“Let me tell you about the very rich,” F Scott Fitzgerald once wrote. “They are different from you and me … Even when they enter deep into our world or sink below us, they still think that they are better than we are.” For that reason they will always be an awkward fit in the world of democratic politics.
The past few days have provided ample reminders of what happens when the very rich take control. The stench emanating from this government reprises John Major’s last days of “sleaze”. But the sums of money back then look paltry compared to the extraordinary finances of the multimillionaires who now fill the Tory benches.
Nadhim Zahawi’s mysterious “error” in failing to pay capital gains tax landed him with a walloping 30% penalty; he agreed to repay an estimated £5m reportedly while chancellor, collecting everyone else’s taxes. No normal citizen could be “careless” about such a sum, so it’s time for Rishi Sunak to come clean about exactly what he knew about Zahawi’s tax affairs when appointing him party chair. Zahawi had been nominated for a gong in the new year honours list, but following the usual due diligence, his name did not appear, reports the Sun on Sunday.
Many will remember his startling expenses claim 10 years ago, when he was obliged to pay back money wrongly claimed for heating his horses’ stables. He declared himself “mortified” at that “error” concerning a £5,000 bill, so presumably he feels a thousand times more mortified over an error a thousand times greater. Since he claims that HMRC called his tax non-payments “careless and not deliberate”, let’s see the correspondence – as there was nothing “careless” about his multiple legal threats to Dan Neidle of Tax Policy Associates, who investigated his tax affairs.
Back in Major’s sleaze days, the “cash for questions” scandal saw MPs taking bribes in brown envelopes from Mohamed Al-Fayed for asking parliamentary questions. How much? A mere £2,000 a time.
By the time Owen Paterson resigned in 2021 for improper lobbying – he was facing a 30-day suspension amid a parliamentary investigation – cumulatively he had received at least £500,000 in payments. But that was small potatoes compared with the shock discovery at the time that Sunak was chancellor of the exchequer, his wife, Akshata Murty, may have avoided paying up to £20m in tax, with her non-dom status implying that her permanent residence was outside the UK; meanwhile Sunak held a US green card that implied he would be living in the US.
Then there was Sajid Javid’s former life as a £3m-a-year Deutsche Bank purveyor of collateralised debt obligations (CDOs). It was reported in 2014 that he made use of the bank’s “dark blue” tax loophole in the Cayman Islands, which helped bankers to avoid tax on huge bonuses. A judge found the scheme to be “sophisticated attempts of the Houdini taxpayer to escape from the manacles of tax”. (Javid denied receiving any tax advantage from the scheme at the time.) It’s no surprise that Ayn Rand’s The Fountainhead is his favourite book – it’s a song for the survival of the fittest, in which individualism triumphs over collectivism. And it’s no surprise either that this former health secretary now calls for a debate about ending a “free at the point of delivery” NHS, writing approvingly about payments for GP and A&E visits.
Tax avoidance is legal, but the ranks of super-wealthy politicians never understand that standards of civic virtue for politicians are far higher than what is merely “legal”. Like Major’s “back to basics” drive, Sunak asked for trouble when he pledged: “This government will have integrity, professionalism and accountability at every level.” Dithering over firing Zahawi shows that he has no idea what that means: the very rich really are different.
Nothing more about Boris Johnson can shock us, I thought, but the revelation that he put forward Richard Sharp as BBC chair only weeks after Sharp had helped to arrange a loan guarantee of £800,000 is breath-taking. Elsewhere, “a high-profile Tory MP has been reported to police over claims of expenses fraud”, relating to housing, reports the Sun.
This tide of money swirling around Tory benches contaminates all politics. And so it was good to hear Rachel Reeves tell the BBC’s Laura Kuenssberg that a Labour government would “clean up this mess, drain the swamp, because frankly, it stinks”. This revival of sleaze is Labour’s cue to purge all tax avoidance for the rich, a political licence to close loopholes and all the jiggery-pokery that is available to wealthy people but not to PAYE citizens. The party should grasp the example of these zillionaire Tory tax avoiders to show why capital gains and unearned income should be taxed at the same rate as hard-earned wages; Labour should clamp down on everything offshore for any public office-holder or company holding a government contract.
Evidence of tax distortions benefiting only the rich mount up by the week. The Institute for Fiscal Studies’ TaxLab lists an array of wasteful tax reliefs. The latest example comes from the Resolution Foundation thinktank, which has identified “five terrible tax breaks”, used by just 70,000 individuals, that deprive the public realm of £4bn.
It notes that the UK’s “myriad tax reliefs are hugely expensive and yet are rarely assessed for their efficacy or value for money”. Tax reliefs together cost £195bn in 2020-21. As for the five obscure tax reliefs, which concern business and agricultural inheritance: “There is little evidence that these policies have encouraged more people to save, and conclusive evidence that rich individuals have gained the lion’s share.” Tax Justice UK proposes the following reforms: equalising capital gains with income tax to raise £14bn a year; applying national insurance to unearned income, which would recoup £8.6bn per year; taxing wealth over £10m at 1% to raise £10bn per year; and cutting inheritance tax loopholes, which would raise £1.4bn. Labour’s promised end to non-dom relief yields £3.2bn.
Calls for taxing wealth are growing: Nobel laureate in economics Joseph Stiglitz is the latest to argue for a 70% top tax rate on the super-rich, plus 2-3% on hyper-wealth (more than $50m) after the post-Covid wealth boom. Widening inequalities worsen in a society where inheritance, not talent, is becoming the main route to super-riches in what he calls “the sperm lottery”. Oxfam last week reported that two-thirds of the new post-pandemic surge in wealth had gone to the top 1%.
All this gives Labour the reason why, when in power, its first budget needs to scrape off the worst tax-relief barnacles. This wouldn’t be about “raising taxes” but simply setting the system to rights, and cleansing the memory of this country’s rule by plutocrat.
Polly Toynbee is a Guardian columnist
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