Britain has not just broken the budget this year – it has been obliterated.

Whether the public coffers have been footing the bill for meals out or paying staff’s wages, Number 11 has dug deep again and again to steer the nation through the pandemic.

But it was always clear these funds came with strings attached.

And now the suggestions are rolling in for how chancellor Rishi Sunak can claw his way back into the black.

And one option is already proving controversial – but some sources claim the Treasury is taking it very seriously.

A wealth tax has been proposed by the Wealth Tax Commission.

The tax would be paid by any UK resident (including recent emigrants) with personal wealth above a set threshold.

The individual’s wealth would include main homes and pension pots, as well as business and financial capital, but minus debts such as mortgages.

However the researchers – from the London School of Economics and Warwick University – have drawn no lines in the sand as to where the threshold should be and how it should be paid.
For context the paper – commissioned by the Economic and Social Research Council – lays out that, for example, a one-off payment on all individual wealth above £500,000 and charged at 1pc a year for five years would raise £260 billion.

In this situation such an individual – around eight million UK residents and a little over 10pc of the population – would pay £25,000 over the five-year period.

The report also modelled that should the threshold be raised to 5pc over five years only on assets of more than £2 million it would raise £80 billion.

Although welcome, these funds would do little to fill the £1,876.8 billion black hole government debt is currently in.

However economists are adamant this policy should be a one-off charge as opposed to a permanent change in fiscal strategy.

Professor Thomas Cornelissen of the University of Essex said: “I believe it would be more effective to have a one-off payment than to bring in a wealth tax. We use tax to deter or incentivise economic behaviour and a permanent wealth tax would effectively be a disincentive to people to save.

“It would also see them potentially work less and thus have a negative impact on productivity.
“In the longer-term we might also see people looking for loopholes to get out of the tax - perhaps spreading their wealth between family or moving it abroad. A one-off payment would not give people time to prepare for that and would potentially have a fairer outcome.”

He added that where the threshold is set comes down to a question of fairness.

“Economists do not really possess the data for whether the threshold should be set because it comes down to individual opinion. Who is to say that someone who owns a flat and has a pension worth £500,000 is in a better position to pay – or indeed someone that is already paying a large amount of income tax should pay more.

“Then again, data is showing us that those on the lowest incomes who have struggled most during this pandemic and continue to be the most vulnerable. These are the questions for politicians to answer.”

The tax would also potentially have a generational and regional divide, added Dr Ayobami Ilori, a lecturer at University of East Anglia’s school of economics.

He said the wealth tax would fall most heavily on older people – who are more likely to own property outright and are likely to have larger pension pots and those in the south where house prices are higher.

Despite this Dr Ilori said he agrees with the report’s authors conclusions that the wealth tax “would work, raise significant revenue, and be fairer and more efficient than the alternatives”.

But he cautioned that it could become “a matter of pennywise, pound foolish” if poorly implemented.

He said the assessment would need to be retrospective – like council tax which is based on house price data from 1991.

“If the government chooses a date after the coronavirus it is likely to influence behaviour as people try not pay it, and the whole point of a wealth tax is that it doesn’t influence behaviour.”

A wealth tax could also make people sell of their assets in order to pay it.

“I believe this could also be problematic,” Dr Ilori added. “Property prices would crash. Then the tax base would fall meaning the government wouldn’t be able to raise as much money as it had expected.”

This predicted market crash was another reason why it would be important to choose a date in the past on which to value people’s wealth, he added.

But for all the decisions yet to be made this may still be the best option on the table, added Professor Cornelissen.

“You could raise a similar amount of money by increasing VAT by 6p from 20p. However when it comes back to the question of fairness this would raise prices across the board – and there is evidence to suggest that relatively the poorest in our society make up the biggest portion of consumers because they do not have enough to save.

“I think because of the amount of talk around this topic we will definitely see it discussed at Westminster – but there are personal and political factors which could hinder it going through.”