The former Conservative minister today warned that burgeoning costs in education, health, and welfare spending should be met by taxing the assets of wealthy baby boomers – or the younger generation could face a 15p income tax hike by 2040.
According to analysis by the Resolution Foundation, a think tank chaired by Willetts, public spending is set to rise by £60bn by the end of 2040.
He argues that higher capital taxes on record wealth levels in the UK, including “long overdue” reforms to council tax and inheritance tax, are necessary options to fund this spending increase.
Willetts, formerly in David Cameron’s cabinet and now chair of think tank Resolution Foundation, said that politicians need to “face up to these difficult and unpalatable questions on tax because the alternatives are far worse”.
“The time has come when we Boomers are going to have reach into our own pockets. The alternative could be an extra 15p on the basic rate of tax, paid largely by our kids,” Willetts said in a speech.
“Is that kind of tax really the legacy we – a generation who own half the nation’s wealth – want to bequeath our children and grandchildren?”
On council tax, Willetts cited Resolution Foundation findings that a family living in a £100,000 house faces tax rates that are five times higher than someone living in a £1m property.
He acknowledged that some of these cases involve “asset-rich, low-income older families”, other options, such as deferred payments, could be considered.
He said: “For many years, higher wealth taxation has been off the political agenda.
“But unless we act, at some point we will face a choice between changing our approach to taxation, or cutting access to the NHS and letting social care get into an even deeper crisis. We can’t delay that debate any longer.
“Politics is going to be very different as the baby boomers retire. The age of tax cuts is over.”