Wednesday, 1 December 2010
The ultra-rich could solve this financial crisis
Surely it is far better to inconvenience 1,000 of the country's richest people than destroy millions of lives
The news that 'only' around 330,000 public sector jobs will be lost, is of little comfort to millions of people; especially as another 500,000 are likely disappear from the private sector. The government's austerity plans will hasten home repossessions, shop closures, increase hospital queues and condemn children to crumbling schools. Yet the chancellor has been quiet about the contribution expected from the ultra-rich.
Warren Buffett, the world's third-richest person, estimated to worth around $37bn (£24bn), has urged the US government to tax the rich more saying "people at the high end, people like myself should be paying a lot more in taxes. We have it better than we've ever had it". Yet there is deafening silence from his UK counterparts. The government can solve the financial crisis by inconveniencing the richest 1,000 people in the UK.
According to the Sunday Times Rich List, the collective wealth of the 1,000 richest people in the UK rose to £335.5bn in 2010. 53 of the richest 1,000 are billionaires. In 1997, when Labour came to office, the collective wealth of the richest 1,000 stood at £98.99bn. No other group has received such a massive boost in its wealth. Even if they have all the clothes, mansions, cars, yachts and jets they want, they still cannot spend it all. They came into this world empty-handed and will exit in exactly the same way, but leave behind impoverished citizens and employees when they could easily give 25%, or some £84bn of their wealth away without any noticeable effect on the quality of their life. This redistribution would reduce and probably eliminate the need for deeper cuts.
With a private fortune of £22.45bn, steel tycoon Lakshmi Mittal is thought to be Britain's richest man. He has connections with offshore tax havens, but his wealth has been amassed though cultivation of the UK political machinery. Tony Blair personally intervened to help him expand his empire in Romania and other places. Some years ago, he spent £38m on the wedding of his daughter and also bought her a £70m mansion in Kensington Gardens in London.
Others on the ultra-rich list include Chelsea football club owner and oil industry magnate Roman Abramovich, worth some £7.4bn; Gerald Cavendish Grosvenor, the 6th Duke of Westminster, whose company Grosvenor Estates is one of the largest property developer and landowner in the UK and worth some £6.75bn. Brothers Simon and David Reuben have amassed a fortune estimated to be around £5.5bn, largely through property, private equity and the Wellington Pub Company.
Sir Philip Green, owner of BHS and Top Shop, is estimated to be worth £4.1bn. Sir Philip, an adviser to the government, has registered the shares in his business empire in his Monaco-resident wife's name to avoid UK taxes. Sir Richard Branson has a fondness of tax havens and weighs in at £2.6bn. Sports entrepreneur Bernie Ecclestone, one-time donor to the Labour party, weighs in at £1.4bn.
Politics is about choices. The government can choose to punish millions of people for the recession that they did not cause, or inconvenience a few rich people. These rich people have gained the most in the boom years. The richest 1% of the population owns 21% of marketable wealth and the bottom 50% own just 7% of the wealth; and if the value of the dwellings is taken out then that figure stands at around 1%. The proportion of gross domestic product going to employees in the shape of wages and salaries has declined from 65.1% in 1976 and now stands at around 55% (see Table D). Ordinary people just don't have the capacity to take economic hits.
We have given the ultra-rich UK passports, peerages, knighthoods, public accolades and public services. Yet many respond by avoiding taxes and impoverishing employees. Without social stability and people's purchasing power they cannot keep or multiply their wealth. The prime minister, David Cameron, could ask his billionaire friend Lord Ashcroft to mobilise the billionaires and ask them to give 25% of their wealth to the country. He could be assisted by the "you've never had it so good" Lord Young.
Surely it is far better to inconvenience 1,000 people than destroy millions of lives. If rich turkeys don't voluntarily vote for Christmas they could be helped by a mansion tax, a wealth tax, the end of their offshore tax haven shenanigans, higher rates of income tax and a higher rate of value added tax on luxury goods.
This article first appeared on Comment is Free
See also proposals for a Wealth Tax