James Frayne: Sunak’s wealth doesn’t matter for working-class voters. His tax rises do.

12 Apr

James Frayne is Director of Public First and author of Meet the People, a guide to moving public opinion.

English working-class voters are the Conservatives’ electoral base. They are also a group struggling badly as living costs rise. With this in mind, what do working-class voters think about class, wealth, and posh politicians?

Specifically, we should ask what they will make of coverage surrounding Rishi Sunak’s tax status and residency. Here are some thoughts from many years talking to working-class voters across England. 

1. English working-class identity is real. Class has dropped off politicians’ radar, with attention shifting to cultural identities. But class defines how vast numbers of people think about themselves, their communities and life choices.

Indeed, such is its hold, working-class identity remains strong even as wealth has spread and traditional working-class professions have changed. It’s therefore reasonable to ask what they will make of a rich Chancellor in times like these, and reasonable to ask how they will react to coverage.  

2. They respect hard-work – and therefore aspiration and deserved success. The clue is in the name: those identifying as working-class respect hard work. In doing so, they respect aspiration and success. Relatively few working-class voters share the Conservative vision of social mobility, happy as they are with their lot (economically and socially).

But they respect, for example, those who make big sacrifices to build businesses, to send their children to private schools, and so on. There is no English equivalent of the American Dream; but the English working-class aren’t hostile to those that work hard to achieve their own success or status. 

3. Unfairness drives them mad. Their respect for hard work reflects their obsession with fairness. It’s fair those that work hard succeed. Conversely, it’s unfair those that don’t want to work hard (as opposed to those who genuinely can’t) get support. It’s fair that people who can afford it are taxed more; but it’s unfair those who work hard are taxed disproportionately more. Measuring fairness is an inexact science, but it’s strongly felt. 

4. They don’t understand the rich. The English working-class have little understanding of the lives of the very rich, and particularly those whose wealth derives from finance. They don’t know who they are, what they do, where they live, where they eat, or where their kids go to school. This is crucial to understand.

After the financial crisis and the cuts that followed, much more working-class anger was directed at welfare recipients – rightly-or-wrongly perceived to be undeserving – rather than, say, “bankers”. Why? It was because seemingly claiming welfare wrongly were in their communities, while those that were primarily responsible existed only in theory and couldn’t be easily imagined. 

5. They support the royal family and accept the primary aspects of an aristocratic culture. While the English working-class admire those that achieve success by working hard, they remain supportive of the monarchy. But also accepting of the primary aspects of our aristocratic and ancient culture (the position of old public schools and universities, and so on) as being uniquely English and part of our historic legacy.

With this in mind, most working-class voters are perfectly comfortable with Etonian Prime Ministers and all the other posh politicians and bureaucrats they see on TV. They are not deferential to the English posh, but they are not hostile at all either. 

6. Their patriotism isn’t ethnically or racially defined or derived. A final brief note: while self-consciously very patriotic, and while committed to border control, the English working-class are proudly anti-racist and supportive of a multi-racial society. They actively welcome migrants from other countries who work hard – and particularly so if they build businesses and create jobs. 

What does all this mean for Rishi Sunak? 

Rishi Sunak’s wealth – and his family’s and in-laws’ wealth – is utterly irrelevant to working-class voters. His “poshness” (Winchester, essentially) is irrelevant too. Working-class voters won’t care in the slightest that he has a number of nice houses, or that he wears bespoke suits and expensive trainers. It won’t be possible to make the English working-class hate his success, to envy it or to denigrate it.

He is seen as a successful businessman, with a successful wife from a successful family. What’s to dislike? Even as the cost of living rises, they won’t care, because they will view his wealth as having been earned. 

What, though, of his and his wife’s tax affairs and the status of their nationality or residency? As businesspeople who have lived and worked abroad and (at least in his wife’s case) who have close family ties abroad. To the extent that people understand any of it, they will at least likely appreciate their personal affairs are going to be complicated. That doesn’t mean they’ll ignore it all, but it undoubtedly blunts the anger that some commentators seem convinced is there. 

It seems all of this will come out in Lord Geidt’s investigation, but Sunak’s taxes would have to look catastrophically bad for this to make people genuinely angry with him, as opposed to making them shake their heads and say “they’re all the same”. In all of this, the only thing that matters is whether it looks like he created rules – or effectively used insider / expert knowledge derived from his political position – to enrich his family.

