Why don’t the super-rich pay down the budget deficit?

There is an alternative to ever-greater austerity for the majority.

One assumption dominates the start of 2012. It will be an extremely grim year as the public starts having to pay down the deficit in real earnest, but they will grudgingly accept the substantial pain involved so long as it is fairly shared. It certainly isn't, however, and the growing realisation of this could well prove the government's Achilles heel in this year's bumpy handling of austerity.

There has been debate about whether the deficit should be cut through a stimulus to growth or through austerity measures, and even if the latter were chosen, how far and how fast the cuts should be inflicted. But there has been no discussion as to whether the pain is being fairly parcelled around. Initial Treasury claims after Osborne's June 2010 budget that the richest fifth of the population would be harder hit than the poorest fifth were quickly exploded when it was shown that this paradox depended on smuggling in the effects of Labour's last two budgets as well. But since then a great deal of new evidence exposes the falsity of this convenient canard.

The 100-page Rich List compiled by Philip Beresford and published last May presented a very different picture. Its analysis found that the 1,000 richest persons in Britain were £60.2bn better off than they were in 2010, and that they were £77.3bn better off in 2010 than they were in 2009. What this means is the staggering fact that just 0.003 per cent of the population, the richest of the rich, could by themselves alone pay off the entire deficit of £127bn and still leave themselves £10bn in surplus. Yet in the absence of a wealth tax, a mansions tax, a land value tax or a supertax on excess gains they are being required to make hardly any contribution at all to deficit reduction, even though many of them were directly involved in causing the financial crash in the first place.

This is all the more remarkable that such colossal gains accrued to such a tiny group of super-rich people when the vast majority of the population were being forced into stringent belt-tightening. In 2010 and 2011 full-time workers right across the earnings range have seen their real earnings decline. Nor was this just a temporary freak winner-takes-all for Britain's richest. In 1997 the richest 1,000 persons had assets of £99bn; by 2011 their assets had grown to £396bn. This means that the increase in their wealth over this period was almost two-and-a-half times the size of the total budget deficit. In terms of fair shares, one might expect they would be required to pay down at least a sizeable chunk of the nation's overdraft.

Whilst these are the facts about wealth in Britain today, the position on the distribution of earnings is equally damning. The OECD report 'Divided We Stand', published last month, showed that the top 1 per cent, those earning over £150,000 a year, doubled their share of the nation's total income from 7.1 per cent in 1970 to 14.3 per cent in 2005. Even more significantly, the share taken by the top 0.1 per cent, those with an average annual income of £1.2 million, jumped to 5 per cent. At the other end of the scale the share of the bottom quarter of the population was only 9.6 per cent. This means that the highest-paid 30,000 earners were taking home the same amount of money as the lowest-paid 4.5 million, a ratio between top and bottom of 150:1. The onus however between rich and poor in paying down the deficit represents almost exactly the opposite ratio.

As a result of the switch from the retail prices index to the significantly lower consumer prices index in uprating benefits, the cap on housing benefit payments, the doubling of the pension contribution rate for public sector workers, the pay freeze and real terms pay cuts, and the disproportionate dependence of the poorest households on public expenditure, the burden of paying back the deficit falls overwhelmingly on the bottom third of households. For the richest, by contrast, the burden is payment-lite. The balance between expenditure and benefit cuts on the one hand and tax increases on the other as decreed by Osborne is 77:23 per cent, and of the latter 23 per cent half is accounted for by the rise in VAT which falls most heavily on the poorest households.

In terms of fair shares in the pay-down this is gratuitously up-ended. Data published last month showed that the bottom tenth of earners got a 0.1 per cent rise in pay in the previous year, while over the same period the rise for FTSE-100 directors was 49 per cent. The month before the published accounts of the canteen catering firm Compass Group, a typical FTSE-100 company, revealed that the pay of the chief executive Richard Cousins was £84,615 a week whilst the average pay of his staff, many of them dinner ladies, was £240 a week, a ratio of 352:1. Yet the deficit charge on Mr. Cousins and others like him, unlike that on his dinner ladies, will be relatively paltry.

Even where the Labour Government had made a small start in focusing payback on the better-off, Osborne has now reversed it. In 2009 tax relief on pension contributions amounted to £20.6bn, of which £14bn or two- thirds was concentrated on higher-rate taxpayers. The 2009 budget then announced that the 40 per cent higher rate pension tax relief would be tapered down to 20 per cent for those with incomes of £150,000, with effect from April 2011. One of Osborne's first acts was to repeal it.

The St. Paul's Occupiers were right about the 1per cent against the 99 per cent, except that the inequality and the unfairness that goes with it are more extreme than even they imagined. Most people have been persuaded that they must now endure grinding austerity for years and years ahead because there is no alternative. But actually there is.

