Billionaire solution to the financial crisis

Austin Mitchell and Prem Sikka argue that no more than 1,000 people need to be inconvenienced in tackling the national debt

by Austin Mitchell & Prem Sikka
Friday, January 14th, 2011

Just when we need to boost demand, the Government has begun, with the VAT hike, the first stage of plans to reduce purchasing power by higher taxes, public sector pay freezes and dilution of pensions and benefits. Yet one group of people remain relatively unscathed: the ultra rich whose wealth runs into telephone numbers. Why not tap some of their largesse to solve the economic crisis? Instead of doom and gloom for millions, the Government only needs to inconvenience around 1,000 people to manage the crisis.

According to the Sunday Times Rich List, the collective wealth of the 1,000 richest people in the United Kingdom rose to £335.5 billion in 2010. This is an increase of 29.9 per cent, or £77.265 billion, since 2009. Despite the deepening recession, this is the biggest-ever annual increase in the wealth of our elite. Fifty-three of the richest 1,000 are billionaires. In 1997, when Labour came to office, the collective wealth of the richest 1,000 stood at £98.99 billion. No other group has received such a massive boost in its wealth. But even if they have all the clothes, mansions, cars, yachts and jets they want, they still can’t spend it all. They came into this world empty-handed. They’ll exit in exactly the same way, but leave behind impoverished citizens and employees when they could easily give 25 per cent, or some £84 billion of their wealth away without hurting the quality of their life. This redistribution would reduce and probably eliminate the need for draconian cuts.

So let’s look at what the ultra rich can contribute to solve the financial crisis.

American billionaire Warren Buffett, the world’s third-richest person, estimated to be worth around $37 billion (£24.45 bllion), has urged the United States 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”. His suggestion is echoed by computer software billionaire Bill Gates. So why not take these billionaires at their word and tax them or ask them to donate some of their fortune to the country? Surely the rich Brits aren’t so selfish that they won’t listen to Buffett and Gates and make their own contribution to a fair deal for the workers and the community from which they derive their wealth?

With a private fortune of £22.45 billion, 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 political machinery in this country. Tony Blair personally intervened to help him expand his empire in Romania and other places. Some years ago, he spent £38 million on the wedding of his daughter and also bought her a £70 million mansion in Kensington Gardens in London.

Others on the UK rich list include Chelsea Football Club owner and oil industry magnate Roman Abramovich, worth some £7.4 billion; Gerald Cavendish Grosvenor, the sixth Duke of Westminster, whose company, Grosvenor Estates, is one of the largest property developesr and landowners in Britain and worth some £6.75 billion. Brothers Simon and David Reuben have amassed a fortune estimated to be around £5.5 billion, largely through property, private equity and the Wellington Pub Company.

Philip Green, owner of BHS and Top Shop, is estimated to be worth £4.1 billion. Sir Philip is an advisor to the Government and registers the shares in his business empire in his Monaco-resident wife’s name to avoid British taxes. Richard Branson has a fondness for tax havens and weighs in at £2.6 billion and famously claimed that he looks for a minimum post-tax return of 30 per cent on all his investments, although his financial empire offers measly returns to investors. Formula One supremo Bernie Ecclestone, one-time donor to the Labour Party, weighs in at £1.4 billion.

Politics is about choices. The Government can choose to punish millions of people for the recession that they did not cause or it can inconvenience a few of its rich friends. These rich people have gained the most in the boom years. The wealthiest 1 per cent of the population owns 21 per cent of marketable wealth and the bottom 50 per cent own just 7 per cent of the wealth. If the value of the dwellings is taken out, then that figure stands at around 1 per cent.
Yet governments have continued to impoverish ordinary people. In 1976, wages and salaries paid to employees accounted for some 65.1 per cent of Britain’s gross domestic product. The Thatcherite onslaught on workers, the public sector and trade unions reduced that total to 52.6 per cent in 1996. After the introduction of the national minimum wage and improvements in the public sector, it now barely stands at 55 per cent, a staggering reduction of 10 per cent in just over 30 years.

Even that shrunken cake has been unevenly divided and the fat cats have taken the biggest slices. Most people do not have adequate savings to meet hardship or even the prospect of decent retirement pension. The Institute for Fiscal Studies has noted that the Government’s austerity drive will slash the annual income of a typical family by some £2,000, with the poorest 10 per cent bearing the heaviest burden.

So here is an opportunity for the rich to contribute to building a good society. Let us take them at face value when they say that they want to pay higher taxes or that they care for their workers and their country. We have given them British passports, peerages, knighthoods, public accolades and public services. Yet many respond by dodging taxes and impoverishing workers. Without social stability and people’s purchasing power, they cannot keep or multiply their wealth.

