Three ways to skin a cat
Taxing wealth has to be part of our response to wealth inequality, but we also need to spread wealth wider at source and put 'guardrails' in place to minimise the negative spillovers
Last week I wrote about the harms caused by wealth inequality, arguing that we need to distinguish between the harms that arise mostly from the concentration of wealth at the very top of the distribution, those that have more to do with the absence of wealth at the bottom, and those that stem from the size and shape of the gap between rich and poor. This is important not least because it helps us to work out what policies we need to address those harms:
Answering these questions is crucial in helping us to better understand and communicate the evidence about the negative impacts of inequality (of wealth in particular), and to win the argument about both the need for change and the effectiveness and feasibility of some of the most promising policy solutions, from better taxes on wealth to ways to share wealth more broadly in the first place, as well as stronger ‘guardrails’ to protect against the worst harms caused by both extreme wealth and zero wealth.
Today I’m going to dive into some of those policy solutions in more detail, looking at these three ‘buckets’ – redistribution (taxes on wealth), predistribution (sharing wealth more broadly at source), and guardrails (protecting against the spillover harms).
Let’s start with taxes on wealth. We wrote about this in autumn 2025, arguing that taxing wealth better would make both the tax system and our economy as a whole fairer, while raising useful amounts of revenue and boosting growth (rather than undermining it, as some suggest).
The debate about a wealth tax (i.e. a new one-off or annual tax on wealth holdings above a threshold, like £10m) continues to rage, with Gary Stevenson’s recent Channel 4 documentary helping to bring the arguments to a wider audience and provoking plenty of impassioned debate on both sides. Gabriel Zucman has made a separate proposal for a global minimum 2% tax rate for those with more than $100m, which is really about ensuring that the extremely wealth pay the same rates of income tax as the rest of us. And there are a whole range of other ways to tax wealth better by reforming existing taxes, on capital gains, inheritance and property, among others, which we explored in our 2025 report. I’ve written for Bright Blue recently on making an argument for taxing wealth that resonates with those on the right as well as on the left.
A key question to consider is why we want more and better taxes on wealth. The fact that there are so many arguments for taxing wealth more is a mixed blessing for campaigners, because they need to find a simple message that cuts through as effectively as ‘stop the boats’ or ‘take back control’. It’s not surprising, then, that they have settled on a wealth tax as the key ask, with the twin aims of making the tax system (and economy) fairer and raising revenues (ideally for public services). Critics will inevitably argue that a wealth tax is being inaccurately presented as a magic bullet, and that it’s populism rather than serious policy. But it’s not clear whether or how campaigners can avoid some of these elephant traps in a media, online and political climate that is not conducive to nuanced and detailed debate.
As well as raising revenues and redistributing income and wealth, taxes can also ‘reprice’ goods and services to encourage desirable behaviours by companies or individuals and discourage undesirable ones. More electric vehicles, fewer sugary drinks. And better taxes on wealth can help here too, for example by incentivising genuine wealth creation while disincentivising wealth extraction.
But we also know (and tax campaigners would agree) that it’s not all about tax. As well as redistributing income and wealth after the fact, we need to find ways to spread them more fairly in the first place (predistribution).
In part this means finding ways to ensure that workers pocket a greater percentage of company profits, through stronger trades unions and other approaches like mandating worker representation on boards, as well as scaling up alternative business models like social enterprises and employee-owned companies. But not everyone is able to work as much as they would like, and we are staring into the abyss of massive AI-driven disruption to the labour market, so we need to look again at how we might design and implement a universal basic income.
Equally, it’s not all about income – spreading wealth is important too. We need to revisit what Liam Byrne has referred to as universal basic capital (perhaps funded by taxes on wealth), which he suggests could comprise a universal savings account alongside a one-off young peoples’ dividend paid from a bigger version of the existing national wealth fund.
Investment is key, but smarter regulation can play a key role here, without incurring enormous expense for the taxpayer. In particular we need regulation to promote wealth creation over wealth extraction, helping to protect free markets and boost growth at the same time as keeping more money in people’s pockets, rather than allowing it to be siphoned off through profiteering by monopolists, rent-seekers and private equity barons.
Finally, we should acknowledge that reducing wealth inequality to a desired level might never be achievable, in part because we might never be able to agree on what the ideal level is. So the third bucket in our armoury (if armouries use buckets) is putting in place ‘guardrails’ around wealth inequality to reduce its spillover effects on our economy, society and democracy. In other words, we can and should be thinking about making wealth inequality less harmful by reducing the importance of both owning wealth and not owning wealth. Think of it as adaptation rather than mitigation, if you find that more useful than confusing (recognising that, as with climate breakdown, we need both).
This is a trick that has been used to good effect by our Scandinavian neighbours, many of which have high levels of wealth inequality, but offset by low levels of income inequality, almost no poverty, and a healthier democracy. How do they pull this off? In part by ensuring that low levels of private wealth do not unduly damage people’s life chances and outcomes, through strong, universal and far-reaching public services (including free childcare, affordable social care and more widespread social housing) and a generous social safety net. Then they tend to have more effective measures in place to reduce the influence that the very wealthy have on politics, from public funding for political parties to rules about lobbying and media ownership.
The German sociologist Jens Becket writes about six ‘capacities’ that wealth brings – security, opportunity, income, bequest (inheritance), status and power. The first four of these can to some extent be provided by the state through public services, using public wealth to compensate for a lack of private wealth. The last two, however, are inherently relative or positional concepts – one person’s status or power is gained over, and so at the expense of, another’s. Researchers looking into the harms of extreme wealth point out that the hoarding of status and power by a few ultra-wealthy individuals also tends to undermine the ability of the state to provide its citizens with security, opportunity, income and a chance to pass on wealth to their children. The wealth of some is undermining the ability of others to generate wealth for themselves, or even to enjoy the benefits of public wealth. And the problem is not just the billionaires; witness the ways in which the ‘ordinarily’ wealthy hoard opportunities for their own at the expense of others, even while feeling uncomfortably off relative to the super-rich.
When it comes to the solutions to wealth inequality, we need to be thinking about how to interrupt some of the transmission mechanisms by which wealth inequality both reproduces itself and harms all of us. We need to identify policy levers that will prevent the very wealthy from blocking routes to ‘necessary’ wealth for everyone else. If we don’t figure this out soon, we might not still have a democratic system that can bring these vital changes about.
My forthcoming book, The Fair Necessities: Why We Need a Fairer Britain and How to Make It Happen, looks at the harms of inequality and the potential policy solutions in more detail. It’s out on 8 September with Policy Press; you can pre-order a copy and sign up to a launch event using the link. Next week I’ll publish a final article previewing the book’s arguments about how to overcome the barriers to change. And we’ll be publishing more on wealth-inequality-specific problems and solutions later this year, building on our Wealth Gap Risk Register.