Britain may be broke, but the government’s desperation to cut the deficit seems to have its limits. This morning, Eric Pickles has ruled out an increase in council tax for houses valued at more than a million pounds.
This is the so-called “mansion tax” proposed by the Liberal Democrats when they were in opposition.
As Communities Secretary, Pickles is responsible for council tax. But he went further, saying in an interview with today’s Daily Telegraph that he also wants to see the end of the 50p tax rate for those on high incomes.
He described top-rate taxpayers, and people with million-pound homes, as “middle class” and “hardworking homeowners” who put lots into society but “don’t take a lot out”. These three phrases combined can easily give a misleading impression about who would be affected by a “mansion tax”. Indeed, they perpetuate an inaccurate understanding of wealth and class in British society.
Firstly, Pickles talks about the “middle class”. Only about 1% of houses are valued at over a million pounds. Similarly, only 1% of the population are rich enough to pay top-rate tax. In no sense are these people in the “middle”.
Eric Pickles is following the common practice of implying that a tax on the very richest would apply to far more people than it does. These implications help to create more opposition to such taxes (as I pointed out when the Liberal Democrats proposed the “mansion tax” two years’ ago – see http://www.ekklesia.co.uk/node/10256).
Secondly, Pickles regards this wealthy section of the population as a group of “hardworking homeowners”. I am sure that many of the are indeed hardworking. Some are not. Many people are low or middle incomes are also hardworking. Some are not. There is no general correlation between hard work and income within the population as a whole. The majority of people in the UK live and die in the same social class into which they were born.
But certain politicians and commentators constantly associate wealth with hard work and poverty with laziness. Despite the lack of evidence behind this, it conveniently makes inequality appear fair.
Thirdly, Pickles claims that “middle class families have put a lot into the country and don’t take a lot out”. Again, he is using “middle class” to mean the tiny percentage rich enough to pay a mansion tax or top-rate income tax. To suggest that these very wealthy people give lots to society without taking much is demonstrably untrue.
As Church Action on Poverty (CAP) point out, richer people pay a lower percentage of their income in tax than poorer people. Admittedly, income tax is higher for the better-off, but VAT is the same rate for everyone from a homeless person to a billionaire. CAP’s research suggests that the richest fifth of the population spend 7% of their income on VAT. For the poorest fifth, the figure is a whopping 14%.
Between them, a number of corporations and wealthy individuals deprive the Treasury of billions every year through tax avoidance. Of course, there are some wealthy individuals who conscientiously pay their tax without looking for loopholes, and I applaud them for doing so. But the extent of tax avoidance undermines Pickles’ claims about how much wealthy people, taken as a group, put into society.
More importantly, the very fact that the rich are rich means that they have taken more of society’s wealth than the rest of us. We are encouraged to see wealth as a personal possession. If we instead see society’s (and the world’s) wealth as belonging to society (and the world) as a whole, it is clear that some people have taken vastly more than others.
The Daily Telegraph quotes Tory MPs who believe that tax cuts for the rich will stimulate the economy and increase growth (from its current level of virtually nothing). For now, I’ll leave aside the question of whether growth is good in itself. But many of those who want to see growth would acknowledge that giving more money to the richest is not an effective way of generating it. Poorer people are far more likely to spend extra money that richer people. And only the very richest syphon off their money to tax havens, where it is of literally no use whatsoever to the British economy.
As you will have guessed, I would be happy to see a “mansion tax” and would like to see the top rate of tax increased, not abolished. However, the money these measures would raise would be minimal compared to the amount that could pour into the Treasury’s coffer if there was a serious crackdown on tax havens and other means of tax dodging by corporations and the very rich.
Ministers tell us that the economic situation is so dire that they have no choice but to increase VAT, abolish Disability Living Allowance, make massive job cuts, scrap Education Maintenance Allowance, treble university tuition fees, attack public sector pensions, cut funding for local services and basically tear the heart out of the welfare state.
But it seems that the situation is not bad enough for minsters to introduce a mansion tax, slightly raise the top rate of income tax or bring in VAT on private education and private healthcare. And the most commitment they have shown to tackling tax dodging is feeble words that seem to have led nowhere.
Their treatment of the wealthy contrasts sharply with the demands made of the rest of us. New Labour governments also seemed wedded to the interests of the rich, though their loyalty was rarely so blatant or their economic policies so extreme.
This situation makes one thing clear. The coalition’s economic policies are not primarily about addressing the deficit. They are the weapons in a vicious assault against the working class and lower middle class. In short, ministers are fighting a class war.
I have for a long time hesitated to use this sort of language. But I am now convinced that it is an accurate description of the extreme approach to society and economics that this government is pursuing. It’s time for people of all classes to stand up and say so.
This blog post appeared originally as my latest column on the website of the Ekklesia thinktank. To read more of my Ekklesia columns, please visit http://www.ekklesia.co.uk/news/columns/hill.