Capping private wealth would be an admission of defeat

By Tom Harris MP

There’s a terrific scene in the TV adaptation of Chris Mullin’s A Very British Coup in which the newly-elected left wing prime minister, Harry Perkins, is catching the train to London and is asked by a journalist: “Do you intend to abolish first class, Mr Perkins?” To which Perkins replies: “No, I intend to abolish second class. I think everybody’s first class, don’t you?”

And there we have it: a template for New Labour half a dozen years before Tony Blair became leader of the Labour Party. New Labour’s appeal was based on an explicit acknowledgement that success, ambition and the pursuit of wealth are all Good Things. Suddenly the taxation of the wealthier was not an end in itself but simply a necessary evil. And it was okay to want a better job, a higher income, nicer holidays, a bigger house. Voting Labour became something you did for yourself as well as for the greater good.

That’s why we won.

Yesterday Compass launched a campaign for a High Pay Commission. Its inaugural statement reads:

“The crisis we find ourselves in is one significantly caused by greed. The salaries of those at the top raced away while the median wage stagnated. Inequality grew, and an economic crisis ensued. The unjust rewards of a few hundred ‘masters of the universe’ exacerbated the risks we were all exposed to many times over. Banking and executive remuneration packages have reached excessive levels. We believe now is the time for government to take decisive action.”

Fortunately, the chancellor has already dismissed the idea. But as dog whistle politics go, it’s pretty effective. After all, so many have suffered as a result of the banking crisis and no-one ever lost votes by having a go at those we perceive as spoiled and arrogant rich kids. But I can’t help thinking that the authors of that statement are the kind of people who might approve of attacking a Tory by-election candidate as a “Toff” and using top hats as photo props.

When the national minimum wage (NMW) is discussed, it’s often described as a concession by Tony Blair, as if it were something he had to tolerate in return for more “New Labour” measures such as public service reform. Wrong. The NMW was as much a New Labour as an Old Labour achievement because it levelled people up. It was exacly the opposite of class warfare, which is why there is now a consensus between the two parties that it should remain regardless of who forms the next government.

I imagine the so-called High Pay Commission (I wonder how much the chairman would be paid?) would have the aim of setting a national maximum wage. I doubt if a clearer example of the politics of envy has been aired at any time in the last 12 years.

This proposal has “securing our core vote” written all over it. Except it wouldn’t, because once you’ve addressed the understandable anger at certain individuals’ exorbitant salaries, pensions and bonuses, you’re left with the principle that a Labour government is setting a ceiling on individuals’ wealth. And that’s not what governments should be doing, because once you’ve established that principle, once you’ve raised a few cheers by ostentatiously depriving some bankers of their bonuses, where do you go next? What do you do when the media get round to identifying the next figures of public hatred? Target them too? How far down the scale do you go? After all, multi-millionaires may not be able to justify their bonuses to the general public, but neither can civil servants earning six figures or MPs earning five justify their incomes to some of those living off benefits.

Undoubtedly, there are already those typing in the comments box to the effect that, since the government already own the banks, it has the right to intervene to limit financial rewards of those still running them. As indeed it does. But most of the banks and financial institutions aren’t in the public sector. The principle that high bonuses are A Bad Thing is surely applicable across the board, whether a company is publicly or privately owned.

If government decides it can intervene in the market to dictate wages, why shouldn’t it have a role in deciding other areas of corporate policy? And if it starts doing that, it might as well nationalise the-… Oh. Okay, I get it now…

As disgraceful and unjustifiable as these bonuses were/are, they did not lead directly to the banks’ bankruptcy. Poor lending and investment decisions and reckless risk-taking did. So although we might feel better confiscating money from rich people, the actual effect on our economy would be negligible. And making yourself feel better is a very poor motivation for policy, whatever “the court of public opinion” might say on the matter.

And when any party starts producing policy “to secure the core vote”, it might as well write of the next election, go quietly into opposition right now and start thinking about the election after next.