Michael Meacher is Labour MP for Oldham West and Royton.

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Is defeat in Stoke the beginning of the end for Paul Nuttall?

The Ukip leader was his party's unity candidate. But after his defeat in Stoke, the old divisions are beginning to show again

In a speech to Ukip’s spring conference in Bolton on February 17, the party’s once and probably future leader Nigel Farage laid down the gauntlet for his successor, Paul Nuttall. Stoke’s by-election was “fundamental” to the future of the party – and Nuttall had to win.
 
One week on, Nuttall has failed that test miserably and thrown the fundamental questions hanging over Ukip’s future into harsh relief. 

For all his bullish talk of supplanting Labour in its industrial heartlands, the Ukip leader only managed to increase the party’s vote share by 2.2 percentage points on 2015. This paltry increase came despite Stoke’s 70 per cent Brexit majority, and a media narrative that was, until the revelations around Nuttall and Hillsborough, talking the party’s chances up.
 
So what now for Nuttall? There is, for the time being, little chance of him resigning – and, in truth, few inside Ukip expected him to win. Nuttall was relying on two well-rehearsed lines as get-out-of-jail free cards very early on in the campaign. 

The first was that the seat was a lowly 72 on Ukip’s target list. The second was that he had been leader of party whose image had been tarnished by infighting both figurative and literal for all of 12 weeks – the real work of his project had yet to begin. 

The chances of that project ever succeeding were modest at the very best. After yesterday’s defeat, it looks even more unlikely. Nuttall had originally stated his intention to run in the likely by-election in Leigh, Greater Manchester, when Andy Burnham wins the Greater Manchester metro mayoralty as is expected in May (Wigan, the borough of which Leigh is part, voted 64 per cent for Brexit).

If he goes ahead and stands – which he may well do – he will have to overturn a Labour majority of over 14,000. That, even before the unedifying row over the veracity of his Hillsborough recollections, was always going to be a big challenge. If he goes for it and loses, his leadership – predicated as it is on his supposed ability to win votes in the north - will be dead in the water. 

Nuttall is not entirely to blame, but he is a big part of Ukip’s problem. I visited Stoke the day before The Guardian published its initial report on Nuttall’s Hillsborough claims, and even then Nuttall’s campaign manager admitted that he was unlikely to convince the “hard core” of Conservative voters to back him. 

There are manifold reasons for this, but chief among them is that Nuttall, despite his newfound love of tweed, is no Nigel Farage. Not only does he lack his name recognition and box office appeal, but the sad truth is that the Tory voters Ukip need to attract are much less likely to vote for a party led by a Scouser whose platform consists of reassuring working-class voters their NHS and benefits are safe.
 
It is Farage and his allies – most notably the party’s main donor Arron Banks – who hold the most power over Nuttall’s future. Banks, who Nuttall publicly disowned as a non-member after he said he was “sick to death” of people “milking” the Hillsborough disaster, said on the eve of the Stoke poll that Ukip had to “remain radical” if it wanted to keep receiving his money. Farage himself has said the party’s campaign ought to have been “clearer” on immigration. 

Senior party figures are already briefing against Nuttall and his team in the Telegraph, whose proprietors are chummy with the beer-swilling Farage-Banks axis. They deride him for his efforts to turn Ukip into “NiceKip” or “Nukip” in order to appeal to more women voters, and for the heavy-handedness of his pitch to Labour voters (“There were times when I wondered whether I’ve got a purple rosette or a red one on”, one told the paper). 

It is Nuttall’s policy advisers - the anti-Farage awkward squad of Suzanne Evans, MEP Patrick O’Flynn (who famously branded Farage "snarling, thin-skinned and aggressive") and former leadership candidate Lisa Duffy – come in for the harshest criticism. Herein lies the leader's almost impossible task. Despite having pitched to members as a unity candidate, the two sides’ visions for Ukip are irreconcilable – one urges him to emulate Trump (who Nuttall says he would not have voted for), and the other urges a more moderate tack. 

Endorsing his leader on Question Time last night, Ukip’s sole MP Douglas Carswell blamed the legacy of the party’s Tea Party-inspired 2015 general election campaign, which saw Farage complain about foreigners with HIV using the NHS in ITV’s leaders debate, for the party’s poor performance in Stoke. Others, such as MEP Bill Etheridge, say precisely the opposite – that Nuttall must be more like Farage. 

Neither side has yet called for Nuttall’s head. He insists he is “not going anywhere”. With his febrile party no stranger to abortive coup and counter-coup, he is unlikely to be the one who has the final say.