Well, the 1% is really a very British and American phenomenon.
The UK and US are by far the most unequal of the 25 richest countries in the world. Only Israel and Singapore come anywhere near our levels. The UK has greater economic inequality than Israel – and the Israel figures include everybody in the Gaza Strip. That shows just how divided Britain is. Broadly speaking, the 1% is anybody who earns £150,000 per year or more, or £200,000 for couples.
Its make up is very varied. They’re not all millionaires or multimillionaires but the majority of them work in finance. Only around 3% of the 1% are celebrities, or sports stars like footballers. The 1% currently earn about 12% of all income in the UK. That is the highest level in Europe.
In Switzerland, their 1% take half as much as our 1%. In France, the amount of money that their 1% don’t take, compared with our 1%, could fund an entire new national health service. The main reason that people at the top in the UK are taking so much is the cost of housing. It’s not that we don’t have enough housing: we have more bedrooms per person than ever. Our economic inequality means that we are doing all kinds of things really ineffectively: the 1% have several homes, while junior doctors are going on strike because in London and the South East they can’t even afford a bedroom.
It’s very plausible to argue that our very unequal society is a legacy of having had an empire, unlike the rest of Europe. That empire earned us money and when it ended, inequality began to rise in the UK because the wealthy in the south east of England didn’t want their living standards to fall, and so voted for the living standards of everybody else to fall.
In the UK, the dominance of the 1% peaked around 1913. It started to fall after the First World War because taxes were needed to pay for the war and the only people who had any money were the rich. In fact, losing a war is a very good way of securing more equal societies. The invading force takes wealth away from the aristocracy because they don’t want another war. Japan was so worried about a possible revolution after the Second World War that it actually handed out land to people in 1946 and 1947 to make a more equal society.
Owen Jones says there are fewer people in the whole of Japan earning €1m a year or more than there are in the Canary Wharf HQ of Barclays Bank. Of course, it is misleading to focus solely on the 1%. Below them the 2% and the 3% are also taking too much. The top 10% in the UK take 28% of all income, which, again, is by far the highest in Europe. But the 1% take nearly half of it. So, how do we end the dominance of the 1%? Well, it is far easier to tackle income than it is to tackle wealth, because the 1% can squirrel their money away in tax havens. If you sort out income inequality, then wealth inequality will get better. That has happened in places such as Denmark.
The best answer is property taxation. The wealthy can hide their money but it is very hard to hide a house. Ed Miliband was on to this before the 2015 election but made the stupid mistake of calling it the Mansion Tax. He should just have called it fairer property taxation and people may have got behind it. Financial crashes also hit the 1%. If, or when, there is a property crash in London, people won’t feel good about it but it will result in increasing equality.
In a lot of countries there is a slow and steady improvement in reducing inequality. It is only the UK and the US that are outliers. I think the fact that the two most economically unequal countries in the rich world have both recently behaved very strangely electorally – Brexit, and Trump – is down more to the inequality in those countries than anything else.
There is some evidence that the wealthiest are beginning to reduce their take in the UK. In 2012, the 1% were taking 15% of all income: now, it is down to 12%. But this is a little dubious because a lot of it was down to tax avoidance and people paying their tax early to avoid Gordon Brown’s 50p top rate. Mostly, my optimism that the 1%’s dominance will reduce is down to the fact that we just can’t go on like this. When you are the most unequal country in Europe, and are the most unequal you have been for a century, something has to give.
The people right at the top are becoming a little bit fearful about what’s going to happen to them. I think they are right to. One last thought – I used to worry that Britain was the only country in the world with no nice members of the 1%. Even America had Warren Buffett, but we seemed to have nobody. So thank heavens for Gary Lineker and JK Rowling.