We Need a Wealth Tax to Rebuild
Originally published in Tribune Magazine, 4th August 2021
Labour’s Director of Strategy has reportedly told the shadow cabinet the social groups which she had identified that we need to win back in order to gain office. Some of us have been making this point for two years now.
The key to Labour’s future is to identify the communities which have been held back by a system which only works for a privileged elite. Having identified these communities, we need to prove that we can offer a way out of the stultifying establishment consensus which has done such damage in our country.
It’s not as if identifying the problems is a difficult task if you are prepared to disrupt the present arrangements. This week we have seen ample evidence: while the NHS staff are struggling, the bankers are coining it.
As July ended, the Prime Minister announced that our health service heroes in these months of Covid are to have their salaries effectively capped. Now, as August begins, we see the banking community literally rolling in money. Last year, perhaps sensitised to how it might be perceived, the Bank of England instructed the UK’s bankers not to pay cash bonuses to their staff and also to suspend dividend payments to their share owners.
But just as Boris Johnson threw open the doors to another round of Covid as he ended the lockdown, we can see what was happening in the financial sector – and perhaps understand the pressures which his paymasters have subjected him to.
The NHBC were first out of the traps. They announced that their profits in the time of Covid had quadrupled during the year’s second quarter. Pre-tax profits are now at £5 billion for the most recent three-month period, compared to £1 billion a year ago. Then the Financial Times reported that ‘Standard Chartered has become the latest lender to record a surge in profits’, an increase of 55 percent over the same period last year.
You might think that modesty as well as a moral imperative not to be seen dancing at a time of sickness of others would lead to restraint in the banking sector – not to mention the role which bankers’ greed played in creating the financial crash in 2008/9. No such morality is to be found, however, in a sector where avarice appears to be the watchword.
Standard Chartered decided to help out their shareholders. They announced an immediate interim dividend of three cents per share, amounting to $94 million. HSBC were even more generous: they announced an interim splurge (technically a ‘dividend’) of seven cents per share.
It should be noted, by the way, that people who receive unearned income like dividends pay less tax than that which is paid by people who earn their living in the conventional way – by working. Let’s be honest: gaining an income by work—never easy—has been very tough in the last eighteen months.
Workers have suffered job losses and pay cuts and have had to rely on furlough throughout the pandemic. In contrast to the bankers, key workers—those people who kept our country and its economy going—are more likely to be paid below the living wage. And public workers have been offered a 1.5 percent pay offer, which essentially adds up to a pay cut when inflation is accounted for.
In any other political culture, the mainstream media might highlight the most striking announcements which emerged. This was the hint that the Chancellor is considering ending the cap on bankers bonuses.
The context for this is provided in a single striking sentence in the business columns of the Guardian, written by Kalyeena Makartoff: ‘The London-headquartered bank said it had raised the amount on offer to compensate its star staff by $900 million in the first half of the year.’
Pointedly, the article went on to remark that ‘last year, HSBC paid 324 of its bankers more than €1 million (£854,000), including bonuses, while eight received more than €5 million. One unnamed banker was given between €9 million and €10 million, roughly double the £4.2 million paid to its chief executive, Noel Quinn, for 2020.’
The economic record of the financial sector in recent decades in the UK can at most politely be described as ‘mixed’. Its morality, less so.
Whatever your view of the bankers, they must surely realise that their activities depend on a healthy society, which is cohesive and unified in facing the challenges ahead. It may be that the key decision-makers simply do not give a damn about the state of British society. But that society is the bedrock of their activities.
The idea that a single banker is worth €10 million in a bonus while a nurse shouldn’t have proper rise at all symbolises much that is wrong in Tory Britain. They will eventually pay a price for this attitude and the rampant greed on display while the hard-working people who have kept the wheels turning face pay freezes, and others face the end of furlough and mounting debt.
Over the last decade some sections of the Left decided that we ought to tax income but not wealth. I have never understood this orientation. This is one of the wealthiest countries in the world – but who owns that wealth, and who are they accountable to? It’s time to tax capital, as well as unearned income.
Taking radical but sensible steps can help to fund pay rises and increases in much-needed public services in order to rebuild the held-back communities which Labour needs to win the next election.