Tuesday, August 18, 2009

Labour Must Not Punish the Rich

That's not me saying it. It's not a Tory MP saying it. It's a Labour MP. Tom Harris has a cracking POST discussing the proposal by the left to cap private wealth.

THERE’S a terrific scene in the TV adaptation of Chris Mullin’s A Very British Coup in which the newly-elected left wing prime minister, Harry Perkins, is catching the train to London and is asked by a journalist: “Do you intend to abolish first class, Mr Perkins?” To which Perkins replies: “No, I intend to abolish second class. I think everybody’s first class, don’t you?”

And there we have it: a template for New Labour half a dozen years before Tony Blair became leader of the Labour Party. New Labour’s appeal was based on an explicit acknowledgement that success, ambition and the pursuit of wealth are all Good Things. Suddenly the taxation of the wealthier was not an end in itself but simply a necessary evil. And it was okay to want a better job, a higher income, nicer holidays, a bigger house. Voting Labour became something you did for yourself as well as for the greater good.

That’s why we won.

Yesterday Compass launched a campaign for a High Pay Commission. Its inaugural statement reads:

The crisis we find ourselves in is one significantly caused by greed. The salaries of those at the top raced away while the median wage stagnated. Inequality grew, and an economic crisis ensued. The unjust rewards of a few hundred ‘masters of the universe’ exacerbated the risks we were all exposed to many times over. Banking and executive remuneration packages have reached excessive levels. We believe now is the time for government to take decisive action.

Fortunately, the chancellor has already dismissed the idea. But as dog whistle politics go, it’s pretty effective.

But perhaps the most damning part of the article is its conclusion...
Although we might feel better confiscating money from rich people, the actual effect on our economy would be negligible. And making yourself feel better is a very poor motivation for policy, whatever “the court of public opinion” might say on the matter.

And when any party starts producing policy “to secure the core vote”, it might as well write of the next election, go quietly into opposition right now and start thinking about the election after next.

Ouch.

27 comments:

David Boothroyd said...

It's worth pointing out that Compass has lacked the ability to build up great influence within the Labour leadership, even among those who have marked with admiration Neal Lawson's ability to traverse the internal politics of the Labour Party leaving no traces of his previous allegiances.

Anonymous said...

Let there not be such obvious and well used tax avoidance either. In the early days of Labour they stopped most IT contractors being self employed, saying they were working for one employer exclusively and so should be PAYE.

However, they never stopped another fiddle, where an owner/director pays themselves a pittance say 6k and then the rest as dividend. This allows them to pay minimal tax and NI. This bolt hole has been around for years and for some strange reason not closed. There is no real need to increase the tax, just make sure the Ba****ds don't have a bolt hole in the first place.

Pete-s

Benjamin Gray said...

One of the signatories is no less a personage than Margaret Moran MP. She knows a thing or two about unearned money.

Anonymous said...

"Although we might feel better confiscating money from rich people, the actual effect on our economy would be negligible"

It's always been that way. It's just that the ideologues of the left aren't bright enough to work it out.

Bardirect said...

The so called poor have got relatively poorer under 12 years of Labour yet the irony seems lost on them.

If there are undeserving rich who need to be squeezed does that imply that there are deserving poor? The reality is that the poorest are not those 6 milliosn in receipt of benefits but those with a work ethic working at the margins who would in all probability be better off on benefits.

My own view is that Labour have no intention of dragging people out of their relative poverty - they are simply in the sink hole expected along with those employed in the public sector to make up called Labour's "popular vote."

WV: tworki

Sean Haffey said...

However, speaking as someone who is deeply conservative and in favour of private enterprise, there is a real problem here.

It's this.

By the nature of where they are, rather than who they are, bankers and investment managers have access to my money. They then have a clique who give each other big salaries and bonuses by skimming tiny bits off my investments (ISAs, pensions and other savings.) I have absolutely no say in the matter, and because the practice is widespread I have no way of moving my money to a less financially rapacious business.

Nor am I convinced that these bankers are the best there is. I quite believe that many of them are very bright indeed, but many others, for example, underperform the market while still drawing in enormous salary packages.

Until the finance industry cleans out its own mess by only paying their management hige bonuses when they deliver outstanding performance, there will continue to be a great deal of dissatisfaction with this clique.

At present it's a "heads I win, tails you lose approach": in good years they "deserve" bonuses, in bad years the bonuses are paid "because we can't afford to lose talented staff".

no longer anonymous said...

“No, I intend to abolish second class. I think everybody’s first class, don’t you?”

I liked the TV adaption but that line is absurd. It's like saying we can abolish the working class.

