The conservatives are out of touch with the renewed politics of redistribution

Posted: 12 Mar 2013 01:00 AM PDT

Bart Cammaerts argues that we have entered an era in which the politics of redistribution is reasserting itself, borne out of the 2008 financial crisis and the moral indignation stirred by massive tax-payer bailouts. The Tories have been caught flat-footed by this development, promoting austerity and breaking down social protections, and will suffer the electoral consequences if they do not pay heed to popular sentiment.

George Osborne’s isolation in relation to (amongst others) the capping of corporate bonuses to one year salary is indicative of how both the UK government and the Conservative Party are out of touch with what more and more people increasingly think and believe across Europe. What the Conservatives fail to understand or rather do not want to hear is that we have now entered an era in which the politics of redistribution is reasserting itself more forcefully and this will, I suspect, manifest itself even more in the years to come.

This renewed politics of redistribution asserts itself in somewhat different ways than in the post-second world war period when the welfare state was massively extended. It is  still taking shape, but it has been given impetus by a financial and economic disaster  comparable in size to the 1930s crash. What this renewed politics of redistribution also draws inspiration from is a deep sense of indignation or outrage, to use the core-concept of the recently deceased activist Stéphane Hessel.

This moral indignation is borne out of the 2008 financial crisis whereby citizens – or taxpayers if you like – effectively bailed out the bankers and by extension capitalism. Subsequently, ‘the market’ moved on to take fright and denounce high sovereign debt rates and forced states to ‘reform’ – i.e. reduce – their welfare states and the rights linked to it, to break down social protections, and to limit the provision of public services. More and more citizens across Europe, but also in the UK, feel that the invisible hand is showing us the finger, so to speak, and they are increasingly unwilling to accept this state of affairs any longer.

The main focus of the renewed politics of redistribution is different from the previous one. This time, the welfare state needs to be protected and/or re-instated rather than still to be built, but like before it is also preoccupied with issues relating to taxation, and is concerned with the out of control wage inequality (the proposals regarding capping bank bonuses are certainly part of this). What is my evidence for these claims in terms of longer-term trends? It is up until now dispersed but conclusive:

  • At the end of 2011 an OECD study revealed that the top 10% in the UK was earning an income on average 12 times higher than the bottom 10%. Moreover, the share of total income of the 1% had more than doubled over the last couple decades. All this, the report concludes, greatly weakened the state’s ability to spread wealth across the population.
  • Last year, Paul De Grauwe, top economist and professor at the LSE, outdid François Hollande by arguing for a 100% tax on salaries above 1 million €. I agree – is there any job that justifies a salary above that amount? I don’t think so.
  • For some years, UK Uncut has been targeting a wide variety of high-street companies such as Top Shop and Vodaphone for dodging taxes and not contributing their fair share to society.
  • Executives of US-based, but in effect transnational, companies such as Amazon, Starbucks, and Google were grilled by the UK Parliament over their aggressive tax avoidance schemes.
  • According to a very recent study conducted by ComRes, 80% of British people feel angry at tax avoidance strategies of companies. One in three people boycott companies that they feel do not pay adequate amount of tax in the UK and a further 10% claim that they are considering doing so.
  • Almost 68% Swiss citizens voted in favour of the “abusive remuneration” initiative, denouncing high bonuses, golden handshakes and parachutes, etc.
  • Although still contested, a Tobin Tax on speculative financial transactions is moving higher and higher upon the political agenda in many European countries, with an expected yield of about 35 Billion. In a way this signals that the time for a payback has come.

Whether the conservatives like it or not, democratic majorities, internationally and here in the UK, are beginning to support the view that back to business ‘as normal’ is no longer tenable; that corporate responsibility towards society has got to start to mean something tangible rather than be a fancy marketing tactic; that a just and proportional taxation system is an important facet of a just society, enabling the re-establishment of social cohesion and solidarity; and that profit should not be the be-all and end-all of our collective life.

Note: This article gives the views of the author, and not the position of the British Politics and Policy blog, nor of the London School of Economics.

Would a mansion tax really be anti-aspiration? | Shelter blog

18 Feb 2013

As often happens on Sunday mornings, I hazily grab my phone, look at Twitter, and spot an interesting new idea that a politician or think tank has floated to deal with an aspect of our housing crisis.

This weekend it was the Mail on Sunday leaking wealth tax ideas from a Liberal Democrat internal consultation paper to be discussed at their forthcoming Spring Conference. The main proposal was for assets – particularly property assets – worth more than £2m to be taxed.

Unfortunately, the proposal threw in suggestions that jewellery might get considered in a wealth tax. Twitter was alive with sneering remarks about bureaucratic snoopers rifling through asset-rich cash-poor widows’ jewellery boxes.

But I was quite surprised at the visceral reaction that some commentators had to the idea of taxing £2 million property portfolios. One MP described it as ‘the politics of envy’, another warned that it would be ‘a tax on aspiration’.

What struck me was how some of the naysayers thought that a £2m property portfolio was within reach of the average person on the street.

That’s definitely not borne out by some of the stats I’m aware of:

Even among older people, the average home value is only £238,000 [PDF]. The average person over 55 would have to own nine homes before they hit that threshold!

