Peter Hargreaves, the multi-millionaire financial sevices "wizard" has recently been loudly complaining about tax increases for those on very high incomes. The core of Hargreaves complaint is the increase from 40% to 50% tax on earnings above £150,000 per year. To put it another way, the level of income where the higher rate kicks in works out at £12,500 per month compared to the national minimum wage of less than £12,000 PER YEAR. Mr Hargreaves estimates that with the extra tax hike, he will pay an extra £500,000 which presumably means that he expects to earn some £5 million ABOVE the £150,000 threshold each year.
It is worth remembering why this extra tax is being introduced. We are, in case you hadn't noticed, in a recession, a recession initiated by the excesses and failures of the financial industry (with the assistance of a compliant government). The effect? Well let's look at what one highly successful financial services executive has to say:
"A trillion pounds has been borrowed to prop up the financial system but revenue from taxes has already been decimated. Royal Bank of Scotland, which was the biggest payer of corporation tax in the UK, no longer makes a profit. The government used to enjoy £8 billion in stamp duty from property deals, but the number of transactions has halved over the last year. The lower value of houses has also reduced the inheritance tax take.At the same time increased unemployment is giving rise to greater welfare payments and the loss of taxes from those who have lost their jobs."
And this same financial expert goes on:
"All main political parties are advocating tax rises for those on higher incomes. The very wealthy already pay the most taxes so as they rise further there is more incentive to employ schemes of avoidance and circumvent the system. Raising top rates of tax therefore usually results in the government's total tax take going down. The only other option is to raise taxes across the board.This means that your taxes are eventually scheduled to rise."
So, in short, the financial services industry (of which Peter Hargreaves is a major player) got us into the mess, the UK tax-payer has been used to prop up this industry, and any effort to increase taxes to repair the damage will be undermined by the very rich (like Peter Hargreaves) who will "circumvent the system" to avoid paying their taxes and thus forcing the burden even more onto those who can't afford expensive lawyers to guide them through the many loopholes available for tax avoidance (it has been estimated that tax avoidance by the super-rich and large corporates cost the country between £25 and £85 BILLION every year!).
And the financial expert from whom the quotes above were taken - why, that would be Peter Hargreaves.
This is not just about paying taxes - the burden left to us by the financial services industry (recently estimated by the Institute for Financial Studies at £2,840 per family) cannot be met by higher taxes alone (especially if some avoid paying), so it will be met by a reduction in spending on public services - that impacts services like state education and healthcare provision - not so much the buildings already used for these essential services (because many of them are subject to long-term PFI schemes that will make profits for the private sector, and the payments on which are subject to 20-30 year contracts) but the quality of the service delivered within those institutions – and the less tax recovered from the very wealthy the greater the negative impact on those services. Our children, our elderly, and our sick will be the innocent victims of the unabated greed and selfishness of those who cannot see beyond their own fat wallets.
In the end we still, just about, live in a free country and if Mr Hargreaves wants to “circumvent the system” to avoid paying his taxes by making use of the legal loopholes available to those rich enough to take advantage of them then that is his decision. Likewise if he chooses to leave the country because of the raising of tax levels – that is his decision. In the Politics Show he admitted that he was unlikely to leave the country because “I’m very patriotic”. Well Mr Hargreaves, here is a suggestion – as a demonstration of your patriotism why not do the patriotic thing and pay your taxes like the majority of the population of this country?
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I've got the Hargreaves interview extracted to go on You Tube - I'll put it up when I get the chance. Quick thoughts from me in my traditional role as designated killjoy - Peter Hargreaves wasn't particularly eloquent, so this is what he should have said:
ReplyDelete"Wealth is not finite. If one person becomes more wealthy it doesn't mean that someone else becomes less wealthy. If you make your money in a market economy where you are freely offering services, then the reason you can make money is because you are creating value for someone else."
So - #1 there's nothing wrong with wealth.
#2 Government is rubbish at spending money.
If Hargreaves money stays in the bank, it will be put to better use than if its given to Parliament. The most patriotic thing he can do with his cash is keep it out of the hands of Westminster as otherwise they will spend it on something really stupid, like...
#3 The Financial services posse didn't cause the economy to tank - it was the politicians. It's always the politicians.
Lending money to people who couldn't afford to repay it was foolish. The banks should have gone out of business, or more likely ended up doing a debt-equity swap or similar transaction which would end up with the shareholders getting nothing. Instead, the government gave the banks lots of our money. So now we've got rubbish banks and a huge bill. Again - Politicians' fault.
If you want to get deeper into the problems - the banks were incentivised to lend money by high interest rates - the same high rates that stoked up the housing market, due to the willingness of the Financial Services Authority and the Bank of England to let them get on with it. Again - the politicians' fault.
James, I'm inclined to agree with much of what you say but do you not recognise that those who acquire wealth often do so without necessarily creating any?
ReplyDeleteMany business enterprises aim primarily to persuade consumers to pay a higher price or to drive down the price paid to suppliers without actually adding anything of value to either.
Of course 'caveat emptor'and 'caveat venditor' apply but not all buyers and sellers are smart enough to realise (or greedy enough to care) that they are getting a bad deal. Do you not agree that the state has a role in intervening to give some protection to consumers, workers and small scale providers from at least the worst excesses?
There's nothing wrong with wealth per se but do you not think that big disparities in wealth tend to undermine social coherence? Poverty in our society is essentially relative so the richer some are the poorer others are, almost by definition.
I could offer all sorts of practical examples but I expect you can anticipate what they might be. I'm not alluding to Hargreaves in particular. For all I know his wealth is entirely generated by his own efforts and simply wouldn't otherwise exist, but there are certainly many others whose wealth has been acquired at the expense of others. Should the state attempt to do anything about that?
