Socialist Worker

Tax rich to fund workers' pay rises

by Gordon Brown could raise billions without causing inflation
Issue No. 1828

THE GOVERNMENT says it would cost too much to pay the firefighters a decent wage. Ministers can't pretend that Britain is not rich enough to fund such an increase.

But they say that many other workers would pile in demanding similar rises. They continually claim such rises would fuel hyperinflation. Gordon Brown has rammed home the message that it would be a disaster to give in, and that everyone would suffer if the government is not 'prudent'.

It is nonsense to cover up polices that defend people who live in luxury. If the government was prepared to tax the rich and companies it could raise billions without causing inflation. There is immense wealth in Britain.

The Sunday Times 'Rich List', published earlier this year, showed the richest 1,000 people in Britain now have wealth of £159,699 billion. That is around ten times the amount needed to give every public sector worker a 16 percent rise without strings. And there are around one million people, less than 2 percent of the population, who get over £1,000 a week.

We should heavily tax such people, the fat cat executives, the parasite bankers, the do-nothing consultants and the leeches that fatten off privatisation. That would provide the money for better public services and pay. It would also give more cash to assault poverty, give money to pensioners and write off Third World debt.

  • New Labour has set the top rate of tax at 40 percent. It was 60 percent or higher during Tory prime minister Margaret Thatcher's first eight years in government. If New Labour reinstated this 60 percent top rate of tax on income over £50,000 a year it would raise at least £19 billion a year.
  • Labour has also slashed corporation tax, a tax on business profits. When New Labour came to office the rate was 35 percent. Businesses now pay between 10 percent and 28 percent. Through slashing corporation tax last year the government handed £11.64 billion to rich businessmen. If the government raised the rate to 35 percent again it would raise at least £12 billion a year and possibly £18 billion.
  • National insurance is a heavy drain on workers - and it's going up another 1 percent next April. But the rich get off easy. They do not pay a penny in national insurance on any income over £605 a week. Just making all income liable to national insurance, treating the rich just like the rest of us, would raise £6 billion a year.
  • Companies save huge amounts in tax by siphoning off profits abroad. The Sun's Rupert Murdoch, the firefighters' enemy, is a master at this. As the Observer reported recently, 'Transnational corporations are leading the Inland Revenue a merry dance by booking profits into tax havens thanks to a global banking system that has an instinct for secrecy and disregard for civil society.

'The taxman is failing to collect around £20 billion each year in tax avoidance by big business. Minutes of an Inland Revenue meeting revealed the agency was going soft on multinational tax returns for fear of driving investment away. 'They might be a bit late. A 1997 accountants' report put the figure for legal avoidance alone at £85 billion a year.'

'Prudent' Brown ought to be outraged at this rip off. But he lets these firms get away with it and hand the money to executives and wealthy shareholders. The government ought to stop up all these loopholes and confiscate the assets of firms that try to cheat.

If the government took these measures, raising around £40 billion a year, it would be a powerful curb on inflation. There would no longer be a crazed scramble of rich people trying to grab houses and thereby forcing up the housing market.

  • Britain should have nothing to do with war against Iraq and halt its planned participation in George W Bush's 'Star Wars' project. That would save at least £12 billion.

  • 123 bosses grab over £1 million a year
  • Company directors got huge pay rises last year, averaging 16 percent of their salaries
  • GlaxoSmithKline boss Jean-Pierre Garnier wants a pay increase from £3.5 million to £7 million plus huge bonuses

Wealthy don't have to 'modernise'

IN THE short term raising tax on the rich would be an extremely effective policy. The only barrier is New Labour's unwillingness to upset businessmen and bankers. But it is not enough.

The wealthy would use every manoeuvre, legal and illegal, to get out of paying. They would transfer money into secret accounts and hide their earnings. Companies might threaten an 'investment strike' or encourage financial speculation to destabilise the economy.

That is what business has done to democratically elected governments whenever they felt their assets were threatened. New Labour's response has been to give up on confronting the rich. The socialist answer is to go further, and to transfer economic power from the rich to the majority of the people.

Once ordinary people control the economy then they would do more than simply shift tax rates. If there is a minimum wage, why not a maximum wage? Nobody could claim they were twice as useful to society as a teacher, a firefighter or a nurse.

So it would be fair to say that nobody should be paid more than twice as much as a nurse. Workers will not get justice by leaving the economy as it is and skimming off a little more of the fat that the wealthiest gain.

Instead we have to reorder the priorities so that people come first. At present real needs are ignored while vast resources are poured into producing weaponry and super-luxury items, or into helping capitalism make more profit. 'One hundred years ago, you might have built yourself an extraordinary house on a big estate with your money. Today you can't do that - too many people would complain. But there are no planning laws covering the building of a yacht. You can do just what you want,' says Jamie Edmiston, the marketing director of an international yacht brokerage.

More than 500 yachts longer than 120 feet are under construction around the world. The price can sometimes be the far side of £100 million. The 446 foot Savarona is a favourite of Lawrence Stroll, the man behind the queen's jeweller, Asprey's.

Stroll frequently charters the yacht at a cost of between £200,000 and £220,000 a week in the Mediterranean (fuel and food extra). With a crew of 48, it can take 34 guests in 17 sumptuous staterooms. For those who do not want to be at sea, a private island could be the solution. Sir Richard Branson (worth £1,000 million) bought Necker, a small Caribbean island, in the 1970s.

No fundamental change can come about without taking back the economic and political power that the rich have stolen from us.

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