LABOUR HUB EDITORS

A painless policy no party wants to look at

JULY 3, 2024

Mike Phipps reviews Enough: Why It’s Time to Abolish the Super-Rich, by Luke Hildyard, published by Pluto.

Britain’s top 1% own assets of a greater value than those of the bottom 50% combined. In 2023, the combined wealth of the UK’s richest 350 households reached a new high of nearly £800 billion.

Wealth inequality is widening in other countries too. In the US, where life expectancy is falling, 20 million people live in deep poverty and 28 million have no health insurance.

It’s odd then that the inexhaustible accumulation of riches by a tiny number of people, while public services collapse and hardship balloons, has provoked so little political debate about rebalancing income and wealth. Neither of Britain’s two main parties support a wealth tax: instead the Tories lifted the cap on bankers’ bonuses, which Labour has no plans to reinstate. Yet opinion polls show strong majorities in support of higher tazes on the rich and caps on executive pay.

Building on this support, Hildyard makes a strong case for taxing the rich more. First, hoarding vast private fortunes is needless and inefficient. While most people would accept the idea that more money means more wellbeing, research also suggests that after a certain level of wealth, this reaches a plateau. So rewarding people above a certain level of income itself becomes inefficient and adds no value. This stands in contrast to the prosperity that would be generated if the 99% saw some of the wealth that accrues to the top 1%.

Plenty of evidence from elsewhere supports this hypothesis. The rich in Britain get more than in many other European countries, where median incomes are higher than in the UK, where the majority of people are poorer. Furthermore, the greater level of poverty necessitates people taking on more debt, which increases risk and instability. In this light, a less servile attitude towards the super-rich on the part of government looks like an economic necessity.

The super-rich are not just bad for the economy – they are bad for the planet. A four-hour flight in a private jet emits as much carbon as the average EU citizen in a year. A study of the carbon footprint of 20 billionaires estimated their average emissions at 8,190 tonnes each, compared to the average UK citizen’s of 3.5 tonnes.

Too high a concentration of wealth also exacerbates the housing crisis, via buy-to-lets and second homes. The social impact is also significant. It’s not just that more unequal societies have worse mental health and higher homicide rates: they also weaken empathy, fostering crime, resentment and fear.

This point needs underlining. Not only do the extremely rich not understand the problems faced by the poor, hence the  “let them eat cake” attitudes that are increasingly widespread today, as when a senior government minister described rough sleeping as a “lifestyle choice.” Worse, as the Equality Trust suggest, “having more money than someone else makes you think that you are different from someone else.” This leads to ethnic and social ‘othering’ and constitutes, as I have argued elsewhere, a significant factor in the riser of the global far right.

HIdyard also challenges the deference shown to the super-rich, in particular the idea that they are the irreplaceable engines of economic success, who if taxed a bit more, would inevitably head for foreign shores. American executive pay levels dwarf those of other countries, but it’s is extremely rare for CEOs from elsewhere to relocate there. The evidence suggests that paying business leaders vast sums of money to acquire their services is frequently unnecessary.

As for taxation, while the rates of millionaires leaving Norway did increase in response to a wealth tax hike in 2022, “the rate of exit would need to have been 15 times higher than it actually was to have offset the increased revenue for public services that the tax increase achieved.”

Marxist economic theory makes clear that the super-rich are not society’s wealth creators. But empirical evidence also shows that they don’t work especially hard – or may not work at all: 15% of people in the top 1% get their income without having to work in any way.

“Self-help books and LinkedIn influencers regularly promote habits of highly successful people that others should seek to copy – the backgrounds of UK billionaires suggests that ‘inheriting vast business empires’ and ‘befriending Vladimir Putin’ should feature prominently on their lists,” notes the author. The idea underlines how so much in the way of rewards is allocated to socially useless work.

The super-rich don’t benefit just from their background, contacts and lower-earning colleagues: they are also propped up by public money. Tesla in the US has benefited from over $3 billion in government support. In the UK, the extractive industries get government technical help and lobbying, while defence firms and exporters also work in partnership with the state. The state’s bailing out of banks ‘too big to fail’ is another example, as is the vast sum paid in in-work benefits to underpaid staff in Britain’s service sector.

Getting rid of the super-rich, argues Hildyard, is desirable. But is it feasible? Yes, he suggests: by a combination of redistribution, via taxation, and pre-distribution – that is, stopping them acquiring their immense wealth in the first place. Mechanisms for the latter include changing the rules of corporate governance, encouraging stronger trade unions that could exert more influence over corporate pay, more worker ownership and profit-sharing mechanisms that could channel corporate wealth to the people who create it, and a maximum wage.

These are sound proposals, but given that so much wealth is not actually earned in this way, some other proposals might be considered, in particular rent controls, building restrictions and more powers for local government that could target private landlordism.

It’s clear that the next Labour government will face a huge to-do list in terms of rebuilding public services, from health to education, prisons to probation, local government services to national infrastructure – and above all a socially just transition to greener energy and measures that tackle the cost of living crisis, including benefits that people can live on. The idea that these challenges can be met financially simply by efficiency savings, improved tax collection and further marketisation is absurd. Labour will inevitably be faced with a choice: do less or tax more.

If it fails to meet the challenges, it will have squandered a terrific opportunity to bring large numbers of people out of poverty, indebtedness, housing and job precarity. It will have alienated huge sections of the electorate who are desperate for an alternative to the austerity and inequality that the current government champions.

To forestall this, the Party needs to have a serious debate about taxing the super-rich, an electorally far more painless option than rises in general taxation. If things are to improve for the vast majority of us, there really is no alternative.

Mike Phipps’ book Don’t Stop Thinking About Tomorrow: The Labour Party after Jeremy Corbyn (OR Books, 2022) can be ordered here.