John Street’s Diary November 4

Written By: John Street
Published: November 4, 2011 Last modified: November 3, 2011

Bosses of FTSE companies may have seen their pay jump 48 per cent in a year, while others fared considerably more modestly, but new research suggests that there is nothing new in this and that it is merely continuing a well-established trend. Those in the financial sector especially may see themselves as wealth-creators whose rewards and recompense are only in proportion to the riches they have generated but the financial sector has been helping itself to a disproportionate share of economic growth, according to the National Institute for Economic and Social Research. In fact, from the late 1970s to the turn of the century the very highest earners saw the fastest growth in their remuneration. Pay for the top one per cent grew 68 percent faster than that of the median earner – the person slap bang in the middle, as opposed to the average – from 1977 to 2002, said the NIESR. The higher the earnings the greater the trend or acceleration in increases, as the top 0.5 per cent grew 84 per cent faster than the median over the same period. And the calculations and data did not even include bonuses. “The prospect of income inequality is likely to rise again, driven both by structural change and governmental policies”, said NIESR director Jonathan Portes. “[Our] research shows that if you want to do something about rebalancing inequality you have to take on the financial sector, and that what we’re seeing in the [St. Paul’s Cathedral] protests. “The financial sector has taken a disproportionate share of economic growth, and it is not surprising that we are seeing such popular discontent.”

And now an insight into tax man’s league table of who is really rich, just rich or even merely affluent  but not quite rich enough to do a one-to-one handshake deal with HMRC boss Dave Hartnett like Vodafone or Goldman Sachs. HMRC, like all the banks, has its own so-called “black card” or “platinum card” customers in its own High Net Worth unit – believed to be about 5,000 people with income, assets and other wealth in excess of £20 million. But this week, in an effort to justify the extra billion pounds or thereabouts given to it last year by Chancellor George Osborne (to recruit 2,250 tax inspectors), it set about targeting those people it hopes can, collectively, help it bring in an extra £7 billion a year by 2015. But that does not mean that nice Mr. Hartnett spreading himself thin by turning up on the doorsteps of those 350,000 people earning more than £150,000 a year and whom HMRC thinks might have more to give. The newly-formed “affluence” unit of 200 inspectors has been established to see if such people have overseas properties, or income from those properties, which they may overlooked in their tax returns.But to get the really personal service from Mr Hartnett you really do need to owe a lot more.

Jon Moulton, one of the pioneers of private equity in this country and a man greatly admired within the financial industry, is no stranger to pithy quotes. About five years ago, he ruminated in a Financial Times interview how it was not right that he paid less tax than his cleaning lady, a sentiment echoed more recently by Berkshire Hathaway’s Warren Buffett. He also thinks Britain should be more like Estonia in cutting public expenditure (it applied across-the-board cuts of 20 per cent and saw unemployment soar before the jobs growth of its current recovery) and that the deficit – in which Britain allegedly “spends £5 for every £4 it earns” – is “immoral”. Speaking on BBC’s Newsnight this week, Mr Moulton spoke ruefully of the £35,000 donation to Defence Secretary Liam Fox’s self-styled advisor Adam Werrity that had been solicited from him after one of his investment vehicles had acquired an interest in a company that does business with the MoD. There is absolutely no suggestion of impropriety by Mr Moulton or any of his companies and the investor made his clear his irritation at having been talked into making the donation – especially given subsequent disclosures about its “charity” work. “The definition of ‘foxed’ is ‘discoloured with yellowish brown staining’ and I fear it might be reasonably appropriate. I can definitely say that I was mugged,” he said.

About John Street

John Street is Tribune's diary columnist.

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