Posted on 02/15/2008 9:29:58 PM PST by TigerLikesRooster
An embarrassment of richness
Review by Brian Groom
Published: February 15 2008 20:22 | Last updated: February 15 2008 20:22
Who Runs Britain?: How the Super-rich are Changing Our Lives
By Robert Peston
Hodder & Stoughton £20, 360 pages
FT bookshop price £16
Since Margaret Thatcher’s free-market revolution, the orthodoxy in Britain has been that in freeing the wealth-creators to become rich, everyone benefits. Recently, though, the sheer scale of the riches enjoyed by a tiny minority – and resentment at their success in avoiding taxes – has prompted many to question that orthodoxy. Ironically, we now have a Labour prime minister who once argued passionately that the super-rich should pay their fair share of taxes, but who now, in the words of the author of this book, is “careful to the point of neurosis’’ not to change the tax system and risk driving them elsewhere. In Who Runs Britain?, Robert Peston, the BBC’s business editor and a former FT journalist, offers an account of these developments that, while uneven in quality, catches the zeitgeist of Britain and the paradox that is Gordon Brown.
A turning point came last June when Nicholas Ferguson, a senior provider of funds to the private equity industry, voiced concern in an interview with the FT about tax rates that left buyout executives “paying less tax than a cleaning lady’’. And that was even before credit markets froze in August and the bubble of financial innovation burst. As Peston puts it: “What many will find offensive is that just as the spoils of the boom were disproportionately accumulated by the super-rich, so the costs of the subsequent bust are being heaped on all of us.’’
That is a global story, of course. Its particularly British aspect is the extent to which New Labour put the health of the City of London, and its international success as a financial centre, at the heart of its economic strategy. Tony Blair’s love of the wealthy is well known; less appreciated, yet more remarkable, is how far the more puritan-minded Brown, closer to his party’s socialist roots, became sucked in too. Hedge fund managers, private equity partners and bankers have become rich to a degree not seen since Victorian times during Brown’s tenure as chancellor and now prime minister. Any socialist-style redistribution has been from the moderately well-off to the moderately poor. The super-rich pay little or no tax.
Peston puts it down to a simple mistake: Brown thought he was creating tax breaks for US-style venture capitalists who would back new businesses; but the tax breaks ended up benefiting private equity firms buying and selling public companies. I doubt it was that simple. But Brown accepted private equity’s case that it can make companies fitter and stronger, and in the fuss that followed Ferguson’s remarks, the government changed capital gains tax in a way that hit entrepreneurs but left private equity partners largely unscathed.
This book has two main flaws. First, it is not about who runs Britain. Peston demonstrates how the super-rich can influence tax policy to their own benefit; he describes the corrupting influence of wealthy donors on politics; and he expresses concern that inheritors of this wealth might use it in ways that undermine democracy. But he does not suggest that the rich run the country.
And while its subtitle is How The Super-rich Are Changing Our Lives, it is in no sense a sociological exploration. At times it seems simply a wrapper for telling the big business stories of recent years, some of which – such as Allan Leighton’s efforts to turn round the Royal Mail – have little bearing on the overall theme.
His accounts, though, are lively and there is an interesting conflict in Peston’s attitude to the super-rich that mirrors Brown’s and, perhaps, that of the nation. While he is critical of excessive wealth, he is admiring to the point of being starry-eyed about the individuals who made it – notably the retailers Sir Philip Green, Sir Stuart Rose and the ubiquitous Paul Myners, whom he dubs “the New British Corporate Establishment’’. This would be a problem if he did not resolve the conflict intellectually; but he does. In an analysis of the private equity buyouts at Travelodge and the AA, he argues persuasively that, while the new owners significantly improved the performance of the businesses, the rewards went disproportionately to senior managers and owners rather than to employees.
Peston’s argument is not that the rich should be penalised, but that they should pay the same rates of tax as everyone else. That seems only fair, since their businesses rely on society’s infrastructure, including its hospitals and schools. The government’s fear of driving the super-rich away is surely exaggerated.
Brian Groom is the FT’s comment and analysis editor
Let the rich buy the politicians. The poor can’t afford to.
As a long time subscriber to the FT, you must understand that it is NOT the Wall Street Journal. It is a short-script scribe on weekdays and and UTTER left-wing disgrace on the weekend additions.
very disappointing
LOL! I somehow doubt that the Junior Bolsheviks who wrote the book and this article are Flat-Taxers. I would wager that they look longingly at the 90% tax rates of pre-Thatcher Britain.
Unlike, say, averaging men's weight, where even a sumo wrestler's weight wouldn't blast the previous average out of the water.
It’s pretty clear that here in the US we are about to elect the best president George Soros could buy.
Just like our republicrat party.
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