A Gift Horse in The Cost-of-Living Crisis
In the years since the 2008 financial crash as its impact hit home, it has become clear that we were not in fact ‘all in it together.’ In the words of author Peter S Goodman, policies of everyday austerity have been used to “pay for the bailouts of the bankers.” [1] Combine this with the Covid economic brick wall that left most struggling but also saw the biggest ever increase in British millionaire and billionaire wealth [2], and it’s no surprise that there has been a growing call to tax the rich. That’s not news. What is rather more noteworthy is that now, amongst the loudest voices, are those of the rich themselves.
The Patriotic Millionaires group is at the head of this movement. Formed in 2010 in the US, its members acknowledge that, far from hurting them, the financial crash and the pandemic have benefitted them, often to a spectacular degree. In April it ran a conference entitled ‘Oligarchs versus All of Us — The Fight for Power & Money,’ predicated on the idea described by the Guardian as the “very very rich hijacking the political system around the world.” [3]
This hijack has not gone unnoticed. Gary Stevenson is one of Patriotic Millionaires’ most engaging UK spokespeople. A former star trader at Citibank, he made his first million within a year of the 2008 crash by betting on interest rates going into long term decline. [4] He became a big winner from the ‘disaster’ that he had discovered. The moral loss that accompanied the win prompted him to both change his life and to speak out.
Redirecting the Money Pump
That discovery was the impact of pumping the economy with newly created money. The publicly presented theory was that this would stimulate the economy by putting money in everyone’s pockets that we all then spent. In reality, it simply accumulated at the top where the assets (property, investments etc) of the rich made them richer. Stevenson has pointed out that “the average homeowner in London earned as much last year just by watching their house go up in value as someone with an average job in the whole of the country earned” [2] i.e. — watching not working.
In the UK this has been exacerbated by tax decisions that have cut tax for the rich and raised National Insurance (which the rich don’t pay) for everyone else. Stevenson points to these decisions by Rishi Sunak — “the only group to which he’s given more than he’s taken is the super-rich where we’ve seen a 21% single year increase in wealth. [2]
To redress this balance, Patriotic Millionaires advocate the obvious — taking money back. The estimated impact of its proposed increase in tax to the super rich is astonishing. An annual levy of 2% to 3% on the assets of the wealthiest 113,000 people in Britian would raise £46bn which would wipe out the need to increase NI for the social care levy, pay for 50,000 nurses, 35,000 affordable homes and the permanent increase of Universal Credit. [6]
A Welcome Gift?
In our current economic crisis, the Government clearly needs options. It has declined to levy a windfall tax on the likes of BP and Shell as they make unprecedented profits (£6.2bn and £7.3bn respectively in the first quarter alone) whilst the country struggles with a cost of living crisis centred on energy. You’d think then that another source of tax income would be a godsend.
Apparently not. Some might argue that Sunak (whose combined net worth with that of his wife is estimated at £630m [7]) has a good personal reason to resist but he is not alone.
Philip Hammond, a predecessor as Chancellor between 2016 and 2019, has said that “using the power of the state to seize people’s income and wealth then to redistribute it creates a society in which levels of income and levels of wealth do not reflect endeavours of individuals.” [9] For the rich who are advocating this move there is of course no need to ‘seize’ anything because they are offering it. Hammond’s words studiously exclude the phrase ‘trickle down economics’ although it is very clear what he means — that convenient idea that, left alone, the rich will create wealth for all.
As widely discredited as it is with many, this argument persists alongside its meritocratic cousin — that (in the words of Michael J. Sandel) “if I am responsible for having accrued a handsome share of worldly goods — income, wealth, power and prestige — I must deserve them” and similarly “others’ failure [to do so] must be their fault.” [8] The Patriotic Millionaires — along with many of the rest of us — think not. The current turbulent economy raises many examples that explain why — does it make sense that the CEO of a failed utility company rescued by taxpayers’ money ‘deserves’ to be retained on a £250,000 salary?
Some critics of Patriotic Millionaires are dismissive. Right wing think tank, The TaxPayers’ Alliance has dismissed them as “virtue signallers” whose ideas would “weaken incentives to engage in productive economic activity.” [9] Like Hammond, the organisation also points out that a voluntary scheme already exists for people to donate beyond their taxes [9]. This same point was made by Lucy Fraser, Financial Secretary to the Treasury, in answer to a March question from Daisy Cooper (Lib Dem Health & Social Care Spokesperson) about whether the Government is speaking to Patriotic Millionaires (the overall answer unsurprisingly comprised a claim of world leading ‘progressive taxation’ that renders any changes unnecessary.)
This voluntary alternative rather misses the point of course. The scale of the problem demands more than an ‘honesty box’ approach.
