The revision of the second quarter growth figures which now show the UK economy contracting by 0.5% compared with the original estimate of 0.7% obviously gives Osborne some (small) relief, but still means that the economy has shrunk by 0.6% in the last year and has been flat for the last 2 years as a whole – the period that this Tory-led government has been in office. As a result of this sharp decline in tax receipts Osborne is now forced to borrow some £158bn more than planned and austerity may well extend to 2020. In the short term this rising gap can only be covered by cutting benefits or public spending even more sharply or by raising taxes. It is a certainty that Osborne will rule out any increase in taxation for the super-rich, even though that would be the most obvious and fairest way of raising significant funding quickly, on the grounds that they are the wealth-creators who must be protected and indeed cosseted. He is wrong on two counts.
First, if they are really wealth-creators, it’s strange that other countries are increasing taxes on them. Spain and Italy, both with right-wing governments, have extended surtaxes on the rich. Hollande, the new French President, will this autumn impose a 75% tax on those earning more than €1 million (£835,000) a year, the richest 0.4%. Even in the US the presidential election is being fought around Romney’s private equity and tax avoidance habits as opposed to Obama’s declared intention to raise the top rate of income tax from 35% to 40% and to increase taxes on capital gains and dividends. Once again Osborne cuts a lonely figure in preferring to hammer the poor to subsidie the rich.
But the real argument against Osborne’s anti-poor and pro-rich stance is that the super-rich by and large aren’t wealth-creators in any significant measure at all. Of course there are the outstanding entrepreneurs like Steve Jobs and James Dyson who genuinely create wealth, but they are the exception rather than the rule. Of the 20 persons with the fastest growing fortunes in the UK (according to the Sunday Times Rich List 2012, p.12), only 6 made their money from industry; 4 made their wealth from property, 3 from the internet and 6 from finance and investment.
That’s the 0.001% richest. Below that stratospheric level of wealth the evidence is that the super-rich amass huge sums, not at all as creative or innovative entrepreneurs, but out of paying each other handsomely through shameless mutual back-scratching remuneration committees. There are dozens of cases where top executives are awarded huge rises even when the share price of the company has plummeted. Enormous ‘golden goodbyes’ are handed out to failed chief executives to get rid of them. Even the bankers who dole out colossal bonuses to themselves can hardly be described as wealth-creators when they’ve produced the biggest destruction of capital wealth in the biggest financial crash in the modern era, driving up the national debt to some £1.4 trillions.