers feel as if they had been reborn.

Another 40% of our current housing stock was built between 1946 and 1980. This clip is from a new estate under construction in the 1950s. Built in 12 weeks for less than a thousand pounds each, these houses seem one answer to the housing drive. With a living room, dining annex and kitchen downstairs. They have three bedrooms upstairs. Women will find their work has been made as simple as possible.

That's because when he made the plans, architect Mr Appleton asked housewife Mrs Appleton for suggestions. Gosh. But this brief history of British house building starts to run thin from about 1970. House building rates, already below those of the interwar years, fell dramatically in the 1970s, and despite the occasional micro-boom, they have been continuing to fall ever since –

Fundamentally, that is why the average house is so old. Not because we have lots of old houses, but because we don't have many new ones. The situation in many Western European countries is different. Most of them have built a lot more since the war than the UK has. One exception: Belgium has the same old housing stock as the UK does. But as loyal listener Colin asks, why does this matter? A lot of old housing is much loved.

There are two reasons. The first is that old housing is often expensive to heat. Bad for your pocketbook and bad for the planet. And retrofitting to improve insulation can also be difficult and expensive. Old houses can also underperform in other ways. For example, accessibility for elderly or disabled people. The second reason is not that old housing is a problem, but that it's a symptom.

Our housing stock is old on average because we're not building many new homes, and we haven't done for the last 50 years. And because we're not building many new homes, people can't afford a place to live. As many of you will have heard, the government has announced a new drive to build 1.5 million new homes over the course of this Parliament. If achieved, will this make a huge difference to our overall housing stock? In short, no.

As we already have, something in the order of 80% of the housing stock that will still be here in 2050, 1.5 million homes is a relatively small increase in that number. In other words, the best time to modernise your housing stock was 50 years ago. The second best time is now. Don't expect the UK's housing stock to be modernised overnight.

When you have bars in the sky, onboard showers and award-winning in-flight entertainment, it's no surprise that Emirates was recently named the best airline in the world. We fly you to over 140 destinations and with partners across the globe, we connect you to another 1,700 cities across six continents. So when we say we're also the largest international airline, what we really mean is...

If you're going there, so are we. Book now on Emirates.com. Fly Emirates. Fly better. Life is full of adventures. Do you take this man to be your husband? I do. Welcome home. We did it.

We heard last week about the goings-on at the Office for National Statistics and how their incredibly important labour force survey has gone quite wrong.

Well, not content with that, the Telegraph seem to be accusing them of accounting misdeeds to make Bernie Madoff, Sam Bankman-Fried and the Enron team look like small-time operators. Britain's left £2 trillion worse off by flawed accounting change. £2 trillion worse off? Oh, ONS, what have you done? And to which tropical paradise have you run off with the money? For £2 trillion, you are going to need a very big suitcase.

The Telegraph story is based on a report from the Institute for Fiscal Studies, co-written by senior economist Stuart Adam. So how did the ONS manage to pull off this massive heist?

Well, fortunately, accounting changes can't actually make us worse off. What's happened is that the ONS, the Office for National Statistics, has revised how well off they thought we already were. So it's not actually changing anyone's wealth, but it's changing its measure of people's wealth. Phew. So no, individual Britain is actually worse off in reality. It's just that the ONS's estimate of how much we collectively have has fallen.

The missing £2 trillion is the result of a change in the way the ONS estimates the value of people's pensions. This is combined with attempts to put a value on other things, such as houses, to work out how much wealth we own between us. And the ONS also estimates who owns what, giving a wealth distribution and an estimate for wealth inequality in the UK.

Now, for a lot of people, one of their biggest assets is their pension, which might be a big pot of cash, but it might also be an income from an annuity or a final salary pension. So how to value that?

The ONS recently changed its approach and to show the nation's finest geeks they're working, has published estimates using the new methodology and data from 2018 to 2020. The overall effect of this is that they estimate that pension wealth is over a third lower than they previously thought.

And because pensions are such a big part of people's overall wealth, that means that aggregate household wealth for Britain as a whole is 14% lower than they previously thought. It's a big shift in our estimated wealth, but the IFS thinks there's a mistake in the new methodology. The biggest change the ONS has made is to change the way in which it converts future pension income into today's terms.

This question doesn't have an easy answer, and figuring it out involves a few assumptions. So if I've got a pension that pays me so many thousand pounds a year from now until I die, what's the value of that today? And one way you might go about answering that is to say, well, how much would I need to invest to get the same annual income as I get from this pension?

And the usual way you would go about that is to use an interest rate. Because if interest rates are high, then I don't need very much money now to generate more income in future. Whereas if interest rates are low, I can't get very much return on my savings. So what we do is we use an interest rate to convert that future stream of income into a lump sum value today.

So if you're getting £1,000 a year as a pension, you'd need £100,000 in the bank to earn that if interest rates were 1%. If they were 5%, then you'd only need £20,000. So we might say that your £1,000 a year pension is worth either £100,000 or £20,000, depending on the interest rate.

Now, for a nation-spanning estimate of wealth like this, there is plenty of debate to be had around precisely what interest rate you would use to calculate the value of these pensions.

The ONS, after a big review and lots of expert advice, went down a different path. It's converting future income into today's terms, not using an interest rate at all, but using essentially a forecast of the rate of GDP growth, the rate at which national income can grow.

And I can't see any reason why the rate of GDP growth should be relevant to valuing future pension income in today's terms. You should be using a market interest rate of some sort. The GDP growth rate is related to interest rates over the very long term.

