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THE GUARDIAN |
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COMMENT
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We need
their money
Taxing the super-rich is dismissed by New Labour as gesture politics, but social inequality does terrible harm Polly
Toynbee Eat the Rich, says graffiti on a wall near the Guardian. But do the rich really matter? Denis Healey's promise to tax them until the pips squeak still brings a smile to many lips. But was that just the old politics of envy - and didn't old Labour lose? Cautious New Labour reckons it's safer to let super-rich dogs lie. A startling graph this week from Alissa Goodman, of the Institute for Fiscal Studies, illustrates income distribution since 1997. Swimming hard against strong forces of inequality, the government has managed, more or less, to stop the gap growing worse for most people, helping the poorest. Except at the far top end, where a great spike of mega-wealth shoots into the air like a monstrous carbuncle. Turbocharged superwealth was exposed in this year's Sunday Times rich list; the top 1,000 enjoyed an "explosion of wealth" last year, with assets soaring by 30%. The British rich are enjoying the greatest boom in the world. Why? Partly "the benign tax regime" with a 40% top rate, lower than for most of the postwar - and Thatcher - years. What does Labour think about it? Some express anxious concern, but still the official response is: "It really does not matter." This year marks the 10th anniversary of the seminal Social Justice Commission, chaired by John Smith. After his death, the report launched by Tony Blair shaped part of New Labour's social policy. Now a series of seminars on social justice at the Institute for Public Policy Research is leading to an updated report later this year: new figures show how far there is still to go. Gordon Brown's major cash redistribution to the poor has only managed to freeze inequality at the unjust levels created in the 80s, while the top 1% are vanishing out of sight in a gold-gated society of their own. Professor Tony Atkinson's graphs of top incomes from the start of the last century tell the story of the march of social progress from Lloyd George's day until Healey's, but after that the rich soared away, never to return. Historically, we are back to inequality levels of the 50s. In a decade, unless top tax rates rise, we shall be back to 1932's gulf between top and bottom. Who are the top 1%? They earn over £100,000. There are over half a million of them, and two-thirds live in London and the south-east. Most are in jobs, with only a quarter self-employed. This 1% earns 8% of the nation's income, while the bottom tenth earns just 3%. The rich pay a smaller proportion of their money in taxes, and that of the poorest is much higher due to regressive VAT. Compulsory tithing looks useful since the richest 20% donate just 0.7% of their incomes to charity, while the poorest 20% give 3% of theirs. A quarter of the Sunday Times super-rich owe their fortunes to property. Failing to restrain wealth at the top has contributed to the house-price boom, according to both Professor Atkinson and Income Data Services (IDS). Next week's quarterly earnings figures are expected to show that bonanza City bonuses are back. Alistair Hatchett, of IDS, says that will send "average" pay figures for the private sector soaring. With inequality like this, averages become meaningless. But does it matter? What harm does it do? Some close to government claimed a new super-tax would be counter-productive: even at 40%, the rich yield a lot of tax and no one wants them to run abroad or hide their cash offshore. But this defeatism is not borne out by research showing the rich did not flee in the super-tax era. As for offshore funds, the US anti-terrorist measures are making that much harder. Our FTSE 250 CEOs are not global, as they like to claim, but mainly home-grown and in no great demand abroad. Then nervous New Labour asks what is the point of taking any electoral risk with our steady social progress, just for gesture politics? It would let the Tories claim that Labour doesn't nurture enterprise. Why do battle with the rich? Among them are London's dangerous beasts and opinion-formers: most big media groups have newsrooms run by someone earning over £100k. Paul Dacre, the Mail editor, earns more than £650,000, and the desirable, and vacant, post of director general at the BBC is worth £368,000. (Why? That's another question). But the crunch anti-tax argument is public opinion. People admire success and think the enterprising should keep their well-earned entrepreneurial earnings. No one likes the sour old politics of envy, do they? However, public opinion is bolder than they think. The LSE's Tom Sefton found that that over 80% of the population think the gap between rich and poor is too large, with concern spread across all incomes. Asked what people should earn, voters award more to lower-paid occupations and less to the higher-paid. But politicians won't find the answer in opinion poll entrails. In the end, they will have to feel it in their bones and smell it in the air, finding the words that ring true. Take a leaf out of thundering Lloyd George's great redistributive budget of 1908, when he protested that keeping a duke cost the country as much as a battleship, as he taxed the rich to create state pensions. Even a modest tax increase on earnings above £100,000 - say, 50% - would bring in nearly £5bn. That's enough to roll out SureStart centres for every baby. Teaching parents to listen, read, sing and talk to babies is emerging as SureStart's great success, giving children who risk failure a chance by the time they start primary school. More could be raised with higher taxes on earnings over £200,000, or £500,000. The rich paid far more for decades, so why not now? In an era when the chance of a working-class child entering the middle class is 15 times less than the chance of a well-off child staying middle-class, a tax on the lucky that is earmarked for the unlucky would be social justice for all to see. There is virtually no social mobility now, but it needs politicians to spell out the harsh facts. We know the remedies that work. Imagine an election campaign where the Tories try to defend the right of the top 1% not to pay a fairer share. Labour would be unassailable, standing with the interests of the 99%. Those who shudder at the risk forget the social harm done by gross inequality. It's not the few Beckhams whose golden feet are on display for all to judge each week. It's that great army of half a million people who cannot begin to justify why the jobs they do are so astronomically more valuable than everyone else's. In other European counties, the rich are not allowed to become too far removed from the rest. Pay structures make no sense if wealth is unrestrained and greed is never mentioned in politicians' unctuous homilies. Gesture politics would be a fertile source of Labour renewal. But it's not just a gesture: the money is needed for universal children's centres and childcare for every family.
Guardian Unlimited © Guardian Newspapers Limited 2004
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