And who are you to tell someone that what they think they want is not what they really need? Who are you to demand another free citizen defer to your intellectual “smarts” in regard to the way they spend their own earning?
ReplyDeleteDefine social coherence for me (is it the same as social justice as we're still working on that one?). Your contention seems to be that it is the fault of those with money that those without as much money suffer envy. I suppose you could say that is a rationale for taking money from those who have earned it, but another response would be to dig out the ten commandments and point to No. 10:
You shall not covet your neighbour’s house; you shall not covet your neighbour’s wife, or male or female slave, or ox, or donkey, or anything that belongs to your neighbour.
There is no (absolute) poverty in the UK. And I for one have never been very fond of relativism.
Still, let's all agree that some people have become wealthy by improper means. The best thing we can do now is to go through our parliamentarians receipts and see whether there are grounds to get it back.
Let's be clear - I have not got a problem with wealth, in fact as soon as I can afford it I am quite keen to get some myself (by proper means).
ReplyDeleteHowever when millions of individuals are losing their jobs, their homes, the return on hard-earned savings, the little luxuries in life that contribute towards making them feel a little bit better about themselves when the TV screen bombards them with the lifestyles of the rich and famous, when millions more can look forward to two parliaments of reduced spending on education, local services and healthcare without the capacity to purchase the privately delivered alternatives then you have to have a hide the thickness of a rhino's to start telling us how downtrodden you are because you will only be able to take home £2.5m instead of £3.0m next year.
Mr Hargreaves did reasonably well out of the recession - his company, after early losses eventually made a tidy profit by selling the economy short after the SEC and the FSA lifted the temporary ban on short-selling. He is one of the few, therefore, who might be considered relatively better off after the recession than before. He should count his lucky stars (sorry, I mean financial business acumen) and keep quiet because, despite being a stockbroker, he is coming over as a real banker.
Perhaps he should set aside some of that £2.5 million for a good spin doctor - how much will he need to offer you James?
James, you’re clearly stuck in the thatcherite / market anarchist time-warp, believing all that “no such thing as society, only individuals and their families” nonsense that's so fashionable in the blogosphere.
ReplyDeleteChris raised some very good points that you have attempted to manipulate with a “politics of envy” keylock. Well, the politics of envy crap won’t work on me, for one, because I personally have absolutely no reason to be envious of assholes with more money than sense or decency.
What does worry me, and should worry all you self-styled “libertarians” (whose philosofee really just appears as a rather childish demand for freedom to screw the environment and fellow humans without restraint) is what that old Tory, Disraeli, was wise enough to excoriate as the Two Nations situation. You may not be very fond of relativism, James, but relativism is reality. Many Tories used to understand this very well, understanding that different cultures have very different ways of regulating themselves and very different traditions … but that’s another argument. The simple psychological fact is that people always measure ourselves against others. We also have a built in sense of fairness and unfairness. Our current dismal situation is one of grievous unfairness, where people who do vital work that keeps our whole social structure functioning, are seen to be struggling along on £6 or £7 per hour, while smug tossers (fill in a few names here … there’s plenty to be seen in business and public life) are wallowing in the lap of luxury on £100,000 per annum and upwards. You can bleat on all you like about how hard you think they work to “earn” this, but most everyday people don’t believe a word of it. The degrading psychological and social effects of this injustice, whether real or, as you think, merely perceived, are manifold and perfectly plain to anyone with basic observation skills and some empathy for their fellows.
No-one, no matter how strong and tall they like to think their expensive and heavily gated ivory tower is, can be immune from the baneful and even deadly effects of what the Conservatives' very own Social Justice group rightly describes as "broken Britain."
"And who are you to tell someone that what they think they want is not what they really need? Who are you to demand another free citizen defer to your intellectual “smarts” in regard to the way they spend their own earning?" - JMB
ReplyDeleteJames, I'm someone who wants to see everyone, as far as possible, having the chance of a decent life. Most people are quite capable of arranging that for themselves and need no help from the likes of me, but some struggle. They need help from others, or they will go under.
What should I do? Just stand back and watch them get fleeced by loan sharks, shysters and scammers? There are some people who don't understand the difference between 2.5% interest and 25% interest, people who when told they have just won £10,000 believe it, people who think the Council is there to look after their interests. Should we just leave them to their fate?
James, you invest of a lot of your time, and thereby potential wealth, in a blog which seeks to help people understand some of the issues affecting their lives. You do it, as far as I can see, not for personal gain but out of compassion for others who might benefit from the knowledge and wisdom contained therein.
Unless I am mistaken you are helping people less fortunate than yourself. That is something most of us want to do, yet you seem to decry it, saying "who are you...etc." Are you not in conflict with that laissez faire approach yourself?
"However when millions of individuals are losing their jobs, their homes, the return on hard-earned savings, the little luxuries in life that contribute towards making them feel a little bit better about themselves when the TV screen bombards them with the lifestyles of the rich and famous, when millions more can look forward to two parliaments of reduced spending on education, local services and healthcare without the capacity to purchase the privately delivered alternatives then you have to have a hide the thickness of a rhino's to start telling us how downtrodden you are because you will only be able to take home £2.5m instead of £3.0m next year."
ReplyDeleteWhereas you'd need testicles the size of a rhino's to spend lots of money creating these problems and then demand more money to fix them. (q.v. Westminster)
Dorothea - When Disraeli was writing Sybil, and thinking Chartist thoughts about the need for salaries for Members of Parliament and Universal Suffrage (men only, obviously) would he have anticipated the world of 2009, where parliamentarians spend tens of thousands furnishing their homes and less than half of the population bother to vote.
Chris - Neither a borrower nor a lender be;
For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry. (subject to status)
So you don't think people should take out mortgages James? Or invest their savings?
ReplyDelete