European Government Debt and Interest Costs for 2024

 Eurostat published the latest figures for European Union Government debt and interest payments in 2024 a few weeks ago. You can find the original data here, but as usual I have extracted the key figures and put them in a table 

If we look at all the 27 European Union countries, government debt now exceeds €14.5 trillion - up 4.9% in a single years. Two countries - Ireland and Cyprus - actually managed to get their debt levels down a bit. But for others, the increases have been dramatic, led by Estonia, Poland, and Romania whose debt levels have all increased by over 20% in a single year.

But, for me, the really depressing figures concern the amount of money that Europe's citizens have handed over in Interest charges. This year, the total reached €335 billion - up 15.63% in  a year. I live in France, and my government has handed over €60.3 billion in interest - a major slice of government expenditure, and up 24.7% in a single year. But even countries like Germany have seen their interest payments increase by over 25%. Austria's interest costs shot up by 30.9%. Finland's went up by nearly 40%! Only Sweden seems to have avoided these massive increases in interest costs.

For me these payments make no sense. We know from Modern Monetary Theory that governments can effectively create money by getting Central banks to create additional money. It's called Quantitative Easing. They could, get the central banks such as the ECB to buy up government debt. And if that happened, taxpayers would no longer need to keep paying all those interest payments. Imagine what Europe could do with the €335 billion that is currently being spent to make investors richer. 

And if you think about how much money has been handed over to "investors" since 2000, the numbers are eye-watering. This wonderful scheme has meant that collectively, European taxpayers have forked out €6.9 trillion. That's a very substantial proportion of the government debt.

COP 29 needs trillions a year to tackle Global Warming - here's how to do it

The COP29 meeting in Azerbaijaan is heading for yet another dismal failure. Everyone seems to agree that developing countries need over $1 trillion a year to cope with the effects of climate change and yet the rich countries are only prepared to commit to $250 million a year "by 2035". Not surprisingly, there are many very angry people. It's outrageous that our leaders get away only promising to do anything in 10 years time, when they will probably no longer be in power. It's easy to sign cheques that will only be paid by a future government. 

No, the payments have to be in 2025, not 2035.

And yet, there is a simple solution. It's based on an idea that I have been pushing since 2012 where I was already arguing that a tiny Global tax on Financial Transactions could eliminate the need for most taxes. See, for example, my TEDx talk (in French) called "Vers un monde (pratiquement) sans taxes" or my presentation of "The 0.0.0.x Tax Reform Plan" from 17th March 2012.

 In 2021,  I posted "COP26 - Proposition #2 - Decide how much funding is required and then propose universal FTT and Asset taxes to provide the finance."

Then, last year, I simplified things by concentrating only on the Financial Transaction Tax For the COP 28 meeting in Dubai, I posted that  "The COP meeting has to find at least $3 trillion a year of funding to fight climate change. Here's how" and only talked about the FTT mechanism.

So, here I go again. We simply need to implement a tiny tax on the world's financial transactions to solve the problem. What rate of tax would be needed to find the $1.2 trillion a year for developing countries? I just looked at the levels of transactions reported by the Bank for International Settlements whose latest figures allowed me to find $18.1 quadrillion of transactions for just 24 countries in 2022. It follows that you would just need to tax those transactions at 0.006% to pay the bill. 

 Frankly, is that to much to ask?

The idea is that everyone, including you and me would pay. But I'm not sure I would really notice if my Credit card company charged me an extra 0.006% to help save the planet. After all, the Credit Card companies are already charging Merchants credit card processing fees of 1.5 to 3.5%.

 Of course, the traders and banks who are doing the bulk of the $18.1 quadrillion will not be happy and will say that they could not possibly afford to pay 0.006%. They will lobby governments to ensure that such taxes are not imposed. But the fact is that they already have to pay to use Real-time Gross Settlement Systems such as the UK's CHAPS system. According to the Bank of England, the charges include an annual charge of £30,000, plus a per item fed of 31.9p. So no, adding in 0.06% is just going to add a bit more. 

Nevertheless, I can imagine that there will be complaints that some other sites located in tax-havens might get away with paying nothing and have an unfair advantage. 

But here I have another suggestion, which I suspect could be a stroke of genius - he says modestly ;-)

Suppose that the UN agency that is trying to collect the $1.2 trillion says that they will impose a financial transaction tax that is just enough to generate the required amount. If only the $18.1 quadrillion listed by the BIS is taxed, I have said that it would require 0.006%. But suppose that the Options Clearing Corporation, which did over 11 billion trades last year, does not publish the value of those trades and tries to avoid paying. Other players could  blow the whistle and reveal the level of hidden transactions and ensure that every actor pays. And they we would be rewarded by getting their own tax rates reduced from 0.06%. The more they reveal the existence of actors in secretive locations who are doing untaxed transactions, the less they would have to pay.

The system would thus provide a strong incentive for all those involved in doing transactions to report, and those that try and hide would get called out. Neat, eh?

 

 

 

 

 

BIS Financial Transaction Data for 2022 - $18.1 quadrillion

Sorry it took me so long. Every year, I have a look at the data provided by the Bank for International Settlements which publishes data on Financial Market Infrastructures and Critical Service Providers for a set of 24 countries. It allows me to come up with a minimum value for Financial Transactions in those Countries. 

The relevant tables are the following. 

PS3 : Payments processed by selected payment systems: value of transactions

CSD3 : Transactions processed by selected central securities depositories: value of delivery instructions

CCP3 : Transactions cleared by selected central counterparties and clearing houses: value of contracts and transactions

CT8: Use of payment services/instruments: value of cashless payments by instrument type

CT8G: Use of payment services/instruments: value of fast payments 

Click on any of the links, and you can select any year  from 2012-2022, and there's a Export option to download the data. 

I've compiled the data into a Google sheet, and simply added together all the different values to get a total of $18.1 quadrillion for 2022 - up 13.2% on the figure I got for 2021 ($15.9 quadrillion), and 71.5% higher than in 2012. 