It’s only at this point that the houses, clothes, trainers and all the rest would make much difference. But, again, despite the innuendo, there’s no evidence for this and, again, it seems extremely unlikely. 

As ever, commentators are focusing far too much on process, not issues. Rishi Sunak is extremely vulnerable amongst working-class Conservatives because their taxes are going up as costs rise and because he hasn’t sufficiently squeezed unnecessary spending and tackled waste. He is also vulnerable because he doesn’t have enough to say about their towns and the levelling-up agenda.

While he is therefore vulnerable to the allegation that he doesn’t understand working-class struggles, he is no more vulnerable than any other professional politician. In short, the danger to Rishi Sunak comes from working-class people’s taxes rather than his own. 

The parable of Rishi Sunak

11 Apr

Christ taught that it is easier for a camel to go through the eye of a needle than for a rich man to get to Heaven. Fitzgerald had Gatsby listen to a ditty about the rich getting richer and the poor getting children. And ABBA sang that it must be funny in a rich man’s world. To those, we can add a new aphorism, based on Rishi Sunak’s recent travails: being rich in British politics is a right pain in the posterior.

Of course, the Chancellor’s mess is one largely of his own making. Akshata Murthy’s non-dom status is perfectly legal. But it is not the best look to have your wife minimising the amount of tax she pays just as you hike National Insurance, let the tax take reach its highest level since the 1950s, and steward the economy through a cost-of-living crisis.

The consensus now emerging amongst commentators is that Sunak was fundamentally naïve if he thought he could get away without his wife’s tax affairs becoming a problem. The swiftness of his rise and his commanding public presence have made it easy to forget he has only been a Minister since 2018, an MP since 2015, and involved in national politics since 2014.

Nevertheless, although Murthy paying up might have been the inevitable tonic for her husband’s political ailments, the medicine leaves a sour taste in my mouth. As I pointed out on GB News last week, the opprobrium heaped on the Sunaks is typical of one of the worst features of the British character – the success-loathing mentality of “it’s alright for some”.

As politically potent as Labour’s attacks on “one rule for them and one rule for you” might be, we should fear the implications of the super-rich being permanently turned off entering Parliament. Seeing the Chancellor’s hounding would make anyone similarly wealthy run a mile from SW1. This would be a tragedy for our politics.

The very rich tend to have a few useful qualities. They tend to be well above average in their powers of mathematical, scientific or logical reasoning. They have a great deal of energy, confidence, and sound risk-taking instincts. And they have had the good fortune – by luck or birth – to be able to exploit these talents. That isn’t my assessment. It’s the Prime Minister’s.

All of these are assets on the green benches. You may or may not think that this Cabinet is one of the weakest on record, or that the general quality of our politicians has declined. I always remember that the former Oxford dons, bon viveurs, and self-styled intellectuals of Wilson and Callaghan’s Cabinets comprised the shabbiest and most disastrous Government in modern memory.

But the canniness of those who have made a buck is of a different quality to those of academics or authors. It is the ability to spot trends, read data, take punts, and discern the good investment from the bad. The Chancellor demonstrated this perfectly when he began worrying about rising inflation and surging debt repayment costs long before most commentators, economists, and politicians.

Yet Sunak’s fellow members of the California pad-owning and £200 coffee-cup drinking class will be appalled by the intrusion and condemnation that their wealth attracts if they swap Santa Monica for SW1. They will want no part in it. They cannot therefore be blamed for avoiding political life and the reputational and financial hit it brings.

MPs salary of £84, 144 is a lot of money for most. But for Sunak’s fellow first-class Oxford and Stanford grads, they could make far more in the private sector. And we wonder why we therefore end up with a representative chamber stuffed with ex-SPADs, lecturers, lawyers, trade union officials, local councillors, and SME owners – as worthy as those professions may be.

Making your pile, enjoying your dream lifestyle, and then devoting yourself to public service should be a worthwhile ambition. An increasing number of former leading politicians take the opposite route, climbing the greasy pole before quitting to seek their fortune in the advisory-lobbying-quango nexus. The Prime Minister, Chancellor, and Deputy PM of a decade ago are all cases in point.

This robs the House of Commons of talent and experience that it desperately needs. In 1937, the Prime Minister’s salary was equivalent to £660,000 today. It is now £157,000. To retain this country’s highly-educated and accomplished Anywheres, we should be bringing the pay of MPs and ministers up towards the former figure. Or stop prying into their personal finances. Unlikely, I’d say.

