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25 May 2022

The UK government gave £450bn to the richest – it should take it back for the people

We need a wealth tax to redistribute the hundreds of billions of pounds that quantitative easing handed to the wealthiest.

By Gary Stevenson

Imagine the government printed £450bn – nearly £10,000 for every adult in England. Now imagine it gave all that money to the richest 10 per cent. That’s £100,000 in cold, hard, newly printed cash for every single rich person in England.

What do you think would happen?

A sensible analysis might go like this: in an immediate frenzy to “invest” or diversify this enormous pile of newfound cash, asset prices – such as house prices and stock prices – would explode. That would raise the net wealth of the rich even further, and not make them any less cash-rich, since they would be, in general, buying those assets from each other.

The rich would then start increasing their spending or, at the very least, become much less sensitive to prices. If you suddenly received £100,000 in cash and also saw the value of all your investments explode upwards, you would too, wouldn’t you?

That would push prices up, which would be fine, wouldn’t it, because you’d be sitting on £100,000? But what about the people who didn’t receive £100,000? What would happen to them when the price of food, heating, petrol – of everything, in fact – started going up?

Sadly, you don’t need to imagine any longer, because this is what has happened. The Bank of England, through quantitative easing, printed £450bn between 2020 and 2021 during the pandemic. According to my analysis, that money has, indirectly, ended up with the rich – the new money created by central banks ends up accumulating in rich individuals’ bank accounts, as demonstrated in this diagram:

Diagram by Gary Stevenson

[See also: “Capitalism’s over”: The man who made millions by betting the economy would never recover]

Yet this enormous, historic transfer of money to the rich during an economic crisis is not noted as a potential factor in the Bank of England’s recent analysis of what’s driving inflation.

Let’s have a look at the numbers here. The Business Secretary Kwasi Kwarteng says the government has “already put forward £9bn of support for those struggling with their bills”. That is 50 times less than has been transferred from the government to the rich in the past two and a half years. The single most expensive piece of support in the recent Spring Statement, the cutting of income tax, is expected to save taxpayers around £7bn. That is 64.3 times less. Plus, the government has simultaneously raised taxes on workers, via the National Insurance increase, by £18bn. (A tax, by the way, that is not paid on income from wealth).

Just because that money has been newly created doesn’t mean it’s imaginary – it’s real. And it is still sitting in somebody’s bank account. If your account isn’t £10,000 higher now than it was three years ago, then somebody else has your share. If the government taxed that money, it could raise support for people through the cost-of-living crisis by 5,000 per cent. The sacrifice? Rich people becoming… as rich as they were three years ago.

Yet no one in government, the media or academia appears to be investigating where the money from the expanded quantitative easing programme has ended up. I can’t say why, but there are some facts about wealth in this country that may be related.

We have created an economic system in the UK in which all the people best-paid and resourced to understand and fix our economic problems are also paid to shut up and profit from them. All of our institutions that actually should be fixing the problem – government, academia, central banking, the media – are designed in such a way that they end up being almost exclusively populated by those from rich families. Rich families that are profiting hugely.

[Listen: Gary Stevenson discusses wealth inequality on the New Statesman Podcast]

Our current Chancellor is, along with his wife, ranked by the Sunday Times rich list as the 222nd richest person in the country, with an estimated wealth of £730m.

Media, politics and academia are all professions that often require years of unpaid, low-paid or, in the case of academia, negatively paid work. After this, they frequently do not provide financially stable careers.

After being the first person in my family to go to university, I chose to enter finance (instead of academia, media or government) because I wanted financial stability. By 26, I was a multimillionaire. While working in that industry, I was contractually barred from talking publicly about the economy.

Every single person I talk to in financial markets thinks this enormous accumulation of cash by society’s richest will damage the economy – and the economic lives of ordinary people and families – beyond repair. I think that too. I don’t just think it, I’m betting on it.

It doesn’t have to be that way. The government gave out £450bn. The government can take it back. Bring in a wealth tax, tax the rich. The only alternative is disaster.

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