Tuesday 26 November 2019 6:02 am

Ignore Labour, Britain needs billionaires to feel welcome

Labour wants to get rid of billionaires. If that sounds hyperbolic, just listen to how the party’s heavyweights talk about billionaires, in their own words.

“No one needs or deserves to have that much money,” shadow chancellor John McDonnell has declared. “It is obscene.”

Meanwhile, Jeremy Corbyn, who hopes to become our Prime Minister next month, has said: “There are 150 billionaires in the UK while 14m people live in poverty. In a fair society, there would be no billionaires and no one would live in poverty.”

Then there’s the Labour party’s manifesto, released last week, which states: “They tell us we shouldn’t care about inequality, because social mobility allows those who work hard to get on. But nobody becomes a billionaire through hard work alone, and as inequality has grown, it has become more entrenched.” 


It is hard to know quite where to start with this declaration of a fatwa against success, but let’s begin with the numbers. Why only billionaires? Does someone with  £100m really “need” all that money? Or £10m? Or £1m? Doesn’t allowing such sums also result in inequality? What level of wealth ceases to be “obscene” for Labour?

The answer, of course, is that a Corbyn government would not want to limit its attack to the billionaires. You can tell this from how often the rhetorical flourishes Labour MPs use are broadened to identify the enemy as the “top one per cent”. This vulgar, greedy cohort is denounced for having more than its “fair share”. 

There is a hitch, though, when it comes to wishing to banish such individuals from the country: according to the Institute for Fiscal Studies, the top one per cent of earners contribute over a third of income tax revenues. 

There has been much discussion in recent weeks about the costings of Labour’s additional spending programme. The Conservatives put it at an extra £1.2 trillion. But let’s put it at nil. What if the “top one per cent” got the message they were unwanted and scarpered? Immediately, the country would be much more equal. The difficulty is that those of us left behind would face huge tax hikes.

Even if we focus on Labour’s more modest initial goal to eradicate only the billionaires, it still has not been made clear how this would be achieved. Would billionaires have their wealth confiscated? What would stop them simply taking it out of the country, given that McDonnell has denied that exchange controls would be reintroduced.

My hunch is that the Corbynistas would not need to worry about the details. They plan a “super rich rate” of tax. But I suspect that many of the “super rich” would jump before being pushed. After all, for them leaving the UK would mean not just avoiding Labour’s tax rise, but taking the opportunity of a tax cut. 

The effective top rate in the UK at the moment is 47 per cent (45 per cent plus another two per cent for National Insurance). In New Zealand, it is 33 per cent; Trinidad and Tobago, 25 per cent; Estonia, 20 per cent. There is plenty of choice.


Others might decide to stay but allow their earnings to slide. The paradox is that Labour’s complaint that the very rich do not “need” all that money is in itself the danger. 

It is true that, beyond a certain level, money is irrelevant in terms of lifestyle. Rather, the spur beyond this point is that sense of achievement to see a business expand — creating new jobs, providing new products, innovating, experimenting, taking risks. If such efforts are resented, some may decide to shrug and not bother.

The stance that Corbyn and McDonnell are taking is extreme and impractical. Fortunately, the current polls suggest that it is unlikely that they will win a mandate for their programme.

However, even if they don’t there is still a deeper battle to be fought for public opinion. Labour’s reasoning that the amount of wealth in the country is fixed and that the question is purely how to distribute it has not been challenged with sufficient rigour. 

Similarly, the general notion that billionaires are baddies has been left unchallenged. The Conservatives have avoided getting into an argument about it, and scrutiny from the media has been muted. 

Some have noted the point about the threat to tax revenues if the rich should flee. Others have made reference to the significance of some of the charitable contributions made by wealthy individuals. 

But these are secondary to points to the fundamental defence of capitalism, which is that the way you become rich is by satisfying the needs of others, by providing products that people choose to buy as they are better than the alternatives. Demonising entrepreneurs is a sure path to ruin for everyone.

That does mean that inequality is essential. Poverty in this country is an important challenge to tackle, but the way to defeat it is not to denigrate the wealthy. Boris Johnson has started to talk about “levelling up rather than levelling down”, which is a positive start. 

But it isn’t enough. The truth is that a dynamic, growing economy that allows widening prosperity needs to welcome billionaires into the mix. Even if Corbyn is defeated on 12 December, our free enterprise system will only be secure when that case is accepted.

Main image credit: Getty

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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