Yes, encouraging the wealthy into politics might give you a few Donald Trumps. But a system equipped only for politicos will give you a lot of Joe Bidens. I’d much rather have Rishi Sunak – polite, compos mentis, and with the best economic brain since Nigel Lawson. With apologies to the Messiah, it should not be easier for a camel to get through the eye of a needle than for a rich man to go into Parliament.

Love Island’s Thatcherite contestant – and what her comments exposed about meritocracy in the 2020s

13 Feb

This week there was huge outrage on social media about the fact that an influencer called Molly-Mae, who emanated from the ITV show Love Island, has been given her own book deal, Becoming Molly-Mae, at the tender age of 22.

Molly-Mae, to explain her relevance to a political blog, has recently evoked comparisons with Margaret Thatcher for advocating the value of hard work. In a Youtube series called The Diary of a CEO, Molly-Mae told listeners that she “worked her a**e off” for her wealth, advising them: “You’re given one life and it’s down to you what you do with it. You can literally go in any direction.”

She continued on her Conservative streak, saying: “I understand we all have different backgrounds and we’re all raised in different ways and we do have different financial situations, but I think if you want something enough you can achieve it.”

Since then, Molly-Mae has proven as divisive as – well – Thatcher. For every conservative delighted to find their poster girl, others reacted as though discovering that their milk money had been taken away. I dare Molly Mae to tell some of the UK’s lowest paid workers that they’re less hard working tha(n) someone who takes Instagram for a living”, wrote one user on the Twitter-sphere, echoing the sentiment of countless others.

Is Molly-Mae in the “right”? (literally). I should add that I have no specific interest in Molly-Mae, although I dislike the type of Twitter pile-on she has been subjected to, but it is interesting that her comments sparked such backlash; that the concept of meritocracy has now become heresy when espoused by a young person.

Maybe, though, part of the reason people were so cross is that the very formula of Love Island flies in the face of conservative values; that the show, along with the whole Instagram model of finding fame, has become symbolic of wider societal ills – leaving many less than impressed with the advice to “try harder”.

Love Island, should you not have had the pleasure, has always been a troublesome show. It is well known that a number of former contestants, and its host Caroline Flack, have died from suicide.

Its format, as far as I can tell, centres around the idea that love can be induced by the same processes seen in Stockholm Syndrome; that if you put two people in a close space together long enough, they will fall for each other. Year after year, a collection of hot young things go to Mallorca – the “Love Island” – in their bikinis and swimming trunks, to see if this effect can take place, earning big bucks from modelling deals afterwards.

At the risk of sounding like Mary Whitehouse at this point, I should add that it is, of course, no secret that young, attractive people have always enjoyed being able to make money from their looks. Power to you – if you have the body of a Baywatch star.

But I also think there have been signs that contestants were uncomfortable with having to do this. Molly-Mae, for instance, quickly dissolved her lip and jaw fillers – which had presumably helped her get a place on Love Island – after the show, and many have gone into completely different careers, distancing themselves from it. 

There’s Dr Alex George, a physician, who has become a mental health ambassador to the Government; Liam Reardon, who revealed plans to quit fame and become a property developer; and Faye Winter, who’s launched a homeware brand and also gone into property. Most have bought expensive houses and some have started families, enjoying the quiet life.

In other words, these contestants appear to have seen Love Island as no more than a launchpad to do what they actually want to do. They have taken advantage of what you might call a “short-cut” economy, finding the financial security that perhaps would have been difficult to achieve before.

It’s not very surprising they might have concluded this is their best option. In the current climate, what could any of these contestants look forward to if they tried to earn capital through more “normal” means, based on the experiences of their peers? A lifestyle of eating baked beans in a shared flat somewhere in London, spending over a third of their income on rent? You get the picture. 

Sadly, the traditional models to “making it” – financial security and a house – have rapidly depleted for people in their 20s, 30s and even older. For all the Government’s talk of “levelling up”, the movement has no generational feel. So why not “level” oneself up through the quick-fix solutions?

In essence, Love Island, in a strange way, should act as a wake-up call to politicians about the current confines of the economy. Far from hard-earned skills paying off, fillers and plastic surgery have become means to a better livelihood. Youngsters are absorbing a worrying message. “If you want something enough you can achieve it”… “if you can show some skin on the way.”

Tom Spencer: A one-off wealth tax is not the way forward – but a proportional property tax might do the job

20 Feb

Tom Spencer is a Young Voices UK contributor. He is also the lead organiser for the London Neoliberals and sits on its Steering Committee as Vice-Chair of International Chapters. 