Here's a table of which countries are responsible for most of the transactions. 

 

The United States is responsible for over $4.7 quadrillion (26%) of the total, but the UK is no slouch,  with over $2 quadrillion. The third player, CLS (for Continuous Linked Settlement) is an operator that doesn't really have a localisation, but which does an enormous amount of Foreign Exchange trading in a range of currencies. I was surprised to see that Canada is responsible for over 8.2% of the transactions, up from 1.9% the previous year. They are followed by Japan which has stayed steady. China was second last year with 12.8% of the trading, and has dropped down to number six. So quite what happened there is unclear. 

It's interesting to look at the really big players. The following table lists all that individually processed over $100 trillion a year. 

Five players each managed to do more than a quadrillion dollars worth of transactions in 2022. Top of the list is the US based Government Securities Division (GSD) of the Fixed Income Clearing Corporation (FICC). They are followed by CLS and the UK based LCH.Clearnet Ltd. But number 4 is the relatively new Canadian HVPS (High Value Payment System) followed by the other big US based player - Fedwire Funds Service, operated by the Federal Reserve. 

$18.1 quadrillion is an eye-watering number but it is very definitely an under-estimate. Despite my pleas, BIS's list of "selected' central depositories, clearing systems and payment systems continues to ignore the existence of the Chicago-based Options Clearing Corporation, which single handedly cleared an astonishing 11,110,241,235 deals in 2023, up 7% on the previous years total. 

I've not been able to find out the value of an average OCC trade, but I wouldn't be surprised if they are typically around $1 million. If so, you can probably add another $11 quadrillion to the annual total. 

 Now, let's see. A 0.01% Financial Transaction Tax on $30 quadrillion could generate $3 trillion a year. You could do a lot of good with that amount of money

It's also interesting to note that while BIS only provides data for 24 countries, an increasing number of central banks are switching to what are known as Real-time Gross Settlement (RTGS) systems. In the past, clearing houses would accumulate trades during the day, and only settle up at the end of the day. That carried a certain risk. With RTGS based operations, all transactions are done in real time, and so are easier to log. The first such system was the Fedwire, introduced by the Federal Reserve in 1970. The UK introduced the Clearing House Automated Payment System (CHAPS)  in 1984, at the same time that France introduced its own SAGITTAIRE system. But today, RTGS systems are used by central banks in  around 90 different countries. This should make it much easier to get a more complete picture of financial transactions at the global level.  For example, Egypt's RTGS system handled $3.61 trillion in 2023. I've not managed to find figures for all the other countries, but they presumably exist somewhere.

More hope for the future - Could Trump eradicate US Government Debt by minting Trillion dollar Platinum Coins?

 Donald Trump's re-election has really shaken me. And my fears for the future have been further increased by his recent picks for his team. For example, he has just selected Chris Wright, the head of fracking company Liberty Energy and a skeptic of mainstream climate science, to lead the Department of Energy and to serve on a new National Energy Council. What better way to demonstrate during the Cop29 meeting in Azerbaijan that he couldn't care less about destroying our planet. 

However, I am still trying to find reasons for optimism. 

 One of the possible advantages of having someone like Trump at the Whitehouse is that he could really shake things up. His support for cryptocurrencies is a good example. I'm not a fan of crypocurrencies, which I see primarily as a way for gamblers to get rich and for criminals to avoid investigation. But cryptocurrencies like bitcoin and dogecoin are interesting because they are a direct threat to conventional banks. If everyone switched to cryptocurrency trading, we wouldn't even need dollars and euros at all. And no need for conventional banks.

Trump has also made it clear that he wants to break the power of the Federal Reserve. He wants to fire the head of the Fed, Jerome Pöwell who is refusing to go.  In case you didn't know, the Fed is not a wing of government, but is actually a consortium of private commercial banks.  And since Trump wants absolute power, the existence of the Fed is a problem for him.

Trump's desire to pick a fight with the Fed opens up a fascinating possibility that I want to explore here. 

The first point is that the level of US government debt has gone through the roof, as can be seen in this graph taken from the treasury's own site. 

The latest figure can be found on the US Treasury's "Debt to the penny" website, updated daily, where is says that on the14th November 2024 it stood at $35,965,533,024,604.05 - nearly $36 trillion. 

Paying the interest on that debt is currently costing US taxpayers $1.12 trillion a year, as you can see in this graph from the Federal Reserve Bank of St Louis.

While about 21% of the debt is owned by the US Government itself, and can safely be ignored, the rest is described as being owned by "the public". However, the Peter G. Peterson foundation has a superb web page that shows  provides the details at the end of 2023, reveals that calling the holders of the debt "the public" is devious.

You can see that roughly one third of the debt is held by foreigners, led by Japan and China. Of the remaining two thirds, a very large slice (27%) is owned directly by the Federal Reserve System. A surprisingly small amount (just over $1 trillion) is held by pension funds.

It is here that it is worth mentioning an idea that has been floated on numerous occasions since 2011. It is the idea that the US Treasury could mint some extremely high value Platinum coins, that could be deposited with the Federal Reserve to cancel out the $5 trillion debt. There's a remarkably complete presentation of the Trillion Dollar Coin idea on Wikipedia that I can recommend.

 Ellen Brown published a fascinating piece in 2013 entitled "The Democratization of Money: The trillion dollar coin, Joke or Game Changer?" and I gave a plug to the idea on my blog way back. It also got support from Nobel Prizewinner Paul Krugman in a piece in the New York Times.

At the time, the only reason it was not used was that apparently the Fed objected - not very surprising really.  And the idea was again rejected in 2013 by the Treasury Secretary, Janet Yellen. Back in 2021 she had said "I wouldn't be supportive of the trillion-dollar coin. I think it's a gimmick. I think it jeopardizes the independence of the Federal Reserve,"

 But maybe with a Trump appointed Treasury Secretary, the Fed would have no choice. The Treasury would deposit  $1 trillion coind at the Fed, who of course would not be able to spend them - I doubt they could find anyone who could find the change for a 1 trillion dollar coin! But it would mean that the hundreds of billions of interest payments would be no longer due. 

