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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Theresa May’s stage-managed election campaign keeps the public at bay

Jeremy Corbyn’s approach may be chaotic, but at least it’s more authentic.

The worst part about running an election campaign for a politician? Having to meet the general public. Those ordinary folk can be a tricky lot, with their lack of regard for being on-message, and their pesky real-life concerns.

But it looks like Theresa May has decided to avoid this inconvenience altogether during this snap general election campaign, as it turns out her visit to Leeds last night was so stage-managed that she barely had to face the public.

Accusations have been whizzing around online that at a campaign event at the Shine building in Leeds, the Prime Minister spoke to a room full of guests invited by the party, rather than local people or people who work in the building’s office space.

The Telegraph’s Chris Hope tweeted a picture of the room in which May was addressing her audience yesterday evening a little before 7pm. He pointed out that, being in Leeds, she was in “Labour territory”:

But a few locals who spied this picture online claimed that the audience did not look like who you’d expect to see congregated at Shine – a grade II-listed Victorian school that has been renovated into a community project housing office space and meeting rooms.

“Ask why she didn’t meet any of the people at the business who work in that beautiful building. Everyone there was an invite-only Tory,” tweeted Rik Kendell, a Leeds-based developer and designer who says he works in the Shine building. “She didn’t arrive until we’d all left for the day. Everyone in the building past 6pm was invite-only . . . They seemed to seek out the most clinical corner for their PR photos. Such a beautiful building to work in.”

Other tweeters also found the snapshot jarring:

Shine’s founders have pointed out that they didn’t host or invite Theresa May – rather the party hired out the space for a private event: “All visitors pay for meeting space in Shine and we do not seek out, bid for, or otherwise host any political parties,” wrote managing director Dawn O'Keefe. The guestlist was not down to Shine, but to the Tory party.

The audience consisted of journalists and around 150 Tory activists, according to the Guardian. This was instead of employees from the 16 offices housed in the building. I have asked the Conservative Party for clarification of who was in the audience and whether it was invite-only and am awaiting its response.

Jeremy Corbyn accused May of “hiding from the public”, and local Labour MP Richard Burgon commented that, “like a medieval monarch, she simply briefly relocated her travelling court of admirers to town and then moved on without so much as a nod to the people she considers to be her lowly subjects”.

But it doesn’t look like the Tories’ painstaking stage-management is a fool-proof plan. Having uniform audiences of the party faithful on the campaign trail seems to be confusing the Prime Minister somewhat. During a visit to a (rather sparsely populated) factory in Clay Cross, Derbyshire, yesterday, she appeared to forget where exactly on the campaign trail she was:

The management of Corbyn’s campaign has also resulted in gaffes – but for opposite reasons. A slightly more chaotic approach has led to him facing the wrong way, with his back to the cameras.

Corbyn’s blunder is born out of his instinct to address the crowd rather than the cameras – May’s problem is the other way round. Both, however, seem far more comfortable talking to the party faithful, even if they are venturing out of safe seat territory.

Anoosh Chakelian is senior writer at the New Statesman.

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