The sun rises over the City of London. Photograph: Getty Images.
Show Hide image

Whose recovery is this? The top 1% are gaining most

As the highest earners have gained, the bottom 90 per cent have seen their share of income shrink.

Most people are familiar with the old adage about the "rich getting richer", but should we just accept that this will be at a much faster rate than for everyone else? The latest statistics on income, since economic growth finally returned, paint a disappointing picture of increasing inequality in Britain; they show that the richest one per cent have increased their share of income while the bottom 90 per cent on middle and lower incomes have seen their share shrink. While unemployment is falling, the continued squeeze on the pay of ordinary workers means that growth has mostly benefited the top.

Here’s how this story emerges from the Treasury’s own data: the latest "Income Tax Liabilities Bulletin" from HM Revenue and Customers, makes projections for the share of total income for percentile groups, setting out the changes affecting the least well-off and the richest in society. After three years of stagnation, growth has begun to gradually return throughout the past year 2013/14. But who has benefited from this growth in the past year?

It turns out the wealthiest one per cent are expected to see their share leap, even after tax has been taken into account, from 8.2 per cent of total UK income to 9.8 per cent of the total. This is a gain of a huge extra £15.4bn of income, shared among less than 300,000 of those at the top. Significantly, 90 per cent of the rest of the country – 27 million taxpayers - have seen their share of total income actually shrink from 71.3 per cent to 70.4 per cent.

What can we conclude from these new figures? First, it appears that we may be experiencing a recovery that is heavily skewed towards those already at the top of the pile – tilting the benefits of growth away from the many and handing them increasingly to the few.

Second, the tax cut for those lucky enough to earn over £150,000 per year in 2013/14 has been of great significance, especially for those receiving executive bonuses that had been held back until the 50p rate had gone.

Third, the shrinking share of income for 90 per cent of the rest of society should set alarm bells ringing; this isn’t just bearing down on the poorest, but a real squeeze on middle-income earners. When the overwhelming majority of the population now see the wealthiest one percent zooming off into the distance, people will rightly ask whether the government are doing enough to build a fair economy that works for working people.

Perhaps people expect David Cameron and George Osborne to fashion an economic recovery which serves the very wealthiest, but we all know this is unbalanced and unsustainable. If the benefits of economic growth are not felt fairly by the vast majority, then the cost of living crisis will persist and divisions will worsen.

George Osborne used to say "we’re all in this together" – but that claim has long since been abandoned. Creating a genuinely One Nation recovery should mean the richest one per cent contribute a fairer share of tax, with a return to the 50p rate for the next Parliament as we get the deficit down. And it should also mean taking action to help the vast majority of working people, with tax cuts targeted at those on lower and middle incomes as a priority and measures to ensure work pays, such as expanding free childcare for parents.

Surely we need the Treasury to step in to ensure the benefits of any growth we get are shared more fairly than this? When 90 per cent of the rest of the country are seeing their share decline then that is a sign something is going badly wrong.

Chris Leslie is the shadow chief secretary to the Treasury

Chris Leslie is chair of Labour’s backbench Treasury Committee and was shadow Chancellor in 2015. 

Getty
Show Hide image

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.