If the Fed could be forced to take the trillion dollar coin, the investors who currently hold US government bonds could hand their bonds back to the Federal Reserve, and every time the Fed's holding reached $1 trillion, another coin could be minted.   

 Trump would be able to claim that he was saving US taxpayers a fortune. 

Does it sound too good to be true? Maybe not. 

 Comments please!

Hope for the future? Could Trump and Musk help create a Global Universal Basic Income?

 Yes, I'm depressed about the fact that the majority of voters in the USA just chose Donald Trump. But I refuse to be despondent. Here are some ideas for how we might exploit the situation to make the world a better place.

The fact is that Trump's alliance with Elon Musk could open some interesting possibilities. At a World Governments Summit in 2017, Musk said the pace of technological change was leading to “a massive social challenge. And I think ultimately we will have to have some kind of universal basic income (UBI). I don’t think we’re going to have a choice.” And he repeated the same thing in June this year. The Hindustan Times just compiled the following list of 8 statements by Musk on UBI

1. "There's a pretty good chance we end up with a universal basic income, or something like that, due to automation. I'm not sure what else one would do. I think that is what would happen. People will have time to do other things, more complex things, more interesting things. Certainly more leisure time." (CNBC, November 4, 2016).
2. "I think we'll end up doing universal basic income. It's going to be necessary. There will be fewer and fewer jobs that a robot cannot do better. I want to be clear: These are not things I wish will happen — these are things I think probably will happen." (World Government Summit in Dubai, February 13, 2017)
3. "Universal income will be necessary over time if AI takes over most human jobs. Also think there should be a universal basic income that doesn't change even if you get a job. Productivity should be rewarded." (X posts, June 15 and June 20, 2018)
4. "I'm in *favour* of universal basic income. Goal of government should be to maximize the happiness of the people. Giving each person money allows them to decide what meets their needs, rather than the blunt tool of legislation, which creates self-serving special interests. If we do a stimulus at all, it should just be direct payments to consumers." (X post, July 24, 2020)
5. "The $1400 ( ₹1.17 lakh) is mostly good imo (UBI lite), as the people get to choose how the money is spent, but the rest is mostly net bad for the people as a whole." (Commenting on pandemic stimulus in a X post, March 6, 2021)
6. "What is the economy at its foundation? It is labor. So what happens when there is no shortage of labor? This is why I think long-term, there will need to be universal basic income." (AI Day, August 2021)
7. "There will be universal high income, not basic, in a positive AI future. No scarcity, except that which we define to be scarce. In that scenario, everyone can have whatever goods & services they want. It is less clear how we will find meaning in a world where work is optional. (X post, December 25, 2023)
8. "In a benign scenario, probably none of us will have a job. There would be universal high income. There would be no shortage of goods and services. The question will really be one of meaning: if a computer can do, and the robots can do, everything better than you, does your life have meaning? I do think there's perhaps still a role for humans in that we may give AI meaning." (VivaTech, May 23, 2024)

So, let's assume that Musk can convince Trump that we need a Universal Basic Income.

Let's also suppose that we are talking about a Global Universal Basic Income, which would be paid to every adult on the planet. Let's be generous, and assume that we want to give every adult $1 a day, or $365  a year, and half that amount to the guardians or parent of each child 16 or under.

Using the latest figures from the United Nations for people of different ages, the table below shows that it would cost nearly $2.6 trillion a year. Now, that may seem a lot. But it's only 0.55% of the total amount of net wealth for the world's population - $450 trillion according to the UBS Global Wealth Report for 2024 - see my earlier post. 

It follows that if everyone paid just 0.55% of their net wealth, you could provide $1 a day for everyone. 

Let's suppose that Elon Musk can convince his billionaire friends that paying 0.55% of their net wealth per year might be worthwhile if it meant that they could sleep more soundly. Of course, everyone would have to pay 0.55% - including you and me. 

 But now, it would mean that wherever you are on the planet, you would be getting a small amount of money, with no strings attatched. 

$1 a day might not seem much, but for people living in many countries, it's not far off the median income, as shown in this table from the world population review. 

Now, this is where it may be possible to get even Trump on board. He wants to discourage people from what he terms "shithole countries" in Africa and elsewhere from trying to get into the USA - complaining that he would rather have people from Norway. Well, suppose that those people could be sure of getting money, even if they stay at home. The "value" of $1 to someone living in a "shithole" country would be far more that it would be if they were to try to move to a more affluent country. 

 Of course, this incentive to stay home gets even more strong if the Global UBI rate is increased. This table shows that you could finance $100 a month ($1200 a year) by increasing the annual Net Wealth tax to 2.2%. Even that rate is not excessive when we know that people's financial assets are often increasing in value by 8% per annum or more.

But the power of the argument becomes even stronger if, in addition to the Global UBI of $100 a month, Trump's government stepped in to increase the monthly UBI rate for bona fide US citizens to say $500. This would remove the need for many complex benefits systems. But at the same time, the $500 a month would not be available to the tens of millions of undocumented immigrants that Trump has been complaining about, and has said he wants to deport. 

Currently, an undocumented Mexican worker can come to the US, get a agricultural job picking fruit on a farm (if the farm owner is not too fussy), and undercut local workers with US citizenship. But, with a $500 a month UBI paid to US citizens, they would be able to undercut the migrant workers because they could live reasonably with a lower wage for working. 

Personally I feel compassion for migrant workers, who are just trying to survive. But providing everyone on the planet with a (modest) basic income that they can keep with no strings attached would provide an incentive for people who live in very poor countries to stay where they are. That would avoid huge numbers of unnecessary deaths for people travelling thousands of miles to reach some sort of Eldorado in developed countries. And then, if the developed countries provided additional UBI payments that were only available for people who are legally present, this would provide yet another strong argument to discourage illegal immigration. 

I've been talking about this for Trump and Musk, but of course the same arguments would apply for France and the UK too.

