Wealth does not trickle down but vacuums up
Speech given by Jon Trickett on the nature of wealth in Britain.
My office has published quite a lengthy document about wealth in our country and proposing a wealth tax. And this is one of a number of discussions which we'll be having online.
Well, where do I start?
When I think about this, I start by saying we live within a capitalist economy. But somehow along the way, we stopped talking about the capitalists.
We ought to be focused on them because our government is in the grip of the wealthiest people in our society. And in the grip of big corporations. We've got a prime minister who is not in charge, he is under the thumb of capital.
The Prime Minister claims he's levelling up, but what he's actually doing is representing the interests of the rich.
Look, for example, about how our most precious institution, the NHS, which we hold dearest in our hearts, has been handed over to the big corporations, many of whom are donors to the Tory party.
I don't know how many have seen today, the news that there are 9000 civil servants from the Treasury going to be relocated to Newcastle. You might say that's good. It's part of levelling up. But look at the deal in detail.
It turns out that the civil servants who work for the Treasury, and are responsible for preventing tax avoidance, will be working from a site which is owned by a subsidiary of a company which is based in a secretive offshore tax jurisdiction.
So, the people supposedly pursuing tax avoidance and tax evasion are actually in the office of a company which we could argue is part of that whole process. And just to add the cherry on the cake, it turns out that the owners of the building and the company which the Treasury officials are going into, are major donors to the Tory party.
Now, often you'll hear the argument made in different ways, it's not very subtle, that when the rich get richer, then somehow their wealth trickles down like magic to the rest of society. By the way, I've never seen Rolls Royces driving through my constituency. Trickle-down theory is totally untrue.
It's time that we turn the tables on this myth. First, we need to understand the nature of wealth, how it’s organised and how its power in our society is critically important to the shape of everything which happens in our country. I want to put a magnifying glass onto the wealthy and the big corporations to see what is happening.
There's a very famous phrase, spoken by one of the richest people in the world, Warren Buffet: “There's class warfare, all right, but it's my class, the rich class, that's making war, and we're winning.”
And he is right.
Between the banking crash and the start of the COVID, the 1000 richest people in our country increased their wealth by £538. That's not what they're worth. It's just what the increase in the value of their wealth was, during the years when the rest of Britain had to deal with austerity. And if you look at the value of the London Stock Exchange, corporate wealth increased by £2 trillion over the same period.
But look what happened to people earning wages and salaries, there are 33 million people work for a living in our country, whether for wages or salaries. The total income of those 33 million workers went down by about £433 billion.
And as we all know, there were cuts to all our public services.
What we see here is not trickle down but vacuuming up the transfer of billions of pounds from public services and from working people into the hands of the richest in our country.
This is not because workers do not work hard enough. As shown in the graph below, workers are producing increasing amounts of wealth, but they are receiving a smaller and smaller share of it.
As we can see, prior to 2008, workers have been producing more value since 1995 and their wages increased roughly in line with productivity.
From roughly the end of the banking crisis to the start of the Tory government through to now, there's been a decoupling of productivity and wages. Workers are no longer receiving any of the increased value they are producing through wages.
So where has that money gone?
It's gone into the hands of the rich through one of the biggest transfers of wealth in generations. It is what Warren Buffet was referring to: a class war which the rich are winning.
This is no accident. This is a political, economic and social system which has been engineered by the richest people and corporations. A system which works in their interest rather than the interests of the majority. They make decisions about how people are employed. They introduced fire and rehire, the casualization of jobs, under-employment, zero hours contracts, agency labour and much more.
But they are also doing something else which is perhaps more insidious. They are also exercising influence over the government and the British state itself. Indeed, the richest in society have embedded themselves and their interests into our state institutions in an alarming way. Through lobbying, the revolving door, consultancies, big donations, sitting on quango boards, etc., the interests of the richest have usurped the interests of the people.
This government has allowed the power of wealth to expand, but what is really needed is a government that will balance the burden currently being borne, almost entirely, by working people and public service users.
We must remember that income, through wages and salaries, are taxed, and wealth is largely left untaxed, unless you sell an asset. This simply adds to the fact that you can increase your wealth, as some have by over £100 million in a year, but it won’t be taxed unless it's sold. You also pay less tax on dividends with the basic rate of tax at 7%, compared to the basic rate of income tax which is 20%.
Clearly, this is an unfair system but if it continues it will also lead to economic problems. For example, because wages are now falling, and we're only taxing the earnings of work, then the amount of money going from the taxpayer to the Treasury is diminishing over time. And as a result, we have a financial crisis in our public services.
This is part of the explanation of what's going wrong in our society, together with the decoupling of productivity from wages, increasing inflation and a resulting cost of living crisis.
That is a real problem. And the only way to inject fairness into our system is to tax every aspect of our economy. And that means tackling wealth. If we equalized dividend and capital gains taxes to income tax levels and introduced a wealth tax on the top 1% whilst closing tax loopholes, we could raise an additional £100 billion a year.
If we're going to do this, we're going to have to have backbones of steel, because the whole of our system has been designed to support the power of wealth and big capital over the rest of society. That means we must change the way our politics works. We need to have a democratic revolution and prise the hands of the rich off the levers of political power and put it back into the hands of the people once more.