Most non homeowners on average wages can’t even afford the mortgage on an average priced home. To suggest it’s anti-aspiration to tax £2m property portfolios is to misunderstand how that most basic aspiration is slipping away from people working hard and doing all the right things. A Lloyd’s TSB’s study suggests that just 0.2% of homes in the UK are worth more than £2m.

Even when you look at landlords, the vast majority (78%) own just one property they let out, so few would reach the £2m threshold. Indeed, the average buy-to-let loan in the last quarter was just over £125,000.

Clearly, there would be lots of practical issues to consider should a policy like this get off the ground.

But the important thing is the message that this kind of policy would send out. It would confirm what a growing number of people are already realising: that ever-growing house prices supporting personal wealth that is tied up in property are not sustainable.

This generation of young people are counting the cost of a decade’s worth of rapidly rising house prices, which are simply too high for a mortgage to be affordable.

Rather like Boris Johnston’s proposal to ringfence stamp duty receipts for building homes in London, perhaps receipts from a mansion tax could be funnelled back into building more homes. Just an idea.

via Would a mansion tax really be anti-aspiration? | Shelter blog.

Someone tell David Cameron that tax avoidance starts at home

Cameron’s Davos speech was long overdue. But the very corporate tactics he condemns abroad, he enables in the UK

Richard Murphy, Thursday 24 January 2013 14.40 GMT

After a decade of campaigning for tax justice it was gratifying to hear David Cameron endorse much of what we have called for at Davos this morning. Unfortunately, as just a few examples show, the prime minister has a long way to go before he walks the talk.

Tax avoidance

Cameron’s said “There are some forms of avoidance that have become so aggressive that …. it’s time to call for more responsibility and for governments to act accordingly.”

When delivering the message he added: “Companies need to wake up and smell the coffee, because the customers who buy from them have had enough”. It could not have been more obvious that he has Starbucks in mind. He’s set the bar on this issue at a point where it must be tackled.

And yet Cameron faces a massive domestic credibility problem as a result. The government’s much trumpeted General Anti-Abuse Rule, which will be enacted this year, which Cameron says targets tax avoidance, will deliberately not go near targeting the sorts of tax avoidance undertaken by Starbucks, Google and Amazon. Legislation put forward by Michael Meacher MP and written by me that would let HM Revenue & Customs challenge their sort of tax avoidance has also been rejected by the government.

It’s all very well for Cameron to say that tax avoidance must be tackled internationally. His difficulty is that he could do it at home as well and has chosen not to do so. He’s correctly assessed that there is real political anger on this issue now; he’s got his assessment of what people want seriously wrong if he thinks his government’s proposals will satisfy those demanding reform.


Cameron said: “The third big push of our agenda is on transparency, shining a light on company ownership, land ownership and where money flows from and to.” I’m delighted he said this, but I am disappointed he added that “this is critical to developing countries” as if somehow this is a problem for Africa but not for us.

Opacity permits corruption everywhere. Accounts that fail to account meaningfully hinder effective economic decision-making. Limited liability companies, existing in a void with no apparent owners who accept responsibility for their decisions, blight economies and permit massive tax dodging. And nowhere is that more true than in the UK.

At present a multinational company trading in the UK does not have to publish a separate profit and loss account for this country so we can see how much tax it pays in the UK. Nor does it have to do so for all the tax havens in which it operates. If Google, Starbucks and Amazon had been required to do that we’d have seen their tax avoidance a lot earlier. So yes, we need transparency for developing countries, but we need it too in the form of full country-by-country reporting.

Despite that, just a couple of days ago David Gauke, the Conservative exchequer secretary, under Labour questioning showed his continued indifference towards country-by-country reporting.

That’s also true on beneficial ownership. There is no legal requirement to disclose beneficial ownership of a company in the UK at present, and our company registry is a near perfect example of appalling company regulation on this and other issues, striking off hundreds of thousands of companies a year rather than demand that they comply with their legal obligations.

If Cameron wants to show the world the way on beneficial ownership he can begin at home by making Companies House into a regime fit for the 21st century. He should follow up with the land registry – riddled as it is with anonymous offshore companies – and then demand that our tax havens put beneficial ownership on public record just as we should.

Automatic information exchange

Cameron said: “If there are options for more multilateral deals on automatic information exchange to catch tax evaders, we need to explore them.” I agree, wholeheartedly. It’s just a shame he said this the month the UK’s appalling tax agreement with Switzerland comes into force that guarantees tax evaders anonymity, lets them off most of the tax they owe, and preserves Swiss banking secrecy in the process. Germany’s parliament rejected such a deal to hold out for full automatic information exchange with Switzerland. The UK harmed the cause by going ahead alone.

And that’s the problem with this whole speech. The talk is great. I welcome it. As Cameron said: “After years of [tax] abuse, people across the planet are calling for more action and most importantly, there is gathering political will to actually do something about it.” He’s right. But Cameron’s pretending the solution lies outside the UK. It doesn’t. It starts at home. And some of the biggest obstacles to be overcome require some serious rethinking of his own government’s agenda on tax, accountancy, regulation, transparency and tax havens, all of which could change without the need for any outside co-operation. We’ve still got a long way to go to win this debate.