Sunday Times Rich List: The Rich Get Richer While We Pay for the Crisis

Raphie de Santos

The publication of the Sunday Times Rich List today was a very striking event. What struck us was how much wealth the richest 1000 people in the UK had. A staggering £335 billion, which was just under half our national debt and about the same amount of money that we have given the banking system to bail them out of the crisis.

The second striking fact is their obscene fortunes have increased by £77 billion in 2009 while the majority of us have faced job losses, wage cuts and cuts in public services. This in a year when the economy was in recession for nine months and has only just limped out of it.

The third striking fact is where this wealth comes from. It's come from us. The vast majority of the rich list run companies or have sold companies that they have owned. And they have made this wealth by giving us even less of the wealth we make for them. This has been a trend that has been happening over the last forty years. In 1976 the bottom 50% of the UK population had 12% of the liquid wealth in the UK. By 2003 this had fallen to 1%. Over the same period the wealthiest 0.01% of the UK population, the rich, have seen their income rise by 500%. No wonder they had to create so much debt otherwise we would not have been able to buy the products we make for the rich companies.

The fourth striking fact about this report is that wealth has grown only because of a more than 50% rise in the stock market in 2009 from a low point in March of that year. Over the last thirty years the rich have increasingly paid themselves in shares in the companies which they run or sold on the stock market. Ironically around 75% of these shares are bought by us indirectly through our pension and insurance policies. The dramatic stock market rise would not have happened without the massive bailouts of the banks and the governments' stimulus programmes that stopped the world economy from going into global depression. Of course the money to do that came from us. Now the governments are asking us to pay for it through cuts in services, pay and jobs.

Taxing the rich would be a good starting point as an alternative. An annual 10% tax on the rich 1000 would fund 2 million apprenticeships a year for example. But dealing with the super rich is just the tip of the iceberg.

The UK is more unequal at any time since records started to be collected on inequality over 50 years ago. Under New Labour the shift from poor to wealthy has continued to increase. In financial year 2007/2008 the Office of National Statistics calculated that the bottom 20% of households brought in on average £4,600 per year in income -- before taxes and benefits. The top 20% of households took an equivalent of £72,500 per year. Since the Tories came to power the top rate of tax has been cut from 83% to 40%. Restoring a progressive taxation system would raise an extra £75 billion a year. Corporations are amongst the rich and they have seen there tax rates on profits cut from around 50% to 28%. They also avoid tax by using offshore tax havens which are estimated to lose the UK £130 billion a year in revenues. Increasing their taxes back to 50% and closing down the tax havens would raise another £200 billion per year.

UK banks are the richest of all the corporations yet we have given them £375 billion to bail them out. Taking them under common ownership and control would release immediately £560bn of what is really our cash and put at our disposal £5 trillion of their assets. The socially useful jobs and projects that could be created in a national Peoples Bank that could result from such an approach would wipe out the public sector deficit, unemployment and social hardship at a stroke. Yes, the rich and wealthy have got richer and wealthier at our expense and the final striking feature of all this is how easy and rational it would be to share the wealth out and create a just and fair society without any suffering that meets all human needs.

25/4/2010
Used with permission

Raphie de Santos

was head of Equity Derivatives Research and
Strategy at Goldman Sachs International.
He was an advisor on derivatives and
financial markets to the Bank of England,
London Stock Exchange, London International
Financial Futures and Options Exchange and
the Italian Ministry of Finance.
He's been a guest lecturer on derivatives and
financial markets at Harvard and New York
universities and the London School of Economics,
and has spoken at the annual Nobel Foundation
conference in Stockholm.
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