If my dream of a truly Global UBI came true, thanks to the arrival of Trump and Musk in the USA, then there might just be a silver lining to the dark black cloud that arrived with the results of the US elections yesterday.

The aftermath of Trump's re-election

 I must confess that the results of yesterday's election in the USA came as a real shock. And I am very concerned about the potential impact of Trump's re-election for the entire planet. 

I intend to make some suggestions that may allow us to take advantage of the situation to move things in the right direction. 

 However, in my first post following the re-election of Trump I would like to make a few simple points.

 For 4 years, Trump has been claiming that the 2020 election was stolen. And he managed to get a large number of Republican politicians, Media outlets and supporters to follow him down that road. And we all saw the result on the 6th January 2021. 

 But if there is one good thing that came out of yesterday's election results, it is the conclusion that the electoral system based on citizens voting for their preferred candidates is fully functional and works well.  Indeed, Trump was the clear winner, with over 50.9% of the votes - roughly 4.7 million more than Kamala Harris. 

 I took the latest numbers and put them in this table. 

Trump really did win the election with over 50% of the votes.

One important point is that, despite all the  media coverage, voter turnout nationwide was only 65%, with large variations according to state. 

 According to the Washington Post the best turnouts were in  Wisconsin (76.1%), Minnesota (75.5%), New Hampshire (74.8%), Maine (74%), Oregon (73.6%) and Michigan (73.5%), so well done to them.  But even in some of the key battleground states, many people didn't vote. For example,  turn out in Georgia (67.4%), Pennsylvania (69.4%), Nevada  (67.5%), and Arizona (65.3%) were all not very impressive. I can imagine that the people in those states may have become thoroughly sick of being bombarded with hundreds of millions of dollars of ads everytime they turn on the radio or television.  The worst turnouts were in staunchly Republican states like Oklahoma, Arkansas and West Virginia with turnout as low as a pathetic 50.5% in Mississippi  In such places, it is likely that many would-be Democrat voters are not interested in voting because the Electoral College system makes their votes irrelevant. 

Although I have long thought that scrapping the electoral college and basing the election directly on the popular vote would be very important, as proposed recently in an editorial in the Guardian, the fact is that this time Trump won fair and square. 

 The result of this voter apathy is that Trump has been elected president despite having less than one third of those eligible to vote supporting him. That's the way things work, unless you introduce compulsory voting as in Australia. Very good idea, in my humble opinion.

But this brings me to what I think should be a crusade. The Republican Politicians and media such as Fox News that promoted the lie that the 2020 election was stolen because the electoral system was "rigged" should admit that they were wrong, and apologise to the American people for spreading lies. Add to that the immense suffering inflicted on the election officials, including death threats, and they clearly have a lot to apologise for.

 I think that the probability that Donald Trump could ever admit that he was wrong is extremely remote. I recently watched the excellent film "The Apprentice" that shows how Donald Trump was influenced by meeting lawyer Roy Cohn in 1973. Cohn told Trump the three rules of winning. Number one: attack, attack, attack. Number two: admit nothing and deny everything. And rule number three: no matter what happens, you claim victory and never admit defeat.

Trump clearly never forgot those three rules. So there is little chance that he will ever admit that he lost in 2020, although he got very close gave that away when he said in an interview with Lex Fridman  that "he lost by a whisker" but said later that he was being sarcastic. "Never admit defeat".

But I see no reason why all the establishment Republicans who went along with the Stolen Election story should not be forced to admit they were wrong. 

Clearly, if there was any way for the Democrats to rig the election on the 5th November, they would have done it. But they couldn't, despite the enormous incentives they would have to do that.

The US election process is demonstrably solid, and the Republicans who spread the lie should be forced to admit it. 

I'm not sure how they could be forced to own up. But maybe the millions of disappointed people in the US who have just accepted the result should petition the Republicans to acknowledge that they were clearly wrong, and apologise for all the trouble they caused. A web site called "Admit the Stolen Election story was a lie", maybe?

I have just posted a short video to make this point on Youtube. Feel free to share it!

https://youtu.be/YHl24mjiEuc?feature=shared

 Update. 

I just found the datasets provide by the excellent University of Florida's Election Lab, where you can find comprehensive data on voter turnout for all elections since 1789!

The data for the 2024 election is still preliminary, but you can find them state by state here.

It's fascinating. It reveals that the turnout of the voter eligible population was 64.5% (of which Donald Trump got 50.8% or 32.7%). However, this ignores the fact that in the USA, 2,591,130 citizens, i.e very nearly 1% of the population are prevented from voting because they are in prison, on probation or on parole.  That percentage varies a lot from state to state.  There are no such exclusions in Maine and Vermont, but reaches its maximum in Georgia where 3.5% are deprived of their right to vote.  There are also 7.88% of the population who don't get to vote because they are not US citizens. So, if you include them to get the total voting age population, Trump's support drops to just 30.4% of the adult population. Oh well. That's just the way democracy's work.

A new proposal - eliminate inheritance taxes and replace them with a 1% tax on net wealth

Inheritance taxes are, in principle, a way of taxing wealth. And, on paper, they can be very high. The top rate to direct heirs in OECD countries can be very high as shown by this table that I found here.

1. Japan 55%
2. South Korea 50%
3. France 45%
4. United Kingdom 40%
5. United States 40%
6. Spain 34%
7. Ireland 33%
8. Belgium 30%
9. Germany 30%
10. Chile 24%
11. Greece 20%
12. Netherlands 20%
13. Finland 19%
14. Denmark 15%
15. Iceland 10%
16. Turkey 10%
17. Poland 7%
18. Switzerland 7%
19. Italy 4%

But in many other OECD countries there is no inheritance tax. They include Australia, Austria, Canada, Estonia, Hungary, Israel, Luxembourg, Mexico, New Zealand, Norway, Portugal, Serbia, Slovenia, the Slovak Republic and Sweden.