Alexander Macleod said...

http://www.freedomandprosperity.org/videos/classwarfare/classwarfare.shtml

A video by the centre of freedom and prosperity which shows the dangers of class warfare tax policy.

Alan Douglas said...

... any more than they always punish the poor".

Frankly, Labour are NOT class-prejudiced, they will extort money from all people equally - look at the rises in fuel taxes, which affect every other thing bought, or tobacco and drink taxes, if you doubt what I say.

Alan Douglas

Lola said...

Your post and quotes perfectly illustrates the central irreconcialble conflicts inherent in leftyism.

The quote from the High Pay commission is a selective and and entirely flawed analysis of the cause of the banking and credit problems. It ignores the facts to appeal to the envy emotion present in all of us.

Then there is the Harry Perkins quote. Just another glib spin statement. By abolishing second class no univesal first class will be created, but something else, probably worse than both as there is no comparative measure or price signal.

Tom Harris's own writings show that he is getting closer to understanding the inherent and certain failures of socialism and how it only ever gets elected on a deceit, and he admits that its previous successes were only achieved by the cheap appeal to envy.

What Tom's post does is perfectly set out why socialism is so useless.

Newmania said...

I think it would be wrong to conclude however that it is un Conservative to worry about the widening inequalities in our society or to pretend that top level rewartds are remotely related to merit .
The examples of Japan and Sweden show that a country can be equal relatively and economically successful . In both cases however the actually redistribution through the tax system is quite small compared to UK taxes ie minus transfers ,.The relatively equal outcomes are delivered by what is sometimes called controlled Capitalism . I would say ,...well they are different to us for historical reasons and leave it at that .Nonetheless as examples they are somewhat more elevating than Brazil

Even if there are not specific lessons to be drawn we should still be thinking about equality of outcome .The IFS have shown ( and I spotted even idiot Hundal getting it ) that there is little scope for more progressive taxes so we have to think a lot harder about retaining fairness is society without which we endanger much Conservatives value . Education and ,in banking , competition for example are part of it spreading assets ..etc. .
So if a high pay commission means taxes then no , if it means thinking about how to structure society in a fair and therefore sustainably peaceful way then yes.

Demetrius said...

They really do not understand. I do not object to people doing well. I do object to them being able to avoid and evade the sort of taxes that ordinary citizens are obliged to pay. I object even more strongly to my taxes and charges rising sharply to subsidise and sustain very rich people who have have gambled away fortunes, and now through their polital hired men force me to provide for their ocean going yachts, estates, huge pensions, and celebrity lifestyles.

Jonforest said...

I am all for people getting rich through hard work, risk and endeavour and we don't want the state to penalise them for it.
Indeed, it should be written into our constitution (if we had a written constitution that is) that no-one can be forced to give up more than half his earnings to the state (to include all forms of direct taxation).
However, that is not the same as allowing the directors of public companies and bank employees to pay themselves ridiculous sums (of shareholders' and investors' money) on the excuse that it is the "going rate".
Not, at least, when they are the ones who set the "going rate".
The only Government intervention we need is to increase the ability of the owners (shareholders) of public companies to control the way their money is spent when it comes to employees' salaries.
Entrepreneurs who risk their own money can make as much dosh as they like as far as I am concerned.

Flemingcrag said...

If success is to be rewarded then there should be an opposite effect for failure. In the case of the Banks this has not applied, these companies which serve bankruptcy notices on so many others have escaped the natural justice of the market by Government intervention that has caused todays Taxpayer and those for many years to come a lot of money for no return.

The few in Banks who risked so much of our money and lost it and who were then made redundant are being lured back with even more lucrative bonus offers. Paying bonuses is the most corrupting method for trying to get good performance out of people. The bigger the bonus the greater deviation from honest good performance. It was tried in manufacturing for many decades and brought about increases in quantity but this was almost always accompanied by the unintended consequence, bad quality. This led to, lost reputation, lost business and then bankruptcy. That the latter was not visited on Banks means no lessons have been learned.

This Government is in no position to moralise on bonuses there is scarcely a Government department (include the FSA) that does not use this crude and ineffective tool to motivate people. It no more guarantees good governance than it did good banking.

Anonymous said...

I don't know about Labour taxing the rich. My wages just took a dive to under £30k after redundancy, and I'm still reeling from the £400-plus road tax on the ten-year old people carrier I just bought to haul around the wife and four kids.
My guess is they're taxing us all far too much, and spending it on consultants, bailing out the banks and the EU gravy train. Face it, we live in a kleptocracy.

simon said...

In private companies, the question of bonuses is one for management and shareholders. If the bonuses aren't incentivising perfomance, they aren't doing their job. Unfortunately many/most big companies have been captured by a clique of senior executives, who with the help of 'remuneration consultants' are effectively gaming the system to ensure it pays out millions whatever the result.

