News Analysis
Rich, poor and LabourWORKERS, FEB 2007 ISSUE
Under Labour, from 1997 to 2002, the number of Britons with more than £5 million in 'liquid assets' rose at the rate of 13% a year. Between 2002 and 2004, the number rose again by 50%. The rich stay rich, and get richer; the poor stay poor, and get poorer. The growing inequality makes British society less mobile. The USA, Britain and South Africa, the world's most unequal societies, have the least social mobility.
Stock markets boom, top salaries and land and property values soar. The gainers are a few thousand chief executives, City dealers, property developers, investment fund managers, landowning aristocrats (80% of the EU's £36 billion Common Agricultural Policy funds go to the richest 20% of landowners), commercial lawyers and bankers.
From 2000 to 2004, the pay, including bonuses and long-term incentive plans, of top executives at Britain's biggest companies more than doubled. By 2004, the average remuneration of a top 100 chief executive was £2.5 million – some 113 times that of the average British worker.
This soaring pay is not due to greater entrepreneurialism, tightening global or national markets, or exceptional skills, or better company performances. Over the same period, from 2000 to 2004, the FTSE 100 index fell by around a third while average earnings increased by only 13 per cent. Britain has a lower rate of innovative activity within firms than France, Germany or Spain, and we are 15th out of the 30 richest countries for productivity growth.
The crooked casino
"Welcome to the City - the biggest crooked casino in the world." In the last 20 years, the City and Wall Street have creamed off £100 billion by rigging capital markets. This is a corporate cartel, where the top 50 fund managers control three quarters of London's stock market. Financial firms' fees from mergers and acquisitions, which destroy value and jobs, are known as 'the croupier's take'. If the bigger company fails the croupier can gain from that too. A City 'star' admitted, "I could not believe that anyone would want to pay me so much for creating nothing."
The capitalists' last line of defence is to claim that their tax contribution justifies their wealth. Yet Britain is a tax haven for the very rich and our tax system regressive. Tax avoidance is worth possibly £85 billion a year. The accountancy firm KPMG has 400 off-the-shelf tax avoidance 'products'. Only Britain and Ireland allow non-domiciliary status to people, whereby they only pay tax on domestically derived income. Other countries collect tax from residents on all their income.
For the very rich, tax is voluntary. For example, Mohamed Al-Fayed made a secret tax deal with the Inland Revenue in 1985 that he would pay just £240,000 a year – he should have been paying £6 million! The state let him trouser £5,760,000 a year. On top of this, Al-Fayed arranged for £100 million to be paid him in dividends, between 1995 and 1998 alone, to an offshore trust in Bermuda.
There are millions of similar offshore companies designed to avoid tax, which Rupert Murdoch, Richard Branson and Bill Gates all use. These companies hold an estimated $11 trillion, and a third of the world's entire GDP flows through them.
The working class produces all this wealth; the capitalists steal their cuts from every aspect of life – work, housing, saving.