Even in the countries with high inheritance taxes, the actual amounts raised are small. This table from the OECD shows that only four countries raise more than 1% of tax revenue from inheritance taxes - Korea, Belgium, France and Japan. And on average, only 0.5% of total tax revenue came from inheritance, estate and gift taxes in the countries that  levy such taxes. The countries with 0% tax rates obviously get nothing from such schemes.

The reason seems to be fairly clear. There are a wide range of tricks that wealthy people can use to avoid paying such taxes. Basically, you would have to be really stupid to pay the maximum rates of over 40% seen in France, the UK and the USA.

For example, in France, if you donate property to your descendants several years earlier, you can avoid paying taxes when you die. It may cost several thousand euros to do the transfer, but in the long run, it is an extremely effective way of getting away with paying no tax.

To quote the OECD report, "the design of inheritance, estate and gift taxes reduces the effective tax rate", and "there is evidence that in some countries, the wealthiest households are taxed at lower effective tax rates". This is illustrated in this figure for the UK, where it can be seen that while estates sometimes pay around 20% tax, it drops to only 10% for the biggest estates. 

And the report lists many of the "tricks" used to reduce the effectiveness of taxation. They include regular renewal of gift tax exceptions under the tax threshold, bequeathing tax-favoured assets such as family businesses, and concealing assets offshore. The UK has many skilled tax advisors who can explain how to set up trusts to avoid taxation!

So, what would I recommend?

Simple. Scrap all inheritance taxes and replace them all by the universal 1% on net assets. That would mean that the government would get income every year rather than trying to get money from rich people when they die. There would be no need to have special exceptions for the transfer of the family residence to the next generation. Indeed, the amount of net wealth tax paid by an entire family composed of grandparents, their offspring, and the following generations would be simply a question of how much wealth is held, and the degree to which those assets are cancelled out by debt.

So much simpler and easy to understand.

What determines net wealth?

With my proposition for a standard 1% annual tax on all net wealth, the question arises of who will end up paying. To what extent would such a tax system help generate a fairer society by making the rich contribute more

Well, I found an amazing  dataset from the UK's Office for National Statistics called "Individual Wealth: wealth in Great Britain".  You can download the dataset as an Excel file here. I actually much prefer this to the "household wealth" measures that are often reported. And it makes the data directly comparable to the UBS Global Wealth Reports which also use individual data.

They provide data for 6 different periods, as you can see in this table, which contains both raw data and inflation adjusted figures for both the median and mean values.

So, you can see that there has been a roughly 23% increase in inflation adjusted median wealth in 20 years. Mean wealth has improved by 32% over the same period. 

In the following, I have only taken the latest data, although if you are keen, you can see how any of them has changed over 20 years.

I had already mentioned the importance of age, but the ONS provides four different ways of breaking down by age bands. Take your pick. The effect of age is clearly enormous. Young families would tend to  pay much less.

Another really important factor is ethnic origin. Just take a look at the results in the four different breakdowns provided by the ONS. Whites are clearly much wealthier than any other group. No huge surprises I guess, but it is amazingly clear just how bad things are.

Note that in all the following data sets, I have simply sorted the rows so you can see where individual wealth is highest.

Next comes regional variations. Here they are. Again, not really surprising, but amazingly clear.

You can also get a breakdown by type of region, again with various ways of doing it.

You would like to know how wealth depends on the educational and employment characteristics of your parents? Here are the details. Clearly, if your parents left school early, and did not have good jobs, your hopes of ending up wealthy are greatly diminished. No huge surprises I guess, but amazingly clear.

There are tables that show net wealth as a function of sex and sexual orientation. On average, men are 12% wealthier than women.

There are tables that show what sort of activity is associated with wealth. Clearly being inactive as a pensioner is the best option - if you manage to have a pension!

When you are working, here's what you should do to get wealthy.

And finally, three tables that show the impact of the your origins, type of family unit, and whether your own your own home, are paying off a mortage or renting. The figures are sobering. On average, home owners are 21 times more wealthy than renters.

It's all absolutely fascinating. But it also shows that the degree to which people are wealthy or not depend enormously on factors that are beyond their control. You are not necessarily wealthy because of your talent, or how hard you work. There are other factors that mean that the playing field is anything except level. So much for the ridiculous idea that people are poor because they are lazy.

For every one of these factors, it seems obvious that a simple 1% annual tax on net wealth would help build a fairer society by allowing governments to help the less fortunate. With £148 billion of revenue coming from this simple measure, the UK government could do a huge amount to help improve society.

You want to bias things in favour of young families? A 1% wealth tax would help.

You want to level up the country? A 1% wealth tax would help.

You want to reduce the inequalities due to your parents? A 1% wealth tax would help.

You want to favour people in professions that don't pay well? A 1% wealth tax would help. 

These arguments are based on figures for the UK. But I am convinced that the same story would apply just ahout anywhere. No need to target millionaires and billionaires. A simple net wealth tax would make for a much fairer society. I would vote for it, except that there are no political parties who are proposing such a scheme. 

Propositions for Kier Starmer's government

The new Labour government in the UK has good intentions, but will be severely hampered by lack of money. They are committed to not raising taxes, but it is unrealistic to imagine that everything can be fixed without some extra income. 

Tax Justice UK has sent the UK government a list of 10 tax reforms that should raise an extra £60 billion for public services and a fairer economy that you can find here. This is their list

1 – Apply a 2% wealth tax on assets over £10 million, raising up to £24 billion a year

2 – Equalise capital gains and income tax rates, to raise £16.7 billion a year

3 – Apply National Insurance to investment income, raising up to £10.2 billion a year

4 – Close inheritance tax loopholes to raise £1.4 billion a year 

5 – Close the loopholes in the new non-dom scheme to raise up to £1 billion

6 – Introduce a 4% tax on share buybacks, raising approximately £2 billion a year 

7 – End fossil fuel subsidies for oil and gas companies to raise £2.2 billion a year

8 – Close the loophole in the oil and gas windfall tax, costing £2 billion a year

9 – Tax private jets to raise £700 million a year

10 – End tax reliefs that benefit huge multinational corporations 

All of them seem fair enough. The first one, applying a 2% wealth tax on assets over £10 million is close to one of the proposals of the UK Green Party,  although the Greens are apparently only proposing a 1% tax increasing to 2% on fortunes of over £1 billion. 

