Liberal Democrat Leader has announced proposals for a
£100bn ‘Citizens Wealth Fund’ to strengthen the UK’s public
finances and ensure the public as a whole benefits from the
country’s wealth.
The fund would be built up over 10 years through a series of
wealth tax reforms, to be set out at party conference on Tuesday,
and via asset sales, including the taxpayer’s stake in Royal Bank
of Scotland. The wealth taxes include harmonising capital gains
tax with income tax and introducing a 25% flat rate of tax relief
on pensions that would encourage the less well off to save.
Liberal Democrat Leader said:
“A decade on from the financial crisis this weekend and still the
taxpayer waits to repaid for saving RBS. This is a disgrace.
“This is one reason the Liberal Democrats are proposing Britain’s
first sovereign wealth fund, so that we can use our assets, such
as sales of RBS shares, to protect the country from future
economic crises.
“I have long argued that investment is what leads to a buoyant
economy. A sovereign wealth fund would be a long term,
non-government vehicle to achieve that stability and wealth
across our society.”
ENDS
Notes to editors:
Creating a Citizens Wealth Fund
• A proportion of the annual revenue raised from higher wealth
taxation should be used to create a Citizens Wealth Fund. By
actively investing in stocks, bonds and physical assets on behalf
of the nation, the fund would enable the country to benefit from
the returns on investment typically only available to the
wealthy.
• The fund would be kept at arm’s length from government and run
by professional fund managers, albeit with robust accountability
measures and a strong emphasis on environmentally sustainable and
ethical investment.
• Such funds have proved successful in Norway, Canada and Alaska,
to name just a few examples. The UK has missed numerous
opportunities to establish a sovereign wealth fund – from
squandered North Sea Oil revenues to the proceeds of past
privatisations – but wealth taxes provide another golden
opportunity.
• To illustrate, if provided with an initial £50 billion public
endowment (consisting, for example, of revenues from future sales
of the government’s stake in RBS and other public assets, and a
long-term public bond issue) on top of £5 billion per year from
higher wealth taxation (see final bullet point below), after a
decade the fund would be worth £100 billion and generate an
average of £4 billion per year, assuming a modest 4% average
annual rate of return.
• Once the fund became large enough to generate a substantial
annual return, this would represent an entirely new source of
public funding, which could be used to increase spending on
public services or – more radically – to give all citizens an
annual dividend.
• The wealth tax reforms include taxing capital gains and
dividends through the income tax system, replacing inheritance
tax with a lifetime gift tax paid by recipients and pegged to
income tax rates, and introducing a 25% flat rate of tax relief
on pension contributions to boost saving among low earners. These
reforms would generate £15bn a year, £5bn of which would be put
into the Citizens Wealth Fund.