Prime Minister David Cameron could ask his billionaire friend Lord Ashcroft, a lavish contributor to the Conservative Party funds, to mobilise the billionaires and ask them to give 25 per cent of their wealth to the country. He could be assisted by the “You’ve never had it so good” Lord Young and advised by Lord Mandelson who is so keen to advise the rich.

It is far better to inconvenience 1,000 individuals than destroy millions of lives. These people have the broadest shoulders and if rich turkeys won’t voluntarily vote for Christmas, they could be helped by the introduction of 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. After all, we’re all in this together. Aren’t we?

Austin Mitchell is Labour MP for Great Grimsby and Prem Sikka is professor of accounting at the University of Essex

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  • Davinder Kohli

    Politics is always about choices but what did Nulabour and Tories do? Let the rich get richers and allow them to dodge taxes too. Left should get the campaiging cue from this superb article. No more burdens on ordinary people until the rich pay more. They have more, take more and should pay more.

  • terence patrick hewett

    I am afraid Austin, that the ability of politicians (as you very well know) to abstract money from the international rich is extremely limited: they will simply move elsewhere and take their wealth with them thereby impoverishing us all. If the last administration, of which you were a part, had lived within its means we would not be stony broke. But there; spending other peoples money is so much nicer than spending your own. Isn’t it.

  • Anonymous

    “Even that shrunken cake”

    Umm, sorry, but while the labour share of income has indeed fallen that’s not the same as a shrunken cake. In the last 34 years the size of the cake has grown substantially, meaning that real wages are higher now than they were, even though they’re a small portion of the total cake. I’d expect a professor of accounting to get that, even if not an MP

  • Mailing

    Oh Dear. The usual right-wing mob is here as well.

    Tim Worstall – Please see the IMF and OECD statistics – they note that one-third of UK workers have not had any real increase in their wages since 1985. Even a cursory glance at newspapers would tell tax exiles and Adam Smith Institute advisers that people are facing wage freezes and losing pension rights. If the real wages were increasing then the income/wealth inequality would be reducing and it is not. Thatcher started the rot it continued under NuLabour. Now Cameron is continuing with the same and expects people to live on fresh air, ore may be that too will soon be privatised.

  • Anonymous

    “If the real wages were increasing then the income/wealth inequality would be reducing and it is not.”

    No. If top 1% wages were increasing faster than, say, bottom 20% wages, then real wages would still be growing and inequality would still be growing.

    Growing inequality does not show that real wages are either static or falling.

  • Mailing

    “Growing inequality does not show that real wages are either static or falling”

    So wages and income do not influence inequalities. This must be some new neoliberal mantra. No doubt, all companies are rushing to give real wage increases to their workers.

  • Anonymous

    Do try, at least, to connect with the points that are being made, there’s a good chap. Of course wages and incomes influence inequality: we measure inequality by the differences in wages and incomes so this should come as no surprise.
    I said something very different indeed: which is that growing inequality is not the same as falling real wages.

    Now, me, I’ve given my real name here: you, “mailing” are whom? For it is interesting to know who cannot understand an argument put in front of them, after all.

  • Mailing

    What patronising drivel you write. My name is Mai Ling and it is given and I am not a chap – shows how Euro and self-centred you are. It takes less than Economics 101 to understand that the % of the GDP going to employees as wages and salaries has declined. That means that less is going into the pockets of employees. Because directors and executives and specualors take a large proportion of this smaller share, other workers get even less. For it is interesting to know who cannot understand an argument put in front of them, after all.

  • Anonymous

    If GDP grows faster than the labour share of GDP falls then real incomes would still be rising. This isn’t even economics, this is basic mathematics.

    The labour share of income in the UK has certainly fallen since the high point in the mid 1970s. But GDP growth has meant that while that labour share has fallen, real wages have risen.

  • Mailing

    Do you ever apologies for patronising others?

    Thank you for admitting that “The labour share of income in the UK has certainly fallen since the high point in the mid 1970s”. Then you add that “GDP growth has meant that while that labour share has fallen, real wages have risen”. So what happened to the one-third of the workforce that has not received any real increase in its wage since 1985? Who took their share and do you have any suggestions about these 9-10 million workers and their families are supposed to do?

  • terence patrick hewett

    Technology is revolutionising the world as it did during the Agricultural Revolution and the Industrial Revolution: and we all learnt to live with it. And we will learn to live with this revolution too. If you really want to change the world Mai; become an engineer like me.