The only way Philip Hammond can ward off Labour is with a wealth tax – but the Tories won’t like it

It is a way to prevent either an impossible tax burden on those of working age or an equally unacceptable paring back of health and welfare

Hammond should announce that he’s looking for new ways to tax wealth to ensure fairness between the generations (Getty)

Even if they must announce bad news, most chancellors enjoy the limelight of big setpiece occasions. Not Philip Hammond. He has moved the Budget to the autumn and scrapped the Autumn Statement, a mini-Budget.

The first Spring Statement next Tuesday will be a no-frills affair. The man jokingly dubbed “Box Office Phil” by civil servants will not carry a red box. As my colleague Joe Watts revealed, his Commons speech might last just 15 minutes, and will not include any tax or spending announcements. The irony is that, after revealing gloomy economic forecasts in last November’s Budget, Hammond will have a surprisingly good story to tell next week. Higher-than-expected tax receipts, and the first surplus on day-to-day spending since 2002, will give him a windfall of between £7bn and £11bn.

The Chancellor’s instincts will be to bank it rather than spend it. That would be a mistake. He should acknowledge the pain of the cuts since 2010 by easing the squeeze. There is no shortage of demands: the NHS, social care, housing and local authorities, which have suffered deeper cuts than any Whitehall department. The four-year freeze on working-age benefits could be lifted to tackle in-work poverty. Easing austerity would be good politics, and wouldn’t be bad economics, even amid the uncertainty caused by Brexit.

If the short-term prospects for the public finances are brighter, that cannot be said for the medium and long term. Every politician knows that the rise in the number of older people makes our current health and welfare systems unsustainable without a rise in taxation. But few are prepared to face up to it. Hammond should use his platform next Tuesday to kickstart a debate on the country’s next big challenge after Brexit. Estimates suggest we will need to devote a further 3 per cent of national income to health, care and pensions over the next 20-30 years – about £60bn a year, the equivalent of adding 15p to the 20p basic tax rate.

It would be intolerable if the higher taxes we need just to stand still fell on today’s hard-pressed workers. Pensioners have been protected since the 2008 financial crisis for nakedly political reasons (they vote). Although politicians don’t dare to say it, pensioner poverty has been largely eliminated. The baby boomers who are now retiring are much better off than previous generations of pensioners and cannot expect to be cosseted in the same way.

There is a way to prevent either an impossible tax burden on those of working age or an equally unacceptable paring back of health and welfare. The answer is to tax wealth, half of which is held by people approaching retirement. Some senior Tories have got the message. David Willetts, the former minister who chairs the Resolution Foundation think tank, called this week for reforms to the regressive system of council tax (a family in a £100,000 home pays five times more proportionately than one in a £1m property) and to inheritance tax (which the rich are good at avoiding). Lord Willetts said: “I believe the argument for a new approach to wealth taxation can be won. But it can only be won by an argument which appeals to both the interests of the boomers and also to their sense of obligation to others.”

Similarly, Damian Green, who was Theresa May’s deputy until he was sacked in December, has suggested that over-40s pay an extra 2 per cent national insurance to guarantee their own social care provision. A similar system exists in Japan.

Naturally, May will be reluctant to go there, after being accused of planning a “dementia tax” in her election manifesto. But if she is serious about having a non-Brexit agenda, she cannot duck the issue of inter-generational unfairness. The measures she announced on housebuilding on Monday are welcome but will not solve the housing crisis. Sensible Tory MPs such as Nick Boles fear that this issue alone will cost their party the next election, as under-40s desert it in even greater numbers than last year.

So Hammond should announce that he’s looking for new ways to tax wealth to ensure fairness between the generations. True, many Tories would be uneasy. But what better way to shed their image as “the party of the rich”, steal a march on Labour and show that the Government can have a meaty domestic agenda?

Of course, taxing the baby boomers would carry political risks. They would hardly say “thank you”. I declare an interest: I am one of them. But people like me are going to have to take a hit. Why shouldn’t we pay national insurance in retirement? Why should we get winter fuel allowances, free TV licences and travel passes we don’t need? Yes, there would be howls of protest at first. But many would subside: baby boomers care about their children and grandchildren, and know that as a country, we cannot go on as we are.