"Can't balance budget on the wallets of the rich"? Yes, we can!

Submitted by martin on 9 October, 2012 - 12:41

"It's an economic delusion to think you can balance the budget only on the wallets of the rich", claimed Chancellor George Osborne as he spoke to the Tory party conference (8 October). He was trying to justify another £10 billion cuts in benefits for the worse-off, on top of all the cuts already in train.

Yes, you can balance the budget on the wallets of the rich! Or, rather, we could balance the budget that way. The Tories never would, and the New Labour types never would, but a government based on and accountable to the labour movement, a workers' government, could and would.

Osborne's claim is even more contemptible because his cuts aren't even balancing the budget. They are worsening, not improving, the government budget deficit. Cuts, especially those that hit the worse-off and public service workers, also mean cuts in consumer demand, shops and businesses shut, reduced tax revenues - and a bigger deficit.

The Guardian reports: "Britain's government deficit is at a record high. Public sector net borrowing excluding financial sector interventions - the government's preferred measure - widened to £14.41bn [in August 2012]... and is now the largest it has been since monthly records began in 1993.

"The official release shows that the deficit for the tax year to date to £31bn. But, stripping out the transfer of Royal Mail pension assets, the deficit has actually widened 22% to £59bn so far this year".

The same thing on a larger scale is happening in Greece, where the huge cuts imposed by the European Union, the European Central Bank, and the IMF are plunging the Greek government worse into debt rather than rescuing. The aim of the cuts is not to ease the debt, but to use the crisis to beat down workers' standards and social provision so that profits can be higher in an eventual recovery.

Look at the figures. The British government's budget deficit is around £120 billion a year. A workers' government would not even try to reduce it to zero straight off. No competent administration, capitalist or socialist, would do that.

Good arguments can be made for increasing the deficit in the short term - through increased social spending, rather than through Osborne's method of depressing economic activity across the board by cuts - in order to boost output and then boost government revenue and sounder budget-balancing in the longer term.

But take Osborne's challenge at face value. Gross domestic household disposable income (after income tax) for the UK is about £1000 billion. Before tax it must total about £1200 billion. The top ten per cent pocket 31% of it, or about £370 billion.

A 32% super-tax on that top ten per cent would balance the budget and still leave them all very well-off indeed.

The top 1% have about 20% of total income, or about £240 billion: a 50% super-tax on them would balance the budget without touching the other 99%. The top 0.1% have about 7%, so taxing them alone heavily would almost balance the budget, even if all the other 99.9% paid no extra.

Remember that these figures understate the luxuries of the top-paid, because they often get paid in tricksy ways that make their loot appear as "capital gains" rather than income, and they get much more "on expenses" and as "perks of the job" than others do. In early 2008, as the capitalist crisis was getting under way, John Thain, the boss of Merrill Lynch, got his company to spend $1.2 million on doing up his office.

The top ten per cent own about half all household wealth in Britain, or about £5,000 billion. A government could balance the budget by leaving their income untouched and instead taxing their wealth at just 2.4%.

If the wealth tax were restricted to just the top 1000 individuals, whose wealth totals £414 billion, it could abolish the deficit for the next three years and still leave those top thousand with personal wealth of £54 million each. That's with no income-tax increase at all.

Osborne will do nothing like that. At the Tory conference he claimed, in vague and general terms, that he would find ways to get more tax revenue from the rich. But he rejected even the mild gestures proposed by the Lib Dems, a mansion tax or an annual levy on wealth.

He also ruled out introducing new council tax bands on high-value houses. Council tax hits the poor much harder than the rich, because it is a flat rate on every house worth above £320,000 (which in London and some other areas is not huge).

He didn't rule in anything specific, and he has already cut the top income tax rate from 50% to 45%. A business tax specialist quoted recently in the Financial Times reports that: "the UK business tax regime [is] now 'fully competitive' when benchmarked against other countries, as a result of a planned cut in the corporate tax rate to 22 per cent in two years' time, a new tax break for patent income, new rules on foreign profits and tax-deductible interest costs". That is New Labour's work as well as Osborne's.

Business profits, as well as top pay, are taxed more and more lightly, at the same time as cuts multiply.

Because of council tax, and other taxes which hit the poor harder, like VAT, the worse-off pay a higher tax rate than the rich. The bottom 20% pay an average of 35.5% of their income in tax, and the top 20% pay 33.7%. The middle 60% pay a slightly lower rate, 31.5% on average.

We must teach the Tories that it is a social delusion to think that they can balance the budget on the sufferings of the poor.

The rich would, of course, respond to high taxes by "strikes" - by taking, or trying to take, their money out of the country. Some forms of wealth they can move easily. Basic productive wealth they can't. The Communist Manifesto had it right when it put near the top of its list of demands one borrowed from the great French Revolution of 1789-99: "Confiscation of the property of all emigrants and rebels".

We can break the tyranny of the budget deficit, and we will do it through reshaping the labour movement to fight for a workers' government which takes into public ownership the whole of high finance and the giant capitalist corporations.

Percentages of gross income paid in tax for quintiles (groups of 20%) of households, 2009-10

Percentages of gross income paid in tax for deciles (groups of 10%) of households, 2006-7

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