A pay cap is not the answer and it's never going to become Labour policy but I don't think I'm alone in believing something needs to be done to address the culture of enrichment unwarranted by results.

Steve Hilton's alter ego. said...

"And when any party starts producing policy “to secure the core vote”, it might as well write of the next election, go quietly into opposition right now and start thinking about the election after next."

I do so hope he is wrong.

labour for the few said...

next election,not the one coming up mmmm,

so labour go for;
help the wealthly,wont increase tax,education education education,
causes of crime,err no,
they did that catastrophically badly.
who in their right mind would let them try that again.

go for core vote of subsidy junkies and quangocrates,ah yes...

Mr said...

@Pete-s:
The government's IR35 legislation aimed at contractors (not just IT ones either) was a cynical tax grab on one of the engines of innovation in our economy.

Contractors get no employment protection, no sick days and no cushy big company benefits.

Accordingly many of them live off their savings when times are hard. Extorting more tax out of them means they are more likely to attempt recourse to public funds when the work dries up.

So, these contractors have a riskier income, and you advocate making it harder for them to get by?

With respect to your owner / director point - these businesses have been started by the owner at their own risk. I've known owners not pay themselves to make payroll each month, owners who re-mortgage their houses or sell assets to keep a company afloat.

The risk is all theirs. So too must be any upside, or small / medium size businesses will be unattractive to run.

Bear in mind that a large percentage of UK employers are small to medium companies.

Or would you rather we all worked at huge multinationals?

Newmania said...

I don't think I'm alone in believing something needs to be done to address the culture of enrichment unwarranted by results.

Indeed not and its no good talking about the "Market" . If the market was operating( without the tax payer) , they would be in the sea and if there was any free access it is inconceivable that people who are glorified clerks should be commanding such absurd incomes.
The question is what ?

simon said...

Newmania

a couple of suggestions:

1 shareholder activism especially on the part of the pension funds etc that own the bulk of shares. They made noises about this during the boom years but, as share prices were mostly going up, it didn't get a head of steam. Now there are clear financial and prudential reasons why bonuses should be reined in and not paid if the results are not there. The tricks remuneration consultants use to keep the bonus stream flowing are well known and could easily be stopped by a determined and active shareholder base.

2 A cultural change in Britain to place less value on the accumulation of wealth. I know this is vague and not easy to put into practice but a decent ethical and social framework should place greater emphasis on other sorts of value.

3 Leadership from government in the areas it can affect. So a curb on spiralling pay increases in eg local government and some quangoes would be welcome and would help to send a message. Government could also use its considerable purchasing power not to award contracts to private firms that take an irresponsible attitude to remuneration

Anonymous said...

Why would Tom Harris imagine that nulab would now start worrying about the working class and discover fairness???

Anonymous said...

Sean Haffey said...


"They then have a clique who give each other big salaries and bonuses by skimming tiny bits off my investments (ISAs, pensions and other savings.)"

Very good point. However there is also the scam whereby 'independent' advisors get people to invest in a fund/whatever with a good record of returns. Subsequently the directors of that fund sell the business to another company (i.e. effectively themselves or their friends, under another name) and that fund takes all the money as 'fees'.

It's a great life in England if you're born rich.

Twelvetrees said...

"labour must not punish the rich".

Well , they do anyway and the labour definition of the rich is not confined to billionaires. In fact they would call Mr Dale part of 'the rich', i.e. owns his own business, works hard and has done well for himself.

Whilst Tories applaud such endevours and enterprise labour feels free to frown on it -especially if you have started off as working class and have made a bob or two, they become public enemy no 1 as they are now part of the wrong class. Unless you are a media luvie who despite a millionare lifestyle is "still true to his/her working class routes".

mongoose said...

I'm happy for people to make money if they are rewarded for risks that they take. I am also happy for people to go completely bankrupt when things go tits up. What I am not happy about is when people a rewarded astronomically for taking risks that, when they do not come off, bankrupt people who did not take those risks. Yet they are still rich. I imagine it costs the country far more to undo the damage the banks have caused in the economy than it raked in in taxation in the past 8 years. Banks just shouldn't be too big to fail.

tapestry said...

Punish away you Labour f..wits. We've all emigrated anyway.

If you want to raise tax revenues you should try to keep the economically successful but no.

You Labour lot prefer group failure to the agonies of watching individual success.

For those who cannot emigrate, the Isle Of man beckons - a healthy tax haven a small sail away.

Man in a Shed said...

Anyway Labour always punish the poor by keeping them down and destroying the economy.

Labour governments are parasites and the poor are their hosts.