To save the arts and all else we hold dear, a wealth tax now seems the only answer

Not since the Great Frost of 1709 has the economy taken such a spine-chilling shock: “A severe recession the likes of which we have not seen,” said the chancellor. On Wednesday, with a thundercloud £300bn deficit and a national debt of 100% of GDP hanging over him as he gives his summer statement, expect nothing normal for the foreseeable future.

Rishi Sunak is besieged by pleas to rescue industries, public services, and the millions falling out of their jobs into the brutality of universal credit. Yesterday his overture was encouraging as he beamed light into the dark theatres, concert halls, music venues, museums and galleries, throwing a last-minute lifeline to the beleaguered arts. Enough to save them all and their army of freelancers, or just for the ministers’ favoured national “crown jewels”? It’s not yet clear, but it is generous enough to spark a flicker of hope that Sunak and Boris Johnson could indeed harbour an unTory belief in what the state must do. The question now is whether they dare tax to match their ambitions.

Consider the overwhelming need that Sunak faces on every side. Jobs will rightly be the priority, with cash promised for employers to take on apprentices – though keeping people in existing jobs by prolonging the furlough for stricken sectors is also essential.

Schools, nurseries and further education colleges need an urgent injection of funds, or we could cripple a generation. The NHS and social care need billions just to return to their old threadbare state: waiting lists are already an erupting scandal. Local councils are billions out of pocket, finding that the government’s “whatever it takes” pledge has been rescinded. Leaders of near-bankrupt councils are drawing up lists of libraries, leisure centres, parks and care to be cut. Look at the regeneration needed for dying high streets. Everyone, everywhere is tugging at Sunak’s sleeve.

The prime minister promises no return to austerity, a building bonanza, and jobs, jobs jobs. But how? Unsurprisingly, the Treasury is hosing down expectations. It was Robert Chote’s duty, as head of the Office for Budget Responsibility, to warn sombrely that, while borrowing costs are virtually zero now, remember the risk of interest rate-rise “nasty surprises”.

But what if, with one bound, we could be free? Extraordinary times need astonishing remedies. In this very rich country, private wealth has soared to six times the value of annual GDP. So take a deep breath and jump in. A once-in-a-lifetime windfall tax of 10% on all wealth would yield £1 trillion – enough to pay for all the things we regard as essential for civilisation.

That calculation comes from Professor Arun Advani, one of a team of people working on an Institute for Fiscal Studies project devising a wealth tax that would work. They are in close conversation with the Treasury, which wants results by the end of the year, to explore every kind of wealth tax and find a solution to every obstacle (there are many) in its way. The Institute for Fiscal Studies 10 years ago produced its Mirrlees review offering a totally reformed tax system, removing unjust reliefs and rebalancing more fairly. But the government moved in the opposite direction – taxing hard work more and wealth less.

The team’s constant consultation with government gives its conclusions a chance of implementation. Beyond academic economists devising a perfect world, the team includes practising accountants and a tax law barrister trained to spot every loophole for the wealthy to wriggle through. A set of watertight options, legislation-ready, would let the politicians set wealth taxes at any rate, and with varying exemptions.

Gus O’Donnell, the former head of the civil service and a long-time Treasury official, jolted observers awake when he spoke at the project’s launch last week. Covid-19 had created “a clear burning platform” for tax reform. Time to “slaughter sacred cows”, as “private wealth has become more concentrated in recent years”; and, after the government’s manifesto tied its hands on raising existing taxes, “a wealth tax could make a significant contribution”.

The many objections to taxing wealth will be solved, one by one: what of the old widow in her expensive house; the tech startup; wealth escaping to tax havens; difficulties in valuing art; and how to collect it efficiently? What of perverse incentives created?

Lessons will be learned from countries that did it badly, and others that succeeded. Lessons will be learned for the UK’s failing tax reliefs for the wealthy, the entrepreneurs’ relief, and a new investment relief. It’s time to end the disguising of income as low-tax capital gains, lobbied for by the politically powerful.

Council tax is a failed property tax: O’Donnell helped bring it in as a temporary emergency to solve the poll tax fiasco, but that regressive deformity is still unreformed 30 years later. The triple-locked pension was supposed to be a brief catchup, not a perpetual escalator, but dare they unlock it?

Tax is the beating heart and defining dividing line between political parties. That’s why now is the right time, O’Donnell says. He puts it bluntly: “Labour wouldn’t be able to introduce a wealth tax without the Conservatives pledging to repeal it as soon as they came back in.” Only Tories with a large majority can do it. “For once, the politics fits … Hold them to their word. Tell them, here’s what you can do to achieve your vision of one nation Conservatism.”

That’s the challenge to Johnson’s big “new deal” talk. Dare he do the dangerous thing to achieve it? YouGov last year found that 69% believed earnings from wealth and work should be taxed the same: 52% said wealth above £750,000 should taxed. But here’s the catch: that was if main homes and pensions were excluded – omitting the heftiest part of the country’s wealth.

It takes heavy lifting to persuade the public to pay any extra tax, but it’s a politician’s job to lead, and who better placed to prove his skills than the great booster-in-chief, who managed to persuade the country to vote for a self-immolating Brexit?

Cast a pained eye over the thread beneath a recent Times article suggesting a wealth tax to see what Tories would confront from their own people: “State sponsored theft”; “Why save, when people flogged their guts out to get ahead”; “Loopy idea, as short-lived as any government suicidal enough to propose it”. Alongside was a familiar list of things to cut instead – foreign aid, benefits, public-sector pensions and the like.

In these frightening times people say they want to “build back better”, yet they face things getting very much worse. On this “burning platform”, enough people can be reminded of what they value most. Margaret Thatcher used to preach that you will always spend the pound in your pocket better than the state will. The truth is the opposite. Nothing you buy in a shop is worth what we buy collectively: the health, education, beautiful public spaces, cleaner greener world, or the wellbeing of others. All these are what make life worth living – and taxes are the price.

• Polly Toynbee is a Guardian columnist