Another voice
The wealth trap
Auberon Waugh
Tt was James Callaghan who, as Chan-
cellor cellor of the Exchequer, made the discovery, which he announced to the Labour Party conference at Scarborough in October 1967, that further increases in public expenditure would mean raising the money from 'our people' — i.e. the lower classes. The idea was a myth that vast revenues could be raised from further taxa- tion of the rich — the much vaunted one per cent of the population who owned 99 per cent of the nation's wealth, or two per cent who owned all the nation's wealth, or whatever ludicrous statistic one preferred.
Mr Callaghan's point was not that he had any distaste for squeezing the pips even drier, merely that such an operation would be fiscally unproductive. Within a few months, he had devalued the pound and resigned, so the Labour Party did not have to hear a repetition of this appalling heresy. Roy Jenkins, who succeeded him, pandered to the myth by raising the highest brackets of tax on unearned income, already at 98 per cent, until the unfortunate recipients of these large incomes were ac- tually paying more than 100 per cent of their top bracket (or twanche, as it became during that glorious spring). This was a one-off affair, cheerfully acknowledged as a tax on capital or 'wealth', and Jenkins was cheered loudly for it, but I doubt whether it earned the Treasury more than a couple of hundred thousand pounds.
The theory that there are vast revenues to be raised in this way remains deeply embed- ded. It is possible to find North London housewives and female novelists who are firmly of the opinion that all income over £20,000 per annum should be confiscated, but they have generally reached this conclu- sion by philosophical rather than by fiscal arguments. Fiscally, as I try to point out to them, such a tax would bring in nothing at all after a very short time, since we would all see to it that we did not receive more than £20,000 from any source.
To the extent that the Labour movement is inspired and held together by envious hatred of the rich, Mr Shore's 'alternative' Budget, published a week before Sir Geof- frey's, might be judged a harmless enough exercise in make-believe. It would be easy to write off Mr Shore an an opportunist try- ing to hold his crumbling party together and win a little credit for himself at the same time. Nobody is really going to believe a Chancellor could increase public expen- diture by £11,000 million and double government borrowing to £6,000 million in a single Budget without finding the IMF in occupation of 11 Downing Street when he returned later that afternoon. He is just a schoolboy playing with sums, promising everybody barley sugars if they will take him seriously. In any case, since he has made an advance announcement of his in- tention to devalue the pound by 25 per cent in two stages, no sooner will any possibility of a Labour victory at the next general elec- tion arise than there will be a run on the pound followed by a collapse of the curren- cy. He will find the IMF in occupation of 11 Downing Street even before he arrives there.
None of us may be deceived, but it is quite likely that outsiders will be. If, as seems perfectly possible, Labour not only holds Darlington but holds it creditably on Thursday, humiliating the obviously rather unpleasant Conservative candidate in the process, then people will start taking Mr Shore's proposals rather more seriously. The danger of the next Labour government, as I never tire of pointing out, is not the danger of Tony Benn and Peter Tatchell, any more than it is the danger of the Of- ficial Monster Raving Loony Party. It is the danger of Peter Shore. To the extent that he believes any of the rubbish he speaks — and I do not think he is a cynic; his opportunism is a sincere expression of everything he holds most sacred — Mr Shore is as disreputable and as dangerous a politician as any in the business.
The greatest dishonesty in Mr Shore's 'alternative' Budget is not where he pro- mises old age pensioners that he will double their Christmas bonuses, or even where he assures 'long-term unemployed' that he will increase their benefits by £10.60 a week. One may jib at this second measure in that it will inevitably enfold a huge number of extra people in what is fashionably called the 'poverty trap' but should more ac- curately be called the 'welfare trap'. It amuses me to hear the Left pilgerising about 'the poverty trap' as if it were one and the same thing as cockroaches in sub- standard Newcastle council housing. In fact, as we all know, it is the product of ex- cessive welfare provisions and nothing else. If wages are lower than welfare entitlements, for the unemployed, then it is common sense to stay at home.
We may also complain about Peter Shore's lavish scheme to spend £5,000 million creating 'jobs' in the public sector. When this has been added to the £4,000 million he proposes to spend on various aids to in- dustry, he hopes to create 500,000 'jobs', or non-jobs, or half-jobs, depending on the extent to which they are anything but a hideously expensive pretence of employ-
ment. I should have thought that nothing was more destructive of self-respect than to be employed in a useless or redundant oc- cupation, as part of Peter Shore's vicarious act of charity, using other people's money to create a permanent drain on the economic vitality of everyone else. But that may be a personal feeling which by no means all of the unemployed would share.
At least this half of Peter Shore's collec- tion of Walter Mitty fantasies seems to derive from genial intentions, however wrong-headed. He would really rather like to spend more of other people's money 00 barley sugars and humbugs for the elderly at Christmas time, on building hideous new housing estates, on hospitals and higher benefits for everyone. Never mind that he has to present these genial leanings as If they amounted to a passionate conviction' these footling little bonuses as if they were desperately needed. His real dishonesty on- ly emerges when he tries to explain how he will pay for his luxuries. He will make the high earners pay, he says: by this he means anyone earning over £13,000 a year. There will be higher na tional insurance contributions for those in this bracket, he says, higher capital transfer tax, mortgage interest relief will be, disallowed in the higher brackets; there be a wealth tax, a great campaign will be mounted against tax avoiders and evaders. In other words, anybody and everybody will pay except the lower classes, those whom Mr Callaghan referred to as 'oar people'. In a moment of exuberance, Mr Shore even went so far as to announce that 93 per cent of the population would be bet; ter off as a result of his 'alternative Budget. Does he honestly expect us t°,1 belive that the remaining seven per cent WI: pay for the creation of 500,000 new 'jobs , provide the long-term unemployed' with .l an extra £10.60 a week and all the rest of • In fact, very few of his proposals are fiscally relevant. In his self-indulgent, reveries, he has confused the pleasures of giving money to the poor with the pleasures of robbing the rich. Both may be highly en- joyable occupations, but they no longer complement each other. The existing wealth trap already ensures that there is nothing_ left to share out which will make the slightest difference to anyone. When I hear my French friends blinding and groaning about Mitterrand's wealth taX, Ipoint out that we have lived through seven socialist administrations in Britain since the war, and survived them all. I have no dou.c.! that we would survive Peter Shore too. Th! thing to do is not to panic, but try to staY.! step ahead. Among Shore's other proposal After fttehre Darlington, asIofszcpheaonpglee may well start to take the socialist threat inn' seriously again. The worst this abominable little man can do at present is to frighten us. We should not let him do it, but it would e may be ig not bttoeareedcognise that other PebPl
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