We must put to work the massive additional savings pot of around £100 billion accumulated by mainly higher-income households whose income continued or even rose, if they work in an industry which has benefited, during Covid whilst their costs fell (see the Bank of England analysis presented to the MPC in November 2020).
The country cannot afford for this money not to be returned to the economy. Everyone must be required to help to get the country back on its feet. Simply collecting money from all taxpayers is not enough on its own. We need to get money flowing through the economy, stimulating employment and trade. Nor can we afford morally not to address the disparity in outcomes from Covid. Those who have had “a good pandemic” cannot be allowed simply to sit back on their additional wealth.
The solution lies in targeted, tailored taxation of the Covid dividend. Those who have accumulated savings in the period of the pandemic must be given a choice: use it to help the economy or contribute some of it to the nation. Therefore we should introduce a deferred tax on savings acquired during Covid, such tax to be levied a year or so after lockdown is lifted. That will encourage people to spend, rather than hoard, the money they have saved whilst benefiting from the effects of the pandemic.
The tax need not be a high percentage and it may well be sensible to allow a threshold below which there will be no Brexit Dividend Tax. But over a threshold of, say, £5,000, a tax of perhaps 5% (these numbers could be set with the benefit of research and analysis) on funds which have not been spent or invested in a relevant asset class would be a fair and effective nudge to help to encourage people to spend the money they have accumulated whilst others fell on hard times.
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