While Brexit obsesses politicians and commentators, the super-rich apparently are more worried about Jeremy Corbyn.
The Financial Times reported last week, “London’s ultra-wealthy are moving assets out of the UK and some are preparing to leave as concerns over a left wing Labour government led by Jeremy Corbyn intensify among the super-rich.
“Multimillionaires are setting up offshore investment accounts or shifting the location of UK-registered trusts holding their wealth to outside the country, in anticipation of higher tax rates and potential capital controls should Labour seize power.
“Some are looking to relocate to countries viewed as more welcoming to the super-rich … ‘Most people are much more worried about Corbyn than Brexit—by a factor of 10,’” a wealth management consultant told the paper.
The confident performances of Corbyn and his shadow chancellor, John McDonnell, at the Labour Party conference in Liverpool have apparently panicked some of the super-rich.
“The conversation has heated up since Liverpool,” said the head of one City wealth planning department. “One client pushed the button [on leaving the country] this morning.”
This story highlights London’s role as the biggest tax haven in the world. This isn’t just a matter of Russian oligarchs buying mansions and Premier League teams and sending their kids to English “public schools”.
Denmark’s Danske Bank is embroiled in a huge scandal surrounding the way its Estonian branch was used to siphon £175 billion out of Russia in 2007-2015. Obscure British corporate structures, limited liability partnerships and Scottish limited partnerships were heavily involved.
One of the big issues in Brexit is whether the City will continue to play its role as a global fiscal paradise.
The French government is particularly worried that London will have even lighter regulation after Britain leaves the European Union, undercutting Paris.
How much of a real threat would be a Corbyn government to the super-rich and their assorted tax scams? On the face of it, not very much. As the feminist philosopher Lorna Finlayson pointed out recently in the London Review of Books, “What he has so far felt able to put forward is moderate by the standards of the Bennite left of the 1970s and 1980s.
“Labour under Corbyn is promising, among other things, to abolish tuition fees and expand free childcare, reversing at least some of the cuts imposed by the Conservatives.
“It proposes to pay for these measures by raising income tax for the top 5 percent of earners—though nowhere near pre-Thatcher levels—and by increasing corporation tax from 19 percent to 26 percent. The lowest rate under Thatcher was 34 percent.”
But, as Finlayson goes on to point out, “Context and direction of travel matter at least as much as the detail of particular policies.”
The super-rich have grown very fat in the neoliberal era, as Thomas Piketty has documented in his studies of the increasingly unequal distribution of wealth.
Governments have competed to make life as comfortable as possible for them. New Labour under Tony Blair and Gordon Brown were as much culpable as the Tories from Thatcher onwards.
One can appreciate the shock the ultra-wealthy must feel when Blair’s and Brown’s party comes under a leadership that says it wants to put a stop to all this. Worse still, that party has quite a good chance of winning the next election.
Some super-rich are planning their exit. This in itself is a form of pressure. Capital flight is the main way that reformist governments have been brought to their knees in the past.
But if the prospect of Corbyn stepping into 10 Downing Street draws closer the pressure will become more direct.
Expect savage media bombardments and the open or concealed disloyalty of the civil service and security forces. Corbyn’s and McDonnell’s proposals may be modest, but they will have to mobilise all the power of the labour movement to push them through.