Britain’s 5 Wealthiest Families Richer Than Poorest 12.6 Million? It’s Time for a People’s Budget

A001An Oxfam report released today, reveals the scale of growing inequality in Britain.  The wealthiest five families in Britain hold the same amount of wealth as the poorest 12.6 million.  As Osborne prepares for another ‘budget for business‘ this week, isn’t it about time we had a budget for the people?

Mind the Wealth Gap

Incomes of the top 0.1% of Britons are rising four times faster than those of the lower 90%, according to Oxfam’s report ‘A Tale of Two Britains’.

The richest families in Britain are:

• Duke of Westminster, Grosvenors (Wealth: £7.9bn)
• Reuben brothers (£6.9bn)
• Hinduja brothers (£6bn)
• Cadogan family (£4bn)
• Mike Ashley (£3.3bn)

And here is how their wealth compares to the rest of the country:

• The poorest 20% have on average £2230 each
• Top 0.1% have seen incomes increase by £24 000 / year since mid 90’s
• Bottom 0.1% have seen an increase of £147 / year since mid 90’s
• 95% of Britains have seen a 12% drop in disposable income since 2003; top 5% have seen income increase.
• The Grosvenors have as much wealth as the poorest 10% of the population.

Britain is becoming a a tale of two nations – a wealthy elite, and a cash strapped majority – and it is mostly the hard work of the latter group that is generating the wealth the former enjoys.  But, who cares?

Why the Wealth Gap Matters

A002Wealth inequality matters because financial power translates to economic, political and structural (media, academics, regulators etc.) power. Also, wealth inequality is exacerbated over time as this generations winners and losers hand over an advantage or a disadvantage to the next, and so on.

UK politics has become dominated by neoliberal economic policies that care not a fig for wealth equality.

Thatcher, Major, Blair, Brown, Cameron and yes, Miliband, all base their policies on ideas put forward by the likes of US neoliberal economist Milton Friedman and the Chicago School, who considered redistributive policies, and other state interference in markets as a barrier to, not bringer of equality.  Friedman once wrote:

“A society that puts equality—in the sense of equality of outcome—ahead of freedom will end up with neither equality nor freedom.… On the other hand, a society that puts freedom first will, as a happy by-product, end up with both greater freedom and greater equality.[1]

Friedman was wrong. Economic inequality matters, because inequality of income translates to inequality of outcome.

In The Spirit Level, Richard Wilkinson (Professor of Epidemiology at Nottingham University, UK) charts data that proves societies that are more equal are healthier, happier societies. By comparing life expectancies, mortality rates and other health indicators, Wilkinson demonstrated a correlation between inequality of income and inequality of health outcomes.

Wilkinson’s paper, and a replication of his findings by the Joseph Rowntree Foundation, characterised those outcomes as an inequality in life expectancy, rate of death and overall physical and mental health. Additional indicators of quality of life and social mobility, highlighted in both papers, were unequal outcomes in educational attainment, likelihood of conviction and incarceration for crimes, and an array of others, which might point to a causal link between income inequality and inequality of outcomes.

Proving such a causal link is notoriously fraught with complexities and uncertainties, however, several studies have sought to assess the independent impact of inequality on health and social problems. One such study (Lynch et al, 1998) suggested that loss of life as a direct result of the impacts of income inequality in the US during 1990 was equal to the combined loss of life due to lung cancer, diabetes, motor vehicle accidents, HIV-related causes, suicide and homicide.  

Economic inequality is also hereditary; a social inheritance passed from parent to child.  Research by Gregory Clark of the University of California, found data to suggest that in the same time period that neoliberal economic policies expanded the economic inequality gap, the rate of social mobility (increased incomes and outcomes by successive generations) declined for the first time in 1000 years.

A Budget for Business is Not a Budget for People

A003

Some poor, ill informed souls might well pipe up with ‘But I rely on businesses to pay my wages, so isn’t a budget for business really a budget for me?’. No, and here’s why.