Other people have recently been proposing wealth taxes that specifically target billionaires. Earlier this year, ministers from Brazil, Germany, Spain and South Africa signed a motion at the G20 meeting proposing that the world's billionaires should pay a minimum 2% wealth tax. And a study by French economist Gabriel Zucman, commissioned by the Brazilian government demonstrated that such a tax was technically feasible. Zucman said that billionaires were currently only paying 0.3% tax on their wealth. And this was despite the fact that the average wealth of the top 0.0001% of individuals had grown by 7.1% a year on average between 1987 and 2024, increasing their share of global wealth from 3% to 14%.

It's true that, according to the Forbes 2024 billionaires list, the UK can boast 55 billionaires. Here they are, and together they have $225.3 billion dollars in wealth.  That might raise about £3.5 billion if you taxed at 2%.

But I note that 55 billionaires is less than 2% of the 2781 dollar billionaires in the world. And their total wealth is only 1.5% of the $14.2 trillion total.

Given the fact that the UK is the world center for offshore banking, I think we can safely assume that much of that wealth would end up shifting to tax havens. Poor Philip Green, who only just made the list this year with $1.2 billion might already have quite a bit of cash in Monaco thanks to the fact that his wife lives there for tax reasons.  

So, for me, the solution is not to target billionaires in particular, or even just those with only £10 million. That sort of targetting will lead to massive lobbying, despite the fact that a small number of ultra-rich people are begging to pay more tax.  There is even an organisation  called Patriotic Millionaires UK,  a sister group to the Patriotic Millionaires group in the USA. The UK based version includes 50+ millionaires who want to do more. They include Gary Stevenson, James Perry, Phil White, Graham Hobson, Gemma McGough, Kristina Johansson, Julia Davies and Tim Stumpff - Good on you!

No, my proposal to Keir Starmer would be to introduce a 1% on all net wealth. No arbitrary figure of £10 million for the 1% rate, or £1 billion for the 2% rate. Such thresholds automatically trigger defensive reactions from the people with the wealth, leading them to lobby against such measures, and encouraging them to shift their wealth elsewhere.

In contrast, if everyone with net wealth paid 1%, it would hopefully make the richest people feel less justified in cheating the system. 

So who would pay in such a scheme. Well, the UBS Global Wealth report gave a figure of  $163,515 for median wealth in the UK (£128,000), which by definition means that half the population would pay less that £1280 a year.  A more detailed analysis can be based on the figures from the Office for National Statistics. Here's the distribution according by decile.

You can see that the bottom half of the population has only 5.9% of the wealth, and that for the first decile, the tax due would be minuscule (0.02% of the total tax take). 

But everyone would be contributing equally.  No specific targetting of millionaires and billionaires. That's fair.

There are lots of other really interesting bits of information in the ONS data. Here's a graph of wealth by centile. But by downloading the data, you can see that 1% of of the population have negative wealth.

It's unfortunate that the latest dataset is over 5 years old, because I am certain that after Covid and five more years of  Tory austerity, the number of people with nothing will have increased a lot. You want proof? Just look at how the use of food banks has soared since 2008.

One of the biggest factors determining the amount that would be paid with a 1% wealth tax is age,  as you can see from this figure. 

Adults under 25 would only £223 a year on average. Between 25 and 34 this would increase to £768, then £1910 between 35 and 44. The wealth tax for those between 45 and 54 would be £3660, for those from 55 to 64 it would increase to an average of £5534, while those of State Pension Age and above would contribute and average of £4687.

Are these figures unreasonable? I don't think so. Because it is not as if the tax payable is determined by your age. Someone in their 50s who is renting, has no pension pot, and no savings would pay essentially nothing. But it shifts the effective tax burden away from young families with children who are often heavilly in debt because of university loans and mortgage payments.

So my message to Keir Starmer and his government is simple. Yes, you need to tax wealth. But please, don't do it by having arbitrary tax bands for people with headline levels of wealth. A flat 1% wealth tax would, according to the figures from the UBS Global Wealth Report, which puts the UK in 13th position with €350k per adult in net wealth (around £270K), generate £148 billion a year. That's a lot more than even the 10 reforms proposed by the Tax Justice UK group. 

Propositions for the future French Government

There is now a possible name for the future French Prime-Minister proposed by (most of) the New Popular Front coalition. She is the economist Laurence Tubiana. I quote from Wikipedia : "She served as France's Climate Change Ambassador and Special Representative for the 2015 COP21 Climate Change Conference in Paris, for which she became recognised as a key architect of the resulting Paris Agreement. Since 2017, she has been CEO of the European Climate Foundation". Interestingly she spent her early life as a member of the Revolutionary Communist League (1968-1976), but was later more closely associated with socialists including Lionel Jospin and François Hollande, and was even invited to join Emmanuel Macron. So, in terms of background, I would say that she has a lot going for her. 

So, perhaps a bit prematurely, I would like to suggest to Laurence Tubiana some ideas that could be useful - several of which are already contained in the New Popular Front's program that you can find here. 

The NPF's program includes a huge number of proposals. I am broadly in favour of the vast majority of them. Some of the ideas that I particularly like include the following;

• Make the first KwH of electricity free of charge. This is the first step to introducing Universal Basic Services - something which seems extremely sensisble. A household that was using energy frugally should be able to manage with no electricity charges at all. And it would end any possibility of people having their electricity cut off completely. I would do the same thing for water - again, every citizen should have a basic amount of water at no charge. Obviously, in both cases, you would have to increase the rates for people who use more than the basic amounts. But the change in rate would be small, and it would further incentivise people to use energy and water sensibly
• Introducing a kilometre tax on imported products. This is another simple idea that would help promote local production and reduce the ecological cost of shipping goods across the planet. It should not make sense to fly beans in from Kenya. I would rather that people in Africa get to eat their own food!
  
