For God’s Sake, John, Stop Trying to Help

On Boxing Day John Rentoul’s column in the Independent took a contrarian turn. He argued that, while we all know that “the rich are getting richer and the poor are getting poorer”, what we all know is wrong:

The gap between rich and poor has not changed significantly for about 20 years, not since the increase in inequality that occurred when Margaret Thatcher was Prime Minister in the 1980s. For most of the boom times since then, everyone got richer, at roughly the same rate, and the ratio between rich and poor remained unchanged. And even now, as we all get a bit poorer again as a result of the bust, the losses are spread pretty equally with, if anything, the rich bearing the greater share of the burden.

Furthermore, according to Rentoul, “it is almost certainly true” that the rich will “pay a greater share of tax” in this Parliament than they did under the last Labour government. We really are all in it together, as Cameron and Osborne claim. Yet the Conservatives have done a woeful job in communicating this reality of declining inequality. By reducing the top rate of tax from 50% to 45% they have needlessly created the impression that they are in politics to help their rich friends:

In an inexplicable reversal of all assumptions about politicians in general and him in particular, Cameron has been true to the “one nation” principles that many people thought he had insincerely espoused. And yet, by cutting the one symbolic tax rate for the richest, he has encouraged everyone to think the worst of him […]

There are one or two problems with Rentoul’s column, some of which are set out in Alex Hearn’s piece in the New Statesman.

Hearn points out that one of the main drivers of reduced inequality in recent years was the increase in the top rate of tax brought in by Labour. Furthermore, the planned reductions in public, especially welfare, spending will tend to increase inequality. All in all, Hearn says, the Conservatives are probably wise to keep quiet about inequality, given that their policies are likely to increase it.

In a followup piece Rentoul clarified his argument. “Perhaps,” he said, “I should have made it clearer that, if there is any political credit to be claimed for the more equal distribution of post-tax incomes in 2010-11, then it belongs to Gordon Brown’s Government.” But he wasn’t trying to claim that the Conservatives were “engaged in Real Labour egalitarianism”. He was making a more modest point. The government, he said, “has a reasonable claim to be trying to restore the public finances without widening the gap between rich and poor”.

More serious problems remain. Rentoul claims that “the gap between rich and poor has not changed significantly for about 20 years”. While this may be true of reported income, those who own property have seen vast increases in their total wealth, thanks to rampant asset price inflation. Furthermore, the extensive use of offshore trusts and other devices raises serious questions about the conventional methods used to calculate the wealth of the very rich. Nicholas Shaxson, John Christensen, Nick Mathiason explore the problem at length in their paper, Inequality: You Don’t Know the Half of It. Put simply, assets and income hidden offshore aren’t included in the statistics on equality. Apparent reductions in reported inequality have to be set against the vast increase in the size of the offshore sector and the associated shadow banking sector.

Even if the government does have “a reasonable claim to be trying to restore the public finances without widening the gap between rich and poor” – and as Hearn points out this is highly debatable – it is defending an indefensible status quo.

Over time “normal” income inequality hardens into inequalities of wealth, opportunity and knowledge. These in turn underwrite steepening inequalities of consideration and respect. The wealthy manipulate the political process, securing de facto immunity for their actions. Economic power also translates into changes in the climate of opinion, as Rentoul himself demonstrates. In amassing their fortunes the rich created a massive financial crisis. When their gains are not downright criminal they are, at the very least, ill-gotten. The entire political and social order is overdue for a thorough-going programme of reform. Yet, according to Rentoul, despite the food banks and the welfare assessments, “the losses are spread pretty equally with, if anything, the rich bearing the greater share of the burden”.

An aristocrat of the ancien regime could not have put it more elegantly.


4 thoughts on “For God’s Sake, John, Stop Trying to Help”

    1. Rentoul’s not a contrarian. He’s one of those Blair fans who’ve moved on to Cameron because Brown wasn’t as charming.

      Same result re Dan’s time.

  1. As I look back on the time I spent writing this, I can’t help thinking that they answer to your question is yes. It is a chance to bring the issue of offshore into mainstream discussions of inequality, though, where the connnection is not always made. I am also happy to remind myself that, to put it simply, rich people caused the crisis.

  2. Gaps between rich and poor can close because of a recession in the City, as happened under John Major. It’s not something a Conservative would normally boast about.

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