Mel Stride, Tory MP and chair of the Treasury select committee, has just proposed a one-off wealth tax as a way of addressing the increasing national debt.

Why is Stride concerned about national debt at the moment? In theory, higher levels of debt should cause a rise in the real interest rate as investors demand a higher return in response to the greater risk of their loan. If this were to happen, then it could risk what is known as a debt-interest spiral – a state where governments accrue debt faster than they can afford to pay it back.

However, this is only problematic when the economy is not growing. Like anyone else, a Government should only view debt in regards to its ability to pay it back. If your profits are rising faster than your debt, then you’ve got nothing to worry about. The same logic applies to the Government – where nominal growth rate is greater than the rate of interest on that debt, then the debts value as a percentage of total wealth (or GDP) is actually decreasing.

Since the 1950s, the UK’s growth has almost always been greater than its interest rate. Indeed, the only exception was in the 1980s, when interest rates were increased instrumentally as a tool for fighting inflation under the Thatcher Government. Given we’re currently exiting one of the worst economic disasters in a century and interest rates are extremely low, it’s safe to say that we’re not at risk of entering the feared debt-interest spiral.

But even if we were, a wealth tax is a rather poor way of addressing this problem. Although some variants of the wealth tax are said to raise as much as £260bn, this is a very inefficient and distortionary way of taxing individuals. In recent history over a dozen countries in the OECD have implemented wealth taxes. Today, only three still have them in place. If these taxes were so effective, why would almost everyone abandon them?

The reason is they simply don’t raise enough revenue normally to justify the administrative and political costs. Looking at wealth taxes in Switzerland, a 2016 NBER working paper found that for every 0.1 per cent rise in the tax, the value of reported wealth falls by 3.5 per cent. This creates a system whereby those more savvy with their creative accountancy end up avoiding the tax en-masse, to the detriment of honest wealthy people.

Indeed, Britain is no stranger to this phenomenon. Denis Healey, former Chancellor of the Exchequer, famously explained his experience with the policy as follows: We had committed ourselves to a wealth tax; but in five years I found it impossible to draft one which would yield enough revenue to be worth the administrative cost and political hassle.” This is a Labour chancellor admitting that wealth taxes are not necessarily the way to go; so, why does Conservative Mel Stride disagree?

Of course, the plan proposed by Stride aims to get around these perennial problems with wealth taxes; rather than aiming to tax future wealth year on year, his plan is for a one-off tax applying retroactively. But this abandons one of the most basic principles of good tax policy given by Adam Smith in his Wealth of Nations: certainty. Regardless of the economics, from an ethical perspective it’s paramount that the individual should know their tax obligations at any one point, for this is the only way to ensure that the system is fair. To abandon this principle and retroactively seize wealth from someone gained before the tax existed is pernicious and unjust.

However, there is another tax that could help address wealth inequality and that is the proportional property tax (PPT). The Government are currently rumoured to be looking to replace stamp duty and council tax with an annual 0.48 per cent tax on property value. Given that the largest reason for rising wealth inequality is the housing market, taxing property values would help reduce inequality by reducing the incentive to take advantage of the housing crisis.

Excessively strict planning laws have gamed the housing market so house price inflation will always rise above earnings; this means those with the capital to get on the ladder are at a privileged position over less well-off individuals who cannot afford the initial investment. What a PPT would do is create an incentive for those holding multiple houses to sell off their excess, freeing up new homes for other individuals; therefore, spreading the housing wealth more equitably.

Whilst this plan may not raise the additional £60bn that Mel Stride hopes to get out of his one-time retroactive wealth tax, the country does not need £60bn at the moment. With debt as cheap as it is, we should instead focus on how we can generate the most growth possible. Taxing wealth in the way he suggests is baleful and will only act as a barrier to our economic recovery.

Instead, to help address wealth inequality the Government are better off pursuing a proportional property tax; this would reduce the incentive for wealth to be hoarded in housing, simultaneously reducing council tax bills for 76p per cent of households.

Rainer Zitelmann: Wealth taxes would not be popular, or Conservative. Sunak must remember this tomorrow.

7 Jul

Dr. Rainer Zitelmann is a historian and sociologist. The data cited in this article is analysed in detail in his recently published book The Rich in Public Opinion

Over the past couple of weeks, UK Treasury officials have been contacting private bankers to sound them out on how the country’s richest citizens might help pay for the huge cost of Coronavirus relief packages. Ahead of Rishi Sunak’s big speech tomorrow, this should be worrying for many.

