Small earthquake in Britain - devastates the economy

The 50p tax rate would apparently have minimal impact but also be devastating to the UK economy. It's worth recalling similar arguments made against the 1981 proposal for a maximum salary cap of four times average wage.

Stuart Weir
7 February 2014

Who knows how much Ed Balls’s proposal for a 50p additional tax rate on top earners will raise, but it has already raised Cain among the rich and corporate business circles. A week or so ago the bosses of 24 of Britain’s large companies joined forces to warn in the Telegraph that this modest tax change would discourage entrepreneurs, endanger what passes for a recovery and cost jobs. The media have been full of similarly dire warnings from the rich 1% whom the coalition government’s economic and tax policies have spared. 

Sir Stuart Rose, formerly of Marks & Spencer, thundered, “This will put at risk all the good work that has been done to put the economy back on track.” Another boss said, “It would be suicidal. Business people aren’t against paying tax, just not at such a punitive rate.”

The fuss reminds me of a couple of things. First perhaps, Claud Cockburn’s celebrated (and disputed) headline for a story in The Times: “Small earthquake in Chile. Not many dead.”  Curiously, the protesters warn of the devastating impact of a policy which they argue will only raise undevastating amounts of money. “Small earthquake in Britain. Devastates the economy”?

However, the angry response of Sir Stuart Rose et al also reminds me of the extraordinary reaction in the media way back in 1981, when I co-edited and co-wrote a joint book, Manifesto, that proposed introducing a maximum income level of £28,000, that at the time was four times the average wage. We argued that social democrats had wrongly assumed that redistribution could be brought about without major changes in the basic structures of pre-tax earnings and wealth – an argument that Ed Miliband has touched on in his hesitant advocacy of ‘predistribution’.

We took this argument a stage further by proposing a minimum level of income, linked to what we called a “participation standard”, to bring about a progressive narrowing of the income range of pre-tax earnings and benefits. We saw this as a long term process that would have to be negotiated nationally over time. The idea was to set a standard of living that would raise wages and benefits to a level that would allow everyone to share in society and to move away from the subsistence standard established by the welfare state (a standard that the coalition government is reducing severely for most state beneficiaries). I suppose the modern parallel is in the campaign for a living wage.

The book - its full title was Manifesto: a radical strategy for Britain’s future -  caused a great stir, coming out as it did in the midst of the fuss over Tony Benn’s political ambitions in the Labour Party. The media was flooded with protests against our proposals from the rich, to whom newspapers turned for comment rather than to people who could have benefited from its proposals. Indeed, the book was seen as a “Bennite bible”, partly because two of the authors, Francis Cripps and Frances Morrell, had served as advisers to Benn in government. 

Benn was at the height of his powers in the Labour Party, had delivered a powerful left speech at the party conference in 1980 and challenged the incumbent Denis Healey for the party’s deputy leadership in 1981. I am struck by similarities between the response by the rich and powerful in 1981 and now in 2014. At the back of the anger and contempt lies a fear that there could be a revolt against their oligarchical power over elected government in the UK. Quite a few of today’s protesters have complained that the 50p rate is a “populist” initiative, and so not worthy policy; and whatever the rich and powerful think of it, it is a popular policy. And who knows, the Labour Party might even go further in redressing the imbalance in British politics, though Ed Balls is doing his utmost to reassure the Sir Stuart Roses.

Benn was not into reassurance. In his diary, Out of the Wilderness: Diaries 1963-67, he railed against both “the power of industrialists and bankers to get their way by use of the crudest form of economic pressure, even blackmail, against a Labour Government”,  and the power of the media, which “ensures that events of the day are always presented from the point of the view of those who enjoy economic privilege”. He went on to conclude that:

“[the] UK is only superficially governed by MPs and the voters who elect them. Parliamentary democracy is, in truth, little more than a means of securing a periodical change in the management team, which is then allowed to preside over a system that remains in essence intact. If the British people were ever to ask themselves what power they truly enjoyed under our political system they would be amazed to discover how little it is, and some new Chartist agitation might be born and might quickly gather momentum.”

That is the nub of it – even now, under a neoliberal hegemony that is effectively world-wide – the bosses fear some sort of “Chartist agitation” and are determined to stamp it out, even in the innocuous form it takes in Labour Party thinking. I am afraid that we Manifesto authors did not combine after the book was published to campaign together on its core proposals, we saw our task simply as invigorating the Labour Party.

We went on separately to other campaigns. Sadly, only two of us are alive today, Francis Cripps and me. The other authors, professors John Griffith and Peter Townsend, Frances Morrell and Jimmy Reid, and Robin Cook, an early collaborator, are dead. I’d like to think that the ideas might live on among a new generation of agitators. Could Labour under Miliband, or the wider left, join the fragments of policy that may be emerging? De-throning neoliberal economic fakery, taking on the business and financial hegemony, disciplining their activities in the interests of society, reducing extravagant rewards at the top and equalising earnings and benefits? Who knows.


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