• Reintroduce a higher wealth tax (ISF) with a climate component. Details are unclear, but this would presumably mean putting back the taxes on financial assets that were abolished by Emmanuel Macron.
• Tax the richest people at European level to increase the own resources for the European Union budget. You may already be aware that I am a big fan of making changes to the taxation system at the European level to avoid claims that rich people can avoid taxes by moving their fortunes to more favorable regimes. 
• Generalise the taxation of superprofits at European level. Again, the key is to do things at the European level. 
• Introduce the Zucman tax on the profits of multinationals. The recently published Global Tax Evasion Report 2024, coauthored by Gabriel Zucman describes the problem in detail.
• Increased taxation of financial transactions.  If you have been following my blog over the last 14 years, you will know that for me, taxing all financial transactions (including my financial transactions) would be a very simple way to generate almost unlimited amounts of funding. 
• Eliminate inefficient, unfair and polluting tax breaks. This seems to be a simple and sensible proposal.  

But I would like to suggest some additional ideas that could be included.

Firstly, I would strongly suggest that the propositions for Wealth Taxes should not have thresholds. Instead, you could have a flat rate 1% annual tax on all net wealth. The Banque de France published an extremely useful report in January 2024. It reports that Net Wealth for households in France stood at €14041 billion at the second quarter of 2023- up 23% in inflation adjusted euros since 2009. 54.2% of that wealth is held by the top 10%, whereas half the population (Deciles 1 to 5) only hold 5%.

There's a particularly interesting figure which shows minimum, maximum and average net wealth for the 10 deciles. 

But I thought it would be interesting to regroup those figures in a table, and calculate the amount of tax that would be paid by households in each decile. I had to guess the minimum (negative) value for net wealth in the first decile by looking at the graph. And then I adjusted the number of households to make the total net wealth figure match the €14,041 billion headline figure. 

You can see that, if there was a 1% annual tax on net wealth,  the poorest 10% of households would pay nothing. The next 10% would only pay an average of €40. On average, the poorest  half the population would only have to pay an average of €462.

But at the top end of the scale, people in the top 10% would have to pay an average of €24,180. This would include people like me who own their own property. But that's only fair. The Banque de France report shows that the top 5% of households hold 41 % of the total wealth (€5708 billion to be precise). They don't provide figures for the top 1% and the top 0.1%, but last year we already knew that the top 500 people in France had a combined wealth of €1170 billion, around 8% of the total. It follows that since they each have an average of €2.3 billion, on average they would have to contribute €23 million a year. Note that these sums are minuscule compared with the increase in wealth that those 500 people have seen in just the last few years (their combined wealth was just €731 billion as recently as 2020).

One point that is not so obvious from these overall decile figures is that net wealth varies enormously with age. I would love to see how these net wealth figures vary between those in the twenties, and those who are in their fifties and sixties or retired. But it seems clear that most young people with families would end up paying very little - simply because even if they have managed to buy property, they will still owe the bank large amounts of money and therefore have negative net wealth. 

And, of course, the wealth tax would be mainly paid by people who own property or businesses. People who rent their accommodation would probably pay little.

All of this seems extremely fair and sensible. The idea that it is better to tax income than wealth makes no sense. Taxes should be paid by the people who have the assets.

This brings me to one of the main areas where I have problems with the NFP's proposals. The NFP program is very keen on "progressive" taxes. They want to "Increase the progressive nature of income tax by introducing 14 tax bands", making the CSG progressive, and getting rid of the 30% flat tax on revenue from financial assets (dividends, sale of shares, rents etc). 

However, I think that there is a much more rational way to do things. You can have a flat tax on income at, say, 30% that would be applied to all types of income - both earned income, and income from investments. Some might say that this is not a sufficiently high level of taxation for high earners. But the point is that people with wealth would be paying a lot more tax on their net wealth, so that the combination of 30% tax on all forms of income, plus a 1% annual tax on net wealth would mean that the wealthy would end up contributing far more. 

At the same time, I would recommend not only getting rid of what the NPF describes as "inefficient, unfair and polluting tax breaks", but indeed all tax breaks. Everytime there is a tax break that is designed to promote desirable behavior such as installing a heat pump, solar panels or purchasing an electric car, it should be clear that there is an alternative approach. Get rid of the tax breaks, and replace them by direct subsidies which would be paid to anyone who installs a heat pump, solar panels or gets an electric car. One of the strongest arguments for such a change is the fact that using tax breaks can only work for people who pay income tax. Since roughly 50% of French citizens pay no income tax anyway, such incentives are clearly not going to work for many French citizens. Why should taxpayers money only be used to help the wealthy? Just give direct, unconditional subsidies to anyone who does the right thing. Easy. And fair. 

The other point I would really want to stress is the need to eliminate means-testing. Many people in France are in the situation where they get government support but where this support is only available if they are not earning any other income. As soon as they start earning any money, they immediately lose at least some of their benefits. This may seem like an intelligent use of public resources - why pay benefits to people who don't really need them? In reality, such a system is a disaster. It means that the effective tax rate for people at the bottom can be as much as 80%. Suppose that you are currently getting income support of €100. Would it be in your interest to get a part time job that pays €100 a month? Not if the result is that you lose €80 of your benefits.

As a consequence, many people will be tempted to avoid taking on paid work at all, especially if they can do other useful activities like child care, looking after elderly relatives, or voluntary work. And those that are interested in paid work will be tempted to take on undeclared work. Part of that will be to avoid paying taxes and contributions, but a lot of it is motivated by a perfectly natural desire to avoid losing the modest support that they get from being unemployed. 

So, in summary, my message to the new French prime-minister is simple. For sure, you should implement a large percentage of the proposals in the NFP's program. But try and be imaginative by adding some even more radical suggestions. 

