How much does Labour care about inequality?
In my posting on the day of the recent local elections, I affirmed my belief in a fairer and more equal redistribution of power and wealth in our society. Given this belief, I found myself in full support of a letter which my friend Jeremy Mitchell wrote recently to the Secretary of State for Business, Enterprise and Regulatory Reform. With my friend’s permission, I share it with you …
Rt Hon John Hutton MP
Secretary of State for Business, Enterprise and Regulatory Reform
1 Victoria Street
London SW1H 0ET
13 May 2008
I have not read the whole of the speech you made recently extolling the virtues of wealth. However, I understand that it included the sentence ‘Rather than questioning whether huge salaries are morally justified, we should celebrate the fact that people can be enormously successful in this country…Rather than placing a cap on that success, we should be questioning why it is not available to more people.’
What puzzles me about your approach is that you appear to equate wealth with success. Are you using a tautology here? In other words, if people are wealthy they must therefore be successful? Well, successful at making money, perhaps, but success can be measured in countless other ways – success at being a good surgeon, at being an outstanding teacher, at writing a poem that gives delight to thousands. The problem is that these and many other kinds of success in our society are not rewarded by inconceivable – or even conceivable – wealth.
Many of the hugely wealthy people in Britain, whose praises you sing, seem to have made themselves rich by in effect buying and selling money in its various forms. It is difficult to see how a city trader who makes a small fortune by talking down the price of a share in order to buy it on the cheap before watching its price rocket back up again can be said to set an admirable example for us lesser beings. And are we supposed to admire the asset strippers, who make themselves fortunes by buying companies in order to break them up? Even the Director General of the CBI has criticized the bonus culture that has turned thousands of bankers and city dealers into millionaires, because the benefit structure rewards success but does not penalise failure. He pointed out that the directors of a number of investment banks have overlooked basic risk controls in their drive to increase profits and enhance their profit-linked remuneration.
When things go wrong, however, Britain’s super rich just walk away with their pockets full. For example, Adam Applegarth, chief executive of Northern Rock, who led a major financial institution from profitability to ruin, is said to live in a £2.5 million mansion and has walked away with a £760,000 pay off, funded by shareholders who have seen 80% or more of the value of their investment wiped out. Bob Diamond, head of investment banking at Barclays, was paid £36 m last year even though Barclays has had to write off £1.6 bn through its reckless involvement in the US sub-prime housing market. Is this the sort of success you ask us to admire?
More generally, we are witnessing the extraordinary sight of a Labour government apparently content with a situation in which society is becoming less and less egalitarian. The distribution of wealth is now back to where it was before the second world war. In the last twenty years, the earnings of the average FTSE 100 chief executive have gone from 17 times the average employee’s pay to a multiple of over 75. To quote The Economist, income in the UK is ‘…distributed more unequally that in almost any big rich country except the US.’
The electorate are not stupid. They know what is happening – and they do not endorse it. According to the British Social Attitudes Survey, 76% think that the gap between rich and poor is too wide. Poverty has a relative as well as an absolute dimension. The feeling of bitterness at the financial excesses of those who are in a position to determine their own remuneration is spreading more and more widely. Do you really think that this is not a major contributory factor to Labour’s poor performance in the recent local elections in England and Wales?
Jeremy Mitchell
May 18th, 2008 at 1:35 am
I certainly have trouble believing that anyone switched their vote to the Tories because they were upset at the gap between rich and poor.
May 18th, 2008 at 12:27 pm
No, Alun, but Labour voters could well have stayed at home because they do not see the Government as sufficiently focused on their concerns.