How Labour loves the rich
WORKERS, SEPTEMBER 2008 ISSUE
The Labour government has embraced the super-rich, making Britain their tax haven. It allows 25,000 non-domiciled multi-millionaires to pay no income tax. When some MPs briefly suggested taxing the non-doms this summer, the interests of the 25,000 easily defeated those of the 50 million. In 2006, 54 billionaires paid a total of just £14.7 million in income tax. So, unsurprisingly, inequality has reached record levels.
Brown cut capital gains tax (40 per cent under Thatcher) to just 10 per cent on gains made on assets held for two years, the same rate that private-equity partners paid on the "carried interest" they gained from the sales of the companies they had bought.
In 1997 Brown ended the dividend tax credit, grabbing billions from our occupational pension funds (and forcing higher contributions). The government then encouraged the City to push our pensions savings into ever more dodgy financial instruments. In 1997, savings were 9.5 per cent of income; they are now just 2.1 per cent. Overseas investors fund private-equity companies whose profits rob our pension funds of the gains.
Private equity companies borrow hugely to fund their purchases. Interest on debt is deductible from profits, so these companies load their businesses with just enough debt to wipe out their tax liability: the taxable profits disappear, and so do their taxes.
The rest of us subsidise these pirates through our taxes. Since 2000, the tax paid by giant corporations has risen just 4.7 per cent, the tax paid by the big banks has risen by 27 per cent, but the tax paid by small firms has risen by 132 per cent.
Debenhams, under private-equity ownership, got £22 million in tax credits in just two years. The AA, under private-equity ownership, stopped paying tax and the Inland Revenue owed it £67.5 million by the end of 2005. Saga, under private-equity ownership, claimed a tax refund of £18.7 million. The global financial markets have become a machine for enriching the few while loading debt on to the many. The interests of hedge funds and private equity are completely opposed to the interests of the vast majority of us.