• an annual 1%  on net wealth, to be paid by both individuals and households and by businesses
• elimination of all tax breaks 
• elimination of all means-tested benefit schemes
• introduction of direct subsidies to citizens to encourage desirable behavior (including free public transport to encourage people to stop using their cars)
  
• introduction of a basic allowance for electricity and water

Global Wealth for the top 8004 companies - $45.1 trillion

Another website that I really appreciate is the one that provides a wealth of information for 8743 top public companies. And the one that I really like most is the listing of NetWealth - Assets minus liabilities. You can find all the data here. 

But here are the summary figures by country.

The number of companies is slightly reduced because there are a few hundred with negative net wealth. And this year, the numbers for Russian companies have disappeared. But lets just imagine taxing the 8004 that have positive values for net worth. They total over $45.1 trillion, and this figure can be added in with the $450 trillion of household net worth. 

Message to Kier Starmer and the future French Prime Minister. Why not tax the net worth of companies based in your countries at 1% per annum? For the UK, it would raise $18.7 billion - around £14.8 billion. 

For France, it would generate $17.4 billion - around £16 billion. 

Simple. And totally fair. 

Of course, these numbers are only for the 8000 that made it to the listing. All companies have to provide such information in their annual reports, so it really would be simple to determine 1% of the value to be paid in tax. 

The top public companies website includes another fascinating listing. It's what is referred to as "Cash in Hand". You can find that listing here. The total is somewhat less than the Net Wealth data, but it still amounts to an impressive $30.3 trillion. 

 What I find intriguing is the fact that while the Net Assets listing includes a fair proportion of companies that actually produce things with, for example, Alphabet (Google), Samsung and Microsoft coming in respectively at #9, #10 and #11 and Toyota at #14, the cash in hand listings are totally dominated by banks and financial institutions. The first company that actually produces anything is Toyota that comes in at #62.

But, whatever the type of company, and irrespective of whether you choose to have an annual tax on Net Assets or Cash-on-hand, it is clear that there is a lot of money around if only someone had the nerve to think about a radical change to the system. 

It is also important to realise that my 1% annual tax on net wealth could not be described at anti-business. After all, the amount of individual and household wealth  ($450 trillion) is ten times larger than the wealth that is visible in companies accounts ($45 trillion).

Global Household Weath now $450 trillion. A 1% annual tax would raise $4.5 trillion

 Thanks again to UBS for providing its 15th annual Global Wealth Report which you can download here.

The bottom line is simple. They calculated the networth of the world's 3.765 billion adults and found a total net worth of very nearly $450 trillion. The key figure is their pyramid of wealth figure shown here.

I've extracted the numbers in the following table that provides the total wealth value. 

 

 

As some of you will know, I have been pushing the simple idea that we could fix many of the world's greatest challenges by imposing a global annual tax on all net worth, whether held by individuals, companies or governments. 

 

The UBS data is invaluable because we can immediately see that a 1% tax would provide no less than $4.5 trillion in funds that could be used to cover the costs of dealing with a wide range of challenges. We are told that we need to find $5.5 trillion a year to fix climate change. That would nearly be covered by the 1% tax.  You would like to provide a $100 a month for every adult on the planet as a global basic income? It would be paid for almost exactly by the 1% tax. You have just ended poverty at a stroke. Actually, that $100 a month to people in the developing world might end up being used to help them fight climate change, so the two actions would go together. 

Would the people who own the assets object to having to fork out 1% of their wealth every year object? Maybe. But given that the value of their assets is increasing by around 4.5% a year, this means that they would still get to keep the other 3.5% increase in value. 

 

Remember that net wealth varies enormously with age. Most adults between 20 and 30 have very little net wealth, and so very naturally, such a tax would be paid by relatively elderly people - the ones who have often already paid off their mortgages. That seems very much fairer than making everyone pay VAT and Income tax, irrespective of whether they are wealthy or not.

The UBS report contains many other interesting details. For example, here is a figure showing which countries are in the top 25 for average wealth.

This provides a clear message for the newly elected governments in both the UK and France where I recently voted. There is a huge amount of net wealth in both countries. Multiply the average net wealth for all the adults in the UK (53.6 million), and you get something like $18.9 trillion - around £14.8 trillion.

If you do the same thing with the 54.6 million adults in France, and you get $17.96 trillion - around €16.53 trillion. 

 

So, message to Kier Starmer:  Impose a 1% tax on the net wealth of all UK adults and you would raise a very useful £148 billion a year - which relative to the £1095 billion in total receipts that the government raised in 2023 would be very useful. 

And message to whoever will be leading the next French government: Impose a 1% annual tax on net wealth for all French adults, and you could raise €165 billion in revenue, which is a substantial proportion of the €1222 billion currently raised. 

 

I must say that I think that this sort of taxation would be a good way to get rid of much of the existing tax mechanisms - based on taxing income or spending (via VAT).  France has an Impot sur la Fortune Immobilier (IFI)  - which uses a sliding scale that ranges from 0% to 1.5% using this table that you can find here.

France used to have a Wealth tax that used to apply not only to Property, but also to Financial assets. But one of the first things Emmanuel Macron did when he came to power in 2017 was to scrap it. His very wealthy friends were no doubt absolutely delighted. 

 

Given the very clear thumbs down sent to Emmanuel Macron in the recent elections, it seems to me that a very obvious thing to do would be to reimpose the Net Wealth Tax on all assets - both financial and property. But please, can we avoid having the variable rates? Just have a fixed rate of 1% for all net assets. Much simpler. And it would make life so much easier for everyone because it would be much harder to avoid the tax by shifting assets from one place to another. 

 

Of course, people will complain that wealthy French people would move their financial assets somewhere else to avoid paying taxes. But the solution to that one is hopefully simple. The 1% net wealth tax should be paid wherever you hide your wealth.

 

My suggestion would be that countries like France and the UK should introduce the 1% net wealth tax locally to demonstrate that it can be done. And then, when the United Nations decides that it would make sense to use the same idea everywhere, the French and UK governments could simply double the amount to pay both the global tax requirement, and also fund local actions.