Similarly, framing the argument in terms of general taxation principles detracts from the fact that this is about the few not the many. As author Peter S Goodman says, “Bezos blasts off into space at the cost of £5.5bn…….he could have vaccinated the world multiple times over.” [1] It is telling that ‘The 1%’ has become a label — when the combined earnings of 50% of the population amount to less than that of the top 1%, the issue is crystallised for all.
It is surely more appropriate to talk of specific principles of taxation for the few — the super-rich. Helen Miller, Deputy Director of the Institute for Fiscal Studies has said that “to a very large degree, wealth just represents people saving at different points in their lives and it’s a pretty bad idea to tax that.” [5] Most of us would agree because most of us try to save for our families and our future. Miller says that we simply need to ensure that “we don’t give lower rates to people who get their incomes in the form of dividends or capital gains” [5] — those people whose riches accumulate from their existing wealth. In the words of Richard Brooks (author of ‘The Great Tax Robbery’) “for these people “there are ways to plan that are not available to the rest of us” because “the wealthy are increasingly indulged by the tax system.” [5] Rather pointedly, billionaire Warren Buffet has pointed out that he pays a lower rate of tax than his secretary. [10]
This disparity is neatly summarised by Gary Stevenson — “at the moment we have a system which is very effective at taxing ordinary workers on their income” but very ineffective for those “very rich families” whose wealth doesn’t come from working salaries [5]. This explains why nowadays there is far less talk about ‘The Income Gap’ and far more about the ‘Wealth Gap” — the difference between those with assets (savings, pensions, housing, investments etc) and those without. As the stock market and property market continues to rise, the wealth gap increases far more than the income gap.
Who’s Listening?
Although the current situation has been likened to a post war rebuild environment, we shouldn’t expect similarities in government response. The Attlee Government in the 1940s is described by historian John Bew as having “set the ethical terms on which Britian’s new social contract was founded.” [11] Today’s Government, comprising a wealthy elite and reflecting a natural antipathy to the idea of taxing ‘success’, has a different social contract in mind.
This leads many to a fear that the calls of Patriotic Millionaires and others are disappearing into the ether. As our politics descend into stage managed soundbites and childish one upmanship, it is serious subjects like this one that fall victim. In the words of Michael J Sandell, people “rightly sense that the absence of robust public debate does not mean that no policies are being decided. It simply means that they are being decided elsewhere, out of public view.” [8] In that case, it is clear whose interests are likely to be front and centre — and whose won’t.
If Government is not acknowledging the call, then surely the media should be? It doesn’t look like it. Gary Stevenson has said that the “media is largely owned by billionaires who oppose it.” [5] Whilst that is almost certainly true, there must surely be more behind the dramatically muted levels of coverage.
The Threat from Silence
The Patriotic Millionaires’ case should matter, not least because they are often people who have made it big through talent and hard work but now see declining chances for others to follow. They don’t want to take up the drawbridge behind them. Gemma McGough (a tech success story who started work at 16 and made her fortune in her 30s) has said that “there needs to be some reward for winning the game but it’s completely disproportionate now.” [12] It’s a theme expanded on by Gary Stevenson who came from humble beginnings — “now, no matter how hard you work or how smart you are, if you come from the ‘wrong’ family you’ll probably never own property. That is feudalism.” [4]
It’s also a recipe for despair. The impossibility of everyday survival for many is driving strife on the streets in many countries right now. Whether or not you believe that a failure to address the Wealth Gap could lead to class war and civil unrest, surely the desperate state that we are in demands that the Patriotic Millionaires’ case is heard and given much more than just lip service.
The argument for much austerity was the absence of a Money Tree — turns out that we have one in our back yard.
****************************************************************
Sources
[1] Peter S Goodman (author of ‘Davos Man’) interviewed in Strong Words magazine, March 2022
[2] Gary Stevenson, Times Radio, March 2022
[3] Dominic Rushe in The Guardian April 2022
[4] Anoosh Chakelian interview with Gary Stevenson, New Statesman, November 2021
[5] Tax Me I’m A Millionaire, BBC Radio 4, April 2022
[6] Taxing Extreme Wealth study by Patriotic Millionaires, the Institute for Policy Studies, the Fight Inequality A Alliance and Oxfam
[7] Adam Bychawski, Open Democracy, January 2022
[8] ‘The Tyranny of Merit — What’s Become of the Common Good?’ by Michael J. Sandel, 2020
[9] Stephen Beard, The Marketplace,org, April 2022
[10] New York Times, August 2011
[11] ‘Clement Attlee — The Man who made Modern Britain’ by John Bew, 2016
[12] PA News Agency, July 2020
