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From Militant, No. 217, 2 August 1974.
Transcribed by Iain Dalton.
Marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).
The Labour Government’s intention to introduce a wealth tax has caused consternation amongst the ruling class. The leading firm of Tax Consultants has reported (The Times, 11/7/74) that “people are very worried”. The Institute of Economic Affairs has produced a pamphlet attempting to dispute the “oft-repeated slogans about the extent of the inequalities of wealth” whilst the CBI says that “in practice the rich may be made poorer but the poor cannot be made richer”.
The conventional definition of personal wealth included houses, furniture and household effects, cars, cash, life insurance policies, government bonds, stocks and shares and so forth. According to the Inland Revenue, in 1970 the richest 1% of the adult population owned 31% of personal wealth, the richest 5% owned 56% and the richest 10% owned 70%.
Polyani and Wood, in the IEA pamphlet How Much Inequality, which attempts to refute any suggestion of ‘massive inequality’ point to a number of factors which they claim tend to exaggerate inequality.
For example, all the wealth of a family may be attributed just to the husband since it is in his name: the wealth of some people with very small holdings is ignored, and some of the more evenly distributed assets, like houses, may be undervalued. However, they make little mention of defects in the figures which tend to lead to inequality being underestimated.
These probably outweigh those they mention. For a large proportion of the wealth of the very rich is not held in their own names, but in the name of discretionary trusts – tax-dodging devices which have made death duties almost voluntary! – and so does not get counted in the figures for personal holdings.
Also omitted are the holdings of very rich people who live a sufficient part of the year outside the country in tax havens like the Channel Isles.
Apologists for capitalism attempt to make the figures appear more acceptable by claiming that much inequality is simply due to disproportionate amounts of wealth held by those in their late fifties and early sixties who have saved up for retirement. A leading advisor to the Labour Party on the Wealth tax, Professor Atkinson, refutes this idea in his book Unequal Shares, where he shows that there is almost as much inequality within any particular age-group as there is in the population as a whole. The importance of inherited wealth, as against saving for retirement, is emphasised in another study which found that half the people leaving £100,000 or more had inherited £100,000 or more.
Unfortunately Atkinson himself sows confusion by arguing that the Inland Revenue’s figures should be adjusted by adding to every person’s holding of wealth the value of the state pension he can expect to receive. Since these are evenly spread throughout the population such an adjustment would knock the share of the richest section down by about 8%.
This is seized on by the IEA authors who want to include in a person’s wealth the value of all his prospective state benefits – unemployment pay, health service benefits etc. But though such benefits constitute an income which is not received directly in return for providing labour, entitlement to them in no sense constitutes ownership of part of society’s stock of assets, and it is totally mystifying to include this entitlement in with wealth. And anyway, social services payments come from money taken from the workers out of taxes, NI contributions etc.
For Marxists, the central feature about the ownership of wealth is that it gives the capitalist not only unearned income, but control over the whole productive system. From this perspective the broadness of the Inland Revenue’s definition of “wealth” can in fact be misleading. The majority of workers own negligible amounts of wealth – in 1970 almost 70% of the adult population owned less than £1,000.
But over the period of struggle for higher living standards during the “boom” numbers of wage, and particularly salary, earners have acquired modest “asset holdings” in the form of owning at least part of their house, some life insurance, a car, and perhaps some cash in a bank or building society – in 1970 another 20% of the population owned between £1000 and £5000 and a further 8% between £5,000 and £10,000. Although individually not enormous, the sheer number of these holdings mean that they make up almost half private holding of wealth. It is the build-up in this size and type of holding which has caused the share of the richest sections to appear to fall over the last sixty years – the IEA pamphlet suggests the share of the top 5% fell from 86% in 1911 to 56% in 1970.
However this tendency towards “greater equality” has in no way dislodged the rich from their control over the productive system. For the available figures show the richest 1% of the population holding 80% of the privately owned stocks and shares in the companies which control the productive system and extract the lion’s share of the profits from the working class.
The fact that some workers own their homes and a few other assets, while affecting the wealth statistics, in no way alters this monopoly of the means of production.
A common answer to these figures is to say that nowadays private holdings of shares are not very important since most shares are owned by Life Insurance and Pension Funds. This is completely false, for these institutions only hold one fifth of the shares and the remainder have stayed in private hands.
Moreover it is nonsense to think that most people in the country have an equal share in those funds; in fact the richest 1% have more than a 10% stake in both these types of institutions. So if we include the shares which the rich hold indirectly through these institutions, we arrive at the richest 1% owning around two thirds of all shares – this being a considerable understatement given the deficiencies of the figures – and controlling a good deal more through their domination of the institutions.
The question immediately arises as to whether the Labour Party’s wealth tax would seriously challenge this monopoly of ownership of the means of production. Precise proposals have not been made public, but presumably they will be fairly close to the 1969 plan in Labour’s Economic Strategy, which called for a tax of 1% on holdings of wealth between £50,000 and £100,000, rising to 5% on holdings above £400,000.
In the first instance the reaction of the rich just to the talk of a wealth tax has been one of horror. There can be no doubt how they would fight it. A profusion of tax avoidance companies would spring into existence. To some extent that process has already started.
But even supposing taxes were levied, it would, at the levels talked about in this document, amount to £250 million. How is this to be financed.
If the rich really had to pay it, they would respond by cutting investment in proportion. That would only intensify the crisis in the system. In political terms a Labour Government with such policies of clipping at the edges of wealth faces the old problem: either carry the measures right through to completely expropriating them, or they will resist to such an extent that the Government is left powerless.
Even if the tax was levied at much more penal rates than at present contemplated, it would be decades before the capitalists were forced to sell all their stocks and shares to the Government to pay the tax. The working class cannot afford to wait for such a gradual process of nationalisation! Nor will the rich wait while they are ‘gradually’ taken over!
Outright nationalisation of all the major industrial and financial companies would eliminate the capitalists’ control over the economy “at a stroke”; and with compensation based not on the stock market valuation of the firm, but on the basis of proven need, the working class would not be lumbered with a gigantic burden of interest on the bonds given in exchange for the companies nationalised, as occurred after the post-war nationalisations.
Such a programme is the only one which would effectively challenge the inequalities in our society, it must be taken up by the whole Labour Movement in response to the capitalists’ opposition to the present modest proposals for the wealth tax.
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