[In a general election year (2015), politicians of all colours will be trying to get our votes - and one of the issues will be the economy. So we need the real facts about what they are saying.The following piece looks at the issue of taxing the wealthiest.]
The Super Rich Bubble
In the 1980s, Reaganomics and Thatcherism promoted the notion that society would benefit from allowing the super-rich to get richer - now referred to as 'trickle-down'. This has turned out to be a fallacy.
Who are we talking about? Let's start with the richest one per cent. But there is an enormous gap between the poorest of the one per cent (anyone earning £200,000 a year) and the top 0.01 per cent - the 85 individuals whose combined peresonal wealth is equivalent to that of half the world's population. [Yes, 85 people are as wealthy as half the world's population!]
What do the rich spend their money on? They flit one from penthouse to another across the globe, have private jets, catch helicopters into London (the fare for a 20-minute ride is £3,000), have their own social calendar (skiing in Loisters, Formula One in Monaco, polo in Oxfordshire) and luxury goods (yachts, cars, planes) while a few buy football clubs. Their luxury spending is typically on things that appreciate fastest in value (diamonds, watches, paintings, vintage cars, gold) and importantly retain value in recessions.
They are insulating their wealth and it's also the reason why trickle-down doesn't work. Super-rich spending stays in the super-rich bubble; it does not convert to jobs in factories or even greater sales on the high street. It is an illusion. More damagingly, governments - Conservative, New Labour and coalition - have pursued low tax cuts to woo the super-rich as a central plank of economic policy.
The mechanism that attracted the super-rich to London was the exploitation of an obscure hangover from Empire called the non-dom rule, first created 200 years ago to protect the wealth of plantations and slave owners returning from the Colonies. In the 1960s, Greek shipping tycoons chose London because they could use the non-dom rule to avoid paying tax. They were followed by the Arab oil sheiks in the 1970s and now the Russian oligarchs.
These non-doms (about 120,000 of them in the UK) pay a flat fee of £30,000 for being here. That status means they don't pay tax in Britain on their overseas assets. World-renowned economists (such as France's Thomas Pikkety and Ha-joon Chang at Cambridge) have been analysing data and come to the shocking conclusions that instead of trickle-down, it is now clear that there is a deluge of cash running upwards to the vast reservoir of super-rich wealth. A key OECD report before Christmas 2014 stated that the UK economy would have been a staggering 20% bigger had the gap between the rich and the poor not widened so dramatically in the last 30 years.
Jaques Peretti in Radio Times, 3-9- January 2015
