Labour’s 2025 budget whispers of a 2% wealth tax on assets above £10 million, championed by figures like Lord Kinnock and Tax Justice UK, aiming to raise £24 billion annually to mend Britain’s fiscal woes. With public services crumbling and a £40 billion deficit looming (MoneyWeek, July 2025), the idea sounds like a lifeline. But history’s littered with wealth taxes that promised gold and delivered dust. Countries like Norway, Spain, France, and others tried and abandoned them, citing meager revenue, capital flight, and administrative nightmares. Let’s dissect Labour’s proposal against these global failures to see if it’s a masterstroke or a mirage. Monty, my skeptical beagle, mutters, “Sounds like they’re taxing my bone stash.”
Labour’s Proposal: The Nuts and Bolts
Tax Justice UK and a dozen Labour MPs propose a 2% annual tax on net wealth—property, stocks, businesses—over £10 million, affecting roughly 20,000 people (0.04% of the UK population) and raising £24 billion yearly (Sky News, July 2025). HMRC would collect it via self-declared asset values, backed by a compliance team and asset register. Supporters argue it’s simple, targets the ultra-rich, and aligns with fairness, as the top 1% hold 30% of UK wealth (Resolution Foundation, 2025). Critics, including the Treasury and OBR, warn of practical hurdles, citing international evidence. Rachel Reeves has dodged committing, saying in 2023, “No wealth tax under Labour,” but recent silence suggests it’s under review (The Telegraph, July 2025).
Global Comparisons: Why Wealth Taxes Fizzled
In 1990, 12 OECD countries had wealth taxes; by 2025, only Norway, Spain, Switzerland, and Colombia cling to them, with France and Italy taxing specific assets (Tax Foundation, 2024). Most scrapped them for three reasons: low revenue, capital flight, and administrative complexity. Let’s break it down:
- Norway: A 1% wealth tax on assets above £1.2 million (2023) raised just 0.6% of GDP but triggered capital flight. In 2022, 30 multimillionaires left, followed by 80 more in 2023 after a dividend tax hike to 20%, taking £40 billion in wealth (Sky News, 2025). A CGE study on a German wealth tax (0.8% on €2 million+) predicted a 5% GDP drop and 2% employment loss, suggesting Norway’s tax stifles growth (Taxpolicy.org.uk, 2025). Labour’s 2% rate, higher and on a £10 million threshold, risks similar exodus, especially with no global coordination.
- Spain: A progressive wealth tax (0.2% to 3.5% on assets above €700,000) brought in less than 1% of tax revenue in 2023. Since its 2022 increase, 12,000 multimillionaires fled, spurring regional challenges to its legality (Tax Foundation, 2024). Labour’s proposal, with a higher threshold but steeper rate, might limit emigration but still faces valuation disputes, as Spain’s tax struggles with illiquid assets like art or private businesses.
- France: Scrapped in 2018, France’s wealth tax (up to 1.5% on assets over €1.3 million) raised only 0.2% of GDP while driving 60,000 millionaires abroad between 2000 and 2012 (Guido Fawkes, 2025). Administrative costs outweighed revenue, and valuation disputes clogged courts. Labour’s plan, reliant on self-declaration, could mirror this, as HMRC lacks the capacity for 20,000 complex audits annually.
- Others: Sweden (scrapped 2007), Germany (1997), and Ireland (1978) ditched wealth taxes after raising under 0.16% of GDP (Sweden’s case). Capital flight and high compliance costs—valuations for private firms or estates—proved unsustainable (Guido Fawkes, 2025). The Netherlands’ 2021 wealth tax was ruled illegal for violating property rights, forcing a 2023-2025 overhaul (Tax Foundation, 2025). Labour’s proposal risks similar legal and practical snags without robust HMRC upgrades.
Labour’s Challenges: Can It Work?
Labour’s 2% tax targets a tiny elite, potentially sparing the broader economy Norway’s GDP hit. But the OBR doubts £24 billion is realistic, citing delays (first revenue by 2029) and capital flight risks (£200-£500 billion, Taxpolicy.org.uk). The UK’s mobile wealthy—think steel moguls fleeing non-dom crackdowns (Steel Times, 2025)—could relocate to low-tax hubs like Dubai. Valuation of illiquid assets (private companies, art) is a headache; Spain and France struggled with disputes, and HMRC’s current understaffing (down 5% since 2020, IFS) doesn’t inspire confidence.
Unlike Norway or Spain, Labour’s higher threshold (£10 million vs. £1.2 million or €700,000) might reduce emigration, but without global coordination (as proposed by Gabriel Zucman), billionaires can dodge it. The IFS argues reforming capital gains tax (CGT) or inheritance tax—raising £8-£10 billion—would be simpler than a new wealth tax (The Guardian, 2024). CGT hikes to 24% and inheritance tax loophole closures in 2024 show Labour’s preference for tweaking existing taxes (Tax Justice UK, 2024).
Verdict: Monty sniffs, “Sounds like chasing my tail—lots of barking, no bones.” Labour’s wealth tax aims high but ignores history’s lessons. Norway, Spain, and France show low revenue (0.2-1% of GDP), capital flight (12,000-60,000 millionaires), and administrative gridlock. Labour could raise £10-£24 billion if valuations and compliance hold, but risks losing more if the rich flee. Reforming CGT or inheritance tax offers less hassle for more gain.
Will Labour’s tax net the rich or just scare them off? Comment below. Poll: Wealth tax or CGT hike—your pick? Share with #UKWealthTax2025.