Tony Blair did a deal with the better off to win and stay in power. He agreed to keep Conservative rates of Income and capital taxation. In return more rich people came here, stayed here, set up businesses here and paid much more tax here. He was able to win enough votes to form a government three times, and to expand public spending substantially before the excess and the crash.
In opposition it is tempting for Labour to say they will spend more of our money by taxing the rich more. They need to remember that the best way to get more money out of the rich for public services is to keep the rates down, not to frighten off the mobile rich by putting them up.
Politicians generally have adopted an anti rich stance, appealing to jealousy and hoping that offers a way to easy spending money for the state. Before embarking on a condemn the rich attack, it would be wise to ask who are the rich? Are they universally bad?
The Lib Dems laughingly said someone is rich if they earn more than £50,000 a year. That makes the Headteacher and some Deputy Heads rich. It makes many senior local government officers rich. It means all GPs, judges and senior quango executives are rich. It means many middle and all senior managers in business are rich. Even Labour think that is a strange definition of rich. In my constituency a £50,000 combined income in a household is common and necessary to pay the costs of much of the housing.
Adjectives applied to the rich are often unkind. Popular amongst them are “idle” and “filthy”. So who are the true rich?
Someone worth £1m is automatically thought rich by some. If it is a pensioner living in a one bedroom flat worth £1 million in central London living on a modest pension they do not have a rich lifestyle. To release their riches they would need to sell up and go and live in a much cheaper part of the country, when they would have some capital to live off as well as the pensions. Maybe we should regard someone as rich if they had £1million of savings as well as a home of their own.
For a good definition of rich is someone who of working age does not have to work because they have enough income and capital to live without needing a salary. If you have sensible requirements for your lifestyle you could be rich in this sense with say £1.5m of capital – a £500,000 house outside London and a savings income based on your £1m of savings that could pay the bills. Then this person could indeed be the “idle rich”. In practice most of the people I have met who have substantial capital are far from idle, and are often entrepreneurial, seeking to create new businesses with the money they have made. Others would say that to qualify as rich you would need a much higher income than these capital figures imply.
The “filthy” rich is an unpleasant jibe. It is clearly not strictly accurate, as the rich have plenty of money and time for baths, showers, and perfumes. It presumably means they came by their money in questionable ways. Many high earners in the financial services have been mauled by politicians collectively with the implication that what they do is not needed and their fees and charges are too high. Some are hauled over the regulatory coals for bad practice.
Not all very highly rewarded people are attacked in this way. Most seem relaxed about footballers being paid very large sums if they are good. People tend to like entrepreneurs like Mr Branson, accepting he deserves rewards for his work and risk taking.
Labour would be wise not to bash the rich. Mr Blair was wrong about many policy matters, especially wars, but he was right about this. Labour has to get on with the rich to govern. Conservatives have to look after the poor and should want to do so to govern. That’s the deal.
There is one thing worse than having lots of rich in London. That would be not having them. They pay lots of tax and help swell demand. There is nothing wrong with aspiration. Aspiration becomes less of an incentive if anyone succeeding is regarded as unpleasantly rich, an object of criticism and for higher taxation.