When the Coalition talk about ‘business’, they mean mostly business owners, large corporations and the Financial Services industry. What they provide for them in each successive budget are tax breaks, subsidies and reduced regulation.  This means the tax burden is shifted from the richest to the rest, that those people-paid taxes are diverted from public services to subsidise these tax dodging corporations, and as a reward you can expect your terms and conditions weakened – that’s lower pay, less holiday, removal or reduction of sickness payments and pensions, and removal of notice periods and right to challenge unfair dismissal.

If you have trouble putting a price on this policy – let’s talk in terms most understand.

The UK Government spend a total of £694.89bn a year, to do everything.  The amount the government spend on the human welfare state is £159bn, with £72bn (45%) of that going on pensions.  So, we have just £85bn (12% of spending) a year actually going on working age benefits.  It makes sense that we spend this proportionate amount shielding citizens from poverty induced by involuntary unemployment, and to support sick and disabled people who cannot work or who bear additional financial costs to work.  Our income in GDP each year is many multiples of this, at around £2trn.

Now, what about the welfare state that has been built for corporations?

The Bankers Bailout

The most obvious recent example was the Bankers Bailout.   According to the National Audit Office, The UK taxpayer spent £850bn bailing out the Banks in 2008. This is almost twice the nation’s total annual budget.  For this amount, the UK could have funded the entire NHS (£106.7bn a year) for eight years , our whole education system for twenty years (£42bn a year) or provided two hundred years of Job Seekers Allowance (£4.9bn a year).

Socialised Losses

he private sector is increasingly invited to deliver public services; the companies keep the profits of success, while the taxpayer is left to pick up the tab when they fail.

In the 2013 budget, George Osborne offered another £130bn to banks in the form of mortgage guarantees, effectively making it so banks can grant mortgages to people, reap the profits, but never fear a default as the government (you and me) will pick up the tab.

The taxpayer bought failed bank Northern Rock for £1.4bn to avoid a run on the banks. The bank was split into a ‘good bank’ likely to generate profits in future, and a ‘bad bank’ containing almost £50m of bad debts. Osborne then sold the good bank to Richard Branson for a measly £747m, while the taxpayer kept the bad bank and the associated debt.

Despite all these failures the same companies are invited to make profits and mistakes on further government contracts while the taxpayer is effectively frozen out of the decision making process.

Private Finance Initiatives

Our hospitals and schools have been built under private loans called Private Finance Initiatives, rather than government borrowing.  These loans are at least twice the rate of interest that government loans would have been, and repaid over 25-30 years.

Today, 22 of the 103 NHS trusts to enter PFI are facing difficulty due to the exorbitant repayments required to pay back the so-called NHS Mortgage (paying back the company for building the hospital).  Some hospitals are having to handover a fifth of their annual budget on paying for the PFI deal.

In Education, it was revealed that we are due to have a shortfall of 250,000 school places for our children by 2014, whilst the tax payer has picked up a £70m bill for PFI schools which had to close.

Overall, for a capital investment of £54.7bn (that’s how much money we actually borrowed to build stuff), the tax payer will pay back an astounding £301bn in just twenty five years.  Given the disasters of debt witnessed so far, many of the 771 PFI projects currently running will bust the budget of these schools and hospitals long before then, leaving us with the debt but not the service.

Handouts, Tax Breaks and Tax Avoidance

While we have privatised rail, energy, utilities and energy – we continue to pay massive subsidies to the private companies running them now. When we aren’t handing money over directly, the government is letting them off paying their dues.

The Rail Service was radically downsized in 1963 as it was said it was losing £140m a year, which was the gap between ticket revenues and running costs.  It was finally privatised in 1993.  Since then, ticket prices are rising above the rate of inflation.  Train firms pay the government £1.17bn in premiums to run their franchises, only for the taxpayer to hand them back £4bn in subsidies.

