FactCheck: Have the super-rich got richer?
“Since the crash, the 1,000 – just 1,000 – richest people in Britain increased their wealth by no less than £190bn.”
Frances O’Grady, 9 September 2013
Union boss Frances O’Grady thinks the government has declared “war on working people”.
Railing against the “Eton-educated elite, with their serial holidays, hired help and inherited millions”, the TUC general secretary had an alternative vision: a million new council and affordable homes, a higher minimum wage, a return to the goal of full employment.
But how would we pay for all this? Ms O’Grady had a Big Number for the chancellor.
“According to the rich list, since the crash, the 1,000 – just 1,000 – richest people in Britain increased their wealth by no less than £190bn… so when they ask how we’ll pay for it, let’s tell them. Fair taxes – that’s how.”
Have the super-rich really been raking it in over the last few years while the rest of us suffer?
This figure comes from the Sunday Times Rich List, which tracks the assets of Britain’s wealthiest 1,000 wealthiest people. They were worth £450bn according to the 2013 list.
The number comes from totting up the value of people’s holdings in publicly listed companies, land, property, works of art and so on. It doesn’t include cash holdings, as the contents of tycoons’ bank accounts are usually not made public.
The crash had a dramatic effect on the fortunes of the super-rich, as our chart demonstrates.
In 2008 the richest 1,000 had assets totalling £412.8bn. By the following year more than £150bn had been wiped off the value.
Since then, the value of assets held by the Rich List entrants have come back up, from £258bn in 2009′s Rich List to £450bn this year – a rise of about £190bn.
So far, so unsurprising. If shares recover globally (which they have) and the super-rich hold a substantial amount of their wealth in companies (which they do), we would expect their net worth to rise as the world economy recovers.
Whether this represents a massive windfall for the oligarchs, and means they should pay more tax, is largely a matter of emphasis.
It’s perfectly true to say that rich list members have increased their wealth by £190bn. But only if you start counting in 2009, at the lowest ebb, and only if you ignore inflation.
On the other hand, if you factor in inflation (courtesy of the Bank of England website), and look a little further back, this year’s figure of £450bn is less in real terms than the 2008 estimate of £412.8bn.
So you could say, equally truly and based on the same statistics, that the fortunes of super-rich have never recovered from the effects of the crash.
Should they pay more taxes anyway? Of course that’s a matter of opinion. Michael Meacher, the Labour MP who first came up with this line about the rich list, sees the (partial) revival in the fortunes of the super-rich as evidence of “a surge towards ever more extreme inequality”.
But economists don’t tend to rely on the Sunday Times Rich List to measure inequality. The Office for National Statistics’ most recent bulletin on household income showed that the richest fifth of households saw the biggest fall in disposable income between 2010/11 and 2011/12.
Income inequality fell during the same period, according to official figures, partly due to a drop in earnings among higher income households, and partly due to government policy on tax and benefits.
The same figures showed that the richest fifth paid nearly a quarter of all direct taxes (like income tax), whereas the poorest fifth only paid about 10 per cent.
Figures from HMRC show that the very rich pay an even higher percentage of income tax, and their share is getting bigger.
In 2013/14 the top 1 per cent of taxpayers are expected to pay 29.8 per cent of all income tax collected. The bottom 1 per cent pay nothing and the poorest 10 per cent pay just 0.4 per cent of all income tax.
Indirect taxes (like VAT, alcohol and fuel duties) tend to hit the poorest households the hardest. That’s why, if you include direct and indirect taxes, the very poorest and richest pay an almost identical percentage of gross income as tax.
Yes – the value of the financial assets of the super-rich have recovered since the crash, if you are happy to take the Sunday Times Rich List as gospel.
But if you take inflation into account, the oligarchs have not quite seen their wealth recover to pre-crash levels.
Does that mean we should feel sorry for them? Probably not – the amounts of money involved are still staggering.
But if we are thinking about squeezing the super-rich let’s not forget that, according to official figures, the top 1 per cent of taxpayers are already shouldering a bigger share of the income tax burden than at any time over the last 15 years.
By Patrick Worrall