29 OCTOBER 1983, Page 6

Another voice

The 1 per cent fallacy

Auberon Waugh

perhaps I am premature in detecting a slight shift in the attitude of polite England towards its handsome and charm- ing new Leader of the Opposition in the last few weeks. We shall have further oppor- tunity to study him, of course, now that Parliament has reassembled. Personally, while welcoming any change after the posturings and odious affectations of Michael Foot, his much-loved predecessor, I was at a loss to understand why so many impressionable young women described Mr Kinnock as good-looking. To me, he has always had the face of an habitual bed- wetter. This may be what they like nowadays, of course — the sensitive, new romantic look, the sort of man who will be putty in the hands of the New Woman. In any case, it was irrelevant to his suitability for the job. There is no reason why an habitual bed-wetter should not make a perfectly good Leader of the Opposition. Ingenious attachments are available from the Postal Bargains Department of the Sun- day Times to reduce the risk of public em- barrassment. If, as child psychologists maintain, the habit betrays some inner con- flict or unresolved anxiety, so much the bet- ter. There is nothing in the world so terrify- ing as a socialist with no inner conflicts.

I, too, may be blameworthy in that while brooding for so long on Mr Kinnock's unusual appearance and speculating about its possible causes I overlooked signs of a much graver incontinence, which has an im- mediate bearing on him as Opposition leader. The fresh air he had promised to bring to Labour's ghastly travesties of inter- nal debate suddenly becomes a very stale breeze indeed. Whether he wets his bed or not he has a Procrustean determination to make us all lie in it.

A few weeks ago I commented favourably on a speech he made in which he urged Labour to set their caps at the coun- try's higher-paid workers. Unemployed single-parent black lesbian prostitutes were all very well, he seemed to be saying, but they do not actually constitute an electoral majority. Many of them, in any case, might be expected to vote Conservative out of ad- miration for Mrs Thatcher's conduct of the Falklands war, or SDP, out of a more general admiration for Mrs Shirley Williams. Labour must be a national party, and must accept that some of the nation's so-called workers were really quite well off. This must have sounded strange in Opposi- tion ears, more attuned to reports from its own Alternative Statistical Service: 'In fact, more than 14 million Britons, a quarter of our population, now live in or close to ac- tual poverty' (Pilger International News Service, New York Times 18.4.80). But that

was what Mr Kinnock seemed to be saying at the time.

He struck a very different note, however, in his address to a Low Pay Unit Con- ference at Birmingham in the week before the Labour Party Conference, and I am afraid that it is this second speech which represents most accurately what must, for want of a better word, be described as his thinking. It contains the key to his plans not only for saving the nation from the destitu- tion, despair etc which he sees around him, but also (much more important) for winning the next election. Nobody can doubt that his first aspiration is doomed; the second might just be realised.

'We need a fairer and more progressive tax system,' he explained, as if these two were one and the same thing. 'As far as the extremes of wealth and income are concern- ed, Britain in the 1980s still looks rather like Brideshead Revisited.' No doubt he was rather pleased with this literary reference. If he had actually read the book, he would have remembered that Brideshead, when revisited, was an empty, echoing barracks, appropriated by the Government and van- dalised by the people's army which used its great marble fountain as an ashtray and lit- terbin for unwanted pieces of sandwich. But that is not the point which Mr Kinnock was trying to make, I imagine. ,He was revealing that his approach to winning the next general election (and to solving all our economic problems, for what that is worth) rests on what might be called the 1 per cent argument. Reduced to its simplest form, this argument runs that since the richest 1 per cent of the population own 23 per cent of personal wealth, then there can be no electoral disadvantage, and there might be some economic advantage, in finding government expenditure from that source. By the same calculation, the richest 10 per cent own 58 per cent of marketable wealth, the richest 50 per cent own 94 per cent, leav- ing only six per cent to be shared out among the poorest 50 per cent. These are not figures produced by the Alternative Statistical Service, or by a Time Out or New Statesman panel of economic experts. They are able to be extrapolated from Inland Revenue Statistics, published annually by HMSO. The 1983 edition costs £9.50.

Mr Kinnock chooses to concentrate on the richest 1 per cent which, according to the Pilger International News Service (New York Times 7.6.83), still own more wealth than the bottom 80 per cent of the popula- tion. Promising that a new Labour govern- ment would introduce large increases in capital transfer tax and capital gains tax, and would impose a new wealth tax — `to which the Labour Party have long been

committed and which ... is now essential' Mr Kinnock then proceeds to show his reasonable side: 'For instance, if we were to ask the top 1 per cent of wealth-holders to give up just 10 per cent of the value of their wealth, the proceeds would be sufficient to finance an increase in social security expen- diture of 65 per cent.'

What could be more reasonable than that? It pains me most dreadfully to think that the Duke of Westminster might be asked to give up 10 per cent of the value of his wealth, but one must accept this life as a vale of tears, and I suppose I shall just have to bear the pain . . .

The trouble with these seductive claims is that they have sufficient truth to be treated seriously, and they stick in the memory much more easily than the com- plicated arguments necessary to expose the essential untruths they contain. Where mat- ters of natural justice are involved, it is a waste of time to urge Mr Kinnock to distinguish between capital and current ac- count. Let us return to Inland Revenue Statistics to see how these figures are reach- ed.

In the first place, this magic 1 per cent in- cludes everybody whose disposable assets exceed £100,000. Total personal wealth was valued at £318 billion in 1979, of which nearly half is the value of people's houses. Insurance policies come next, at 17 per cent of personal wealth. Stocks and shares, the most easily disposable assets, account for only 11 per cent of the total. Personal wealth — call it capital, or savings, or what you will — is in fact a tiny and shrinking part of the economy, representing about one and a half year's purchase on national personal income and less than four years' purchase on annual government expen- diture. What Mr Kinnock is proposing, ef- fectively, is that those whose assets exceed £100,000 should in most cases sell their homes and move to some more humble abode in order to allow the Government to increase social security payments for one year. Similarly, farmers should sell one tenth of their land. All of which might make complete sense to Mr Kinnock, but who on earth does he suppose is going to buy the houses or land? If he excludes houses and land (as other OECD countries do) then his sums are nonsense. A 10 per cent levy on the richest I per cent's stocks and shares would bring in only £800 million.

But the real fallacy behind Mr Kinnock's dream of financing his new deal at a stroke is revealed when one looks at the distribu- tion of incomes. Although wealth, as defin- ed, is most unequally distributed, income is quite different. There the top 1 per cent receive 5.2 per cent of national personal in- comes before tax, 4.1 per cent after tax. In other words, the top 1 per cent enjoy an in- come only four times higher than they would have if everybody had the same in- come. Mr Kinnock must think again. Redistribution may be fun, but it won't solve any of the Government's problems.