So we are now spending almost £3bn a year (£500m more in real terms) today to fund the profits of private companies, while paying 66% more in real terms for our train tickets, with no representative to hold to account for the failure.

Network Rail profits doubled in 2012, and all rail franchises are running at a profit as the companies prioritise (as they have to, as businesses) making a profit rather than lowering ticket prices or investing in the network.  Despite all this, the government are not complaining as they were when the service was nationalised, of a loss making service.

Gas and Oil prices were subsidised to the tune of £3.6bn in 2010, whilst renewable energy projects received just a third of that.

And finally, taxation.  Only one in four of the UK’s top companies pay their taxes, meanwhile they were receiving tax credits to the tune of hundreds of millions of pounds by people who did pay their taxes.

Company taxes now constitute only 12.5% (Corporation Tax is just 7%) of the tax revenues of the UK.  In comparison, the people’s taxes, (income tax and VAT) make up more than 60% of the tax income.

Corporation Tax is lower today than at any time in its history.  UK Corporation Tax in 1984 was 52%.  By 1986 it was 36%.  In 1999 it dropped to 30% and in the most recent budget it was cut to 20%.

Meanwhile, tax avoidance is costing us almost £70bn each year.

Subsidising Low Wages

The three most expensive benefit payments in the UK are Tax Credits, Housing Benefit and Child Benefit, totalling £56.4bn a year.  These are not ‘out of work’ benefits.  Therefore 65% of the total spent on working age benefits, is going to people in work.

These payments have been set up and used mostly by people in work, but whose wages are below subsistence levels.  In the last five years, wages have increased by just 10%.  Inflation according to the Consumer Price Index (CPI) was 17% during the same period.  This means a real terms wage drop of 7%.

However, CPI figures represent a wide range of purchases which many average or below average earners do not buy.  The UK Essentials Index which focuses on the kinds of everyday items which the UK’s working and non working poor buy showed an inflation rate of 33%.

And no one in power is calling for an end to the corporate welfare state which is crippling UK finances and has seen the national debt rise to a record 138% of GDP.

It’s Time for a People’s Budget

inequallity briefingWe need a budget that puts people first.  We need a budget that places investment in the things we all need, and shares the benefits among all those who work to achieve it.  We need a budget that builds the kind of society we all wish to live in.  A society with where:

  • The natural environment is clean, respected and protected,
  • The built environment is clean, safe and caters for all of those who use it,
  • We are all encouraged and enabled to contribute the best of ourselves,
  • We cater for the whole person; employer, employee, entrepreneur, child, parent, carer, in good and ill physical and mental health, from cradle to grave.

These are some pretty simple ambitions.  That they are even controversial speaks volumes to just how detached the idea of economic progress has become from the idea of human progress. The single point of the former, is the latter.  If economic progress/growth is not delivering on those intentions, it is worthless to anyone outside the narrow group it benefits.  We need a people’s budget.

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9 thoughts on “Britain’s 5 Wealthiest Families Richer Than Poorest 12.6 Million? It’s Time for a People’s Budget

  1. Err, a good article but you have missed out the biggest elephant in the room…..the “royals” ??

    never mind a peoples budget….it’s time for the revolution!

  2. So when or at what point do we kneel and accept the injustice? Or stand together and resist, or simply continue to blog chat and nod our heads just a q

  3. Pingback: Britain’s 5 Wealthiest Families Richer Than Poorest 12.6 Million? It’s Time for a People’s Budget | Scriptonite Daily | kickingthecat

  4. Pingback: Britain's 5 Wealthiest Families Richer Than Poo...

  5. You refer to companies avoiding tax. Is it not possible that the top 5 families might also avoid (or even evade) some of the taxation that was designed to be their obligation to contribute to Britain? I would not be surprised of the top 4 families actually owned what the Oxfam report attributes to the top 5.

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