Austerity might be off the menu for the state, but it’s definitely the dish that is being prepared by civil servants to be served to everyone else.

Labour are getting in on the act too with Annalise Dodds, the Shadow Chancellor, stepping onto the Sunday shows to explain with zero detail that the burden of higher taxation ought to fall on those with the “broadest shoulders” and that taxes needed to reflect the “increase in income and wealth inequality over recent years.” She’d called for wealth taxes in the preceding week during a speech at the IFS, again with scant information on what this would actually look like.

Now, leaving aside the fact that a lot of income and wealth inequality is mostly a proxy for geographic inequality and restrictions on growth of jobs and homes outside of major centres of population, we should question what brings together the Shadow Chancellor and Civil Service. Especially when it looks a lot like trying to confiscate wealth and punish those that have worked hard to get on in life.

This isn’t Conservative. The Civil Service should be reminded of that fact, and the party should remember the benefit of providing some clear blue water between the reds in Labour and the Tories in power. Rishi Sunak on Wednesday should signal he’s going in quite the different direction to keep Conservatives and the country on side.

In fact the party of a low-tax dynamic free market that in December ruled out an increase in the rates of income tax, National Insurance or VAT – should also remember voters aren’t keen on the state coming for wealth either.

In a poll conducted in 2018 by Ipsos Mori across the UK, France and Germany, voters were asked their attitudes to the rich and to tax asks of them. They were presented with two statements:

The first was: The taxes on the rich should be high but not excessively high because they have generally worked hard to earn their wealth, and the state should not take too much away from them.

Over the UK as a whole, 29 per cent agreed. Of Labour voters, 20 per cent agreed. Of Conservative voters, 46 per cent agreed.

The second: The rich should not only pay high taxes, but they should pay very high taxes. In this way, the state can ensure that the gap between the rich and the poor does not become too great.

Of the UK population as a whole, 38 per cent agree. Of Labour voters, 53 per cent agreed. Of Conservative voters, 21 per cent agreed.

What the survey was designed to reveal is the proportion of the population in a given country that envies the rich (“social enviers”) and compared this with the proportion who do not (“non-enviers”).

While there is a section of the population in Great Britain that envies the rich, the number of enviers in Great Britain is much smaller than in the other countries. Much lower in fact.

The survey data was used to calculate a Social Envy Coefficient – the higher the coefficient, the higher the proportion of social envy.

The coefficient for France is 1.21, which means there are considerably more social enviers in France than non-enviers. Germany’s coefficient is 0.97, which means there is an even balance between social enviers and non-enviers. In the United States, the coefficient is significantly lower at 0.42. But the lowest coefficient is for the UK, at 0.37.

In other words, a clear majority of the British population are not envious of the rich.

There are significant differences between what Conservative voters and Labour voters think about the rich. Conservative voters say that society as a whole benefits from the existence of rich people (e.g. as entrepreneurs who create new products) but just a fifth of Labour voters think the same.

Despite a platform of envy and higher taxes on offer from the most far-left Labour leader in history, the British people decided to plump for the man opposed to them. Instead of thinking of the rich as a cash cow, when asked to describe the rich Conservative voters plucked for the following terms: industrious, imaginative, visionary, bold, intelligent, and ruthless.

Five out of six being positive traits ain’t bad. Labour voters under Corbyn plucked for the alternative, rich people to them were: materialistic, industrious too, ruthless, bold, self-centred, and greedy.

Starmer has done a good job of modernising his party, but he needs to win over Tory voters that thought of the rich as imaginative industrialists, not just pander to a coalition that thinks of them as ruthless greedy materialists that has failed twice to put the party into power.

Like throughout the pandemic, the UK is not the first to encounter the issues at play. When a few years ago the then socialist president François Hollande introduced a supertax on France’s highest earners, many wealthy people left France.

The tax was subsequently abolished. And France’s neighbour Germany found that the bureaucracy associated with levying a wealth tax is simply not worth it. As a result, Germany has waived its wealth tax since 1997.

Treasury officials and Tory strategists should realise: Britain is a low-envy country; a pro-growth country, and one that knows that imposing more envy taxes on wealthier people simply will not work.

Leave this idea to the Labour left and start pushing for growth by removing, rather than adding to, the burden of the state on businesses and families.