But in the short term, they can be pretty far apart. For the time period the ONS looked at, 2018 to 2020, interest rates were high and GDP growth was low. So changing the methodology made a big difference, reducing the estimated value... By over £2 trillion across the population as a whole, relative to using market interest rates.

Perhaps the big takeaway here is that when you see estimates of the UK's wealth distribution in the news, you need to remember that this big debate is going on in the background. The number changes a lot depending on the ONS methodology, and that means the political argument may change too. But one thing that hasn't changed is your pension. Our thanks to Stuart Adam from the Institute for Fiscal Studies.

While we're talking about the ONS, they have also recently announced that they're pausing the publication of more statistics. The Producer Price Index and the Services Producer Price Indices. These track the inflation that's faced by producers of goods and services, and they're used in the calculations for GDP, gross domestic product.

Oh, at least GDP numbers aren't being used calculating any other stats, eh? We are still keen to talk to the ONS, and we are available for them to reach us via phone, email or Tinder.

In our first episode of the series, which is available to download as a podcast, we did a short, playful item about Lent and how it's not actually 40 days long, as we were led to believe, but 46, because Sundays aren't counted. Lent is still 40 days...ish...

We have received a lot of emails about this. So, like Christ with Lazarus, we are raising this item back from the dead to discuss it further. And with me is our Biblical Numbers correspondent, Lizzie McNeill. Hello Lizzie. Hi Tim. Well, let's take it back to the start. So, as we all know, Lent is celebrated to commemorate Jesus going to the wilderness for 40 days and nights, where he fasted and spent a lot of time resisting temptation.

But the length of Lent has changed throughout the centuries. In the earlier days of Christianity, there was huge debate about how long Lent was, as Saint Arrhenius wrote to Pope Saint Victor I in the 3rd century AD. The dispute is not only about the day, but also about the actual character of the fast. Some think that they ought to fast for one day, some for two, others for still more. Some make their day last 40 hours on end.

Such variation in the observance did not originate in our own day, but very much earlier, in the time of our forefathers. This was a problem that was eventually tackled by the Council of Nicaea in 325 AD, which is probably everyone's second favourite council after the Council of Elrond. Exactly. Anyway, this is when Lent was first given its 40-day timeframe. However, they didn't fast on Sundays.

but did include Sundays in their count, so they only fasted for 34 out of the 40 days. Now, eventually the church split with two distinct branches, East and West, which led to even more variation. In Jerusalem, for instance, people fasted for 40 days, Monday through Friday, but not on Saturday or Sunday, meaning Lent was a period of eight weeks. In Rome and the West, people fast Monday through Saturday, making their period of Lent last for six weeks.

If you're Ethiopian, the Great Lent lasts for 55 days. In Eastern Orthodoxy, Lent is 40 days and includes Sundays. Adding to the confusion, their Lent also generally starts at a different time to Western churches as they use the Julian calendar rather than the Gregorian.

So Lent has lasted one day, three days, 40 days, 46 days or 55 days, depending where you are in history, the world and which denomination you follow. Right. So some people include Sundays, some don't include Sundays, some don't include Saturdays. There's a lot going on. But what about our comments about the number 40 actually being used in the Bible to mean Sunday?

Quite a lot. Umpteen. Loads. Yeah, I consulted a proper expert on this, Alison Salverson, Professor of Early Judaism and Christianity at the University of Oxford and the Oxford Centre for Hebrew and Jewish Studies. She has somewhat ironically spent the last 40 years studying these religious texts, so has come across the number 40 quite a bit.

It occurs in the Hebrew Bible, in particular the Old Testament for Christians, and it's highly symbolic. She agreed that 40 is not a literal number. And it means a sort of significant length of time usually, or a significant number, but not usually in a kind of literal sense.

So 40 days does not necessarily mean almost six weeks, and 40 years does not necessarily mean exactly 40. It takes on a kind of symbolic and delusive value because it's used particularly of Moses on going up to Sinai and staying there, talking to God for 40 days and 40 nights, and not eating or drinking, which I think is very significant for the Gospel passage.

It's also used of Elijah's journey to Mount Horeb to meet with God as well. And that's supposed to have taken 40 days and 40 nights. And so when it's used in the New Testament, I think it's highly likely that the writers were very conscious of making a link with both Moses and Elijah, who were very significant figures for Jews in the first century of the Common Era. And so when it says that Jesus was in the wilderness for 40 days,

It's not an exact number. It is a round figure, but it also points very clearly to the episodes of Moses and Elijah in the Hebrew Bible, meeting with God in the wilderness, in a lonely place and not eating and drinking. So that is what we're meant to be thinking of rather than some kind of countdown from 40.

Thank you, Lizzie, and thanks to Professor Alison Salveson. And thanks also to everyone who wrote in. I hope we have answered your queries, and now I feel more enlightened. And that's all we have time for this week, but we will be back next week with a triple-decker sandwich of statistical news and comment. Something like that, anyway. Please keep your questions and your comments coming in to moreorless at bbc.co.uk. And until next week, goodbye.

More or Less was presented by me, Tim Harford. The producer was Tom Coles, with Nathan Gower, Charlotte MacDonald and Lizzie McNeill. Our production coordinator was Gemma Ashman. The programme was recorded and mixed by Gareth Jones. And our editor is Richard Varden. Hi, I'm Izzy Judd. Have you actually breathed properly yet today? If things are a bit hectic at the moment, if you're struggling to switch off from work, or if you're generally just feeling a bit stuck in life, I've got just the thing for you.

Join me for the Music and Meditation podcast on BBC Sounds and Radio 3 Unwind. It's a place where we press pause with the help of some inspirational guests, wonderful guided meditations and stunning music. Honestly, I think you'll love it. So why not give it a go?

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