Philip Hammond should impose £7bn of new wealth taxes to help UK meet cost of ageing society, says think tank

‘Relatively large sums can be raised simply by tightening up our existing wealth taxes and subsidies,’ according to the Resolution Foundation’s director Torsten Bell

The chancellor, Philip Hammond, could raise £7bn in extra annual tax revenues through “tweaks” to the UK’s wealth taxes, a new report by the Resolution Foundation published argues.

The think tank says the UK’s ageing population is putting pressure on public services, amounting to £36bn a year by 2030.

If services such as health and social care are not to deteriorate further and the structural deficit is not to rise that will likely create pressure for higher taxes.

Resolution thinks the government should look to the UK’s £13 trillion of wealth, which is undertaxed relative to income, to make up a significant chunk of the shortfall.

The think tank favours comprehensive structural reform of wealth levies, but it acknowledges how difficult this will be when the government lacks a parliamentary majority.

So it identifies five wealth taxes that could be tightened up even in the absence of such an overhaul, raising around £7bn by 2022-23.

These are:

• Limiting entrepreneurs’ relief (£1.6bn)
• Increasing council tax top band rates (£1.4bn)
• Closing inheritance tax loopholes (£0.7bn)
• Capping pension lump sum tax relief (£2bn)
• Scrapping Help to Buy Individual Savings Accounts (£0.9bn)

“Relatively large sums can be raised simply by tightening up our existing wealth taxes and subsidies,” said Resolution’s director Torsten Bell. “That is how we protect our public services without placing all the burden of taxation on hard earned income from work.”

Wealth taxes have traditionally met fierce political and wider social resistance.

Ed Miliband’s proposed “mansion tax” in 2015 was heavily attacked in the media.

And polls show that inheritance tax is one of the most unpopular of all taxes, even among people who are unlikely to be liable for it.

The chancellor is due to unveil his latest spending review in the autumn – well after the UK is currently due to leave the European Union.

Mr Hammond had prepared the ground for new taxes in last year’s October Budget, but last-minute downward revisions to borrowing forecasts by the Office for Budget Responsibility meant he was able to avoid them, while still remaining on track to meet his deficit and debt targets.

At that time he declared “the era of austerity is coming to an end”.

But most analysts think that higher taxes, as demands on public services grow for demographic reasons, will ultimately prove unavoidable.

Adam Corlett, an analyst at the Resolution Foundation, said: “Britain’s wealth is under taxed, and the wealth taxes we do have are in serious need of reform. There’s a strong case for scrapping council tax and inheritance tax altogether, and replacing them with proper wealth taxes that are more progressive and harder to avoid ... [but] even without comprehensive reform of our main wealth taxes, loopholes can be closed, fairness improved and billions raised to fund the needs of an ageing society without hitting the pockets – or votes – of the majority.”

In response a Treasury spokesperson said: “We’ve taken significant steps to ensure those with the broadest shoulders bear the greatest tax burden, including ending permanent non-dom status, reducing tax breaks for those with the largest pension pots, and reforming dividend taxes so that those with very large shareholdings pay more. And HMRC’s efforts to ensure better tax compliance has meant we now have one of the lowest tax gaps in the world.”