Westminster isn’t sure. But it’s suddenly obsessed with them
Recently, one Tory cabinet member went for dinner at a top London hotel with some of the most famous members of the financial elite. Good food and better wine: it was the kind of occasion that, in days gone by, would have turned into an orgy of mutual self-congratulation. But the world has changed. The bankers spent the evening attacking the Conservative party for not doing enough to defend them. The cabinet member became steadily more irritated, and as soon as he left the hotel, turned to a friend and decried ‘the obscene arrogance of these people’. The contempt, it seems, is now mutual.
Now is not a good time to be rich in Britain. This Tory’s hostility towards the wealthy is just a single example of a mood that’s seized hold of Westminster. A decade ago, millionaires and billionaires were feted uncritically by the leaderships of both parties. Few asked questions about where their money had come from, let alone whether it was deserved. New Labour famously declared that it was ‘intensely relaxed about people getting filthy rich’. But now politicians are competing with each other to see who can come up with the most damning epithet for their public enemy no. 1, those they term the ‘undeserving rich’.
Ed Miliband has attacked the ‘selfish, greedy and immoral’ bankers ‘who took millions while destroying people’s savings’. But this is positively mild compared to George Osborne’s attack last weekend on the ‘leeches on society’ who secrete their money away in offshore bank accounts.
It is easy to dismiss the Tories’ hostility as mere political positioning. But it isn’t. It’s visceral. They believe that the ‘undeserving rich’ are in danger of discrediting the case for capitalism and driving the country to the left. As one Tory minister says, ‘the system needs some sort of moral defence’.
That defence, they argue, is being undermined by these people. They wonder if it can be right that in the last two years, the average salary package of a FTSE 100 chief executive has gone up by almost a third to 3.5 million pounds over a year while the index itself has only risen by 9 per cent.
Who precisely falls into the category of the ‘undeserving rich’ depends on your ideological predilections. Russian oligarchs or the families of Middle Eastern despots are, perhaps, the most obvious examples. They have acquired huge wealth but often by illegitimate means. Then come those who evade, to use a favourite phrase of both David Cameron and Ed Miliband, ‘their responsibilities’. This includes Mr Osborne’s ‘leeches’ who dodge their taxes or — more controversially — the bankers who went back to paying themselves mega-bonuses only years after being saved from going bust by the taxpayer. Osborne is said to be angry still that top Goldman Sachs executives ignored his advice not to pay themselves big bonuses in 2009.
Strikingly, when Ed Miliband said that irresponsibility at the top had been one of the contributing factors to the riots, David Cameron and Iain Duncan Smith rushed to agree with him. It became a new consensus. Duncan Smith tells friends that his call for those at the top to set an example solicited a better response from the public than almost anything else he has ever said. Politicians believe that they have discovered a new deep vein of public opinion — and they are all trying to tap it.
Tories are becoming particularly worried about the undeserving rich because banks are about to return to the political front line. No. 10 is acutely aware that as long as the banking elite are seen to carry on behaving badly, it is politically almost impossible to defend the financial sector. This is a significant problem given that this sector remains the largest part of the UK economy and one of the few areas where Britain outperforms almost all other countries.
On 12 September, the Independent Commission on Banking will set out how banks should be reformed. Tory ministers are deeply worried about what Sir John Vickers, the Oxford economist who heads the banking commission, will propose. They fear that he will demand what one calls ‘draconian rules on ringfencing’, which would force banks to separate their retail and investment arms.
I understand that both 10 and 11 Downing Street believe Sir John’s proposals are going to be too strict, more a response to the last crisis than a protection against future ones. They fear that they will only succeed in harming the British banking sector still further, thereby retarding the recovery. But they are nervous about saying this in public, fearful that they will be portrayed as the bankers’ friends. Indeed, George Osborne has already told David Cameron that the only chance they have of winning the argument on this subject is if the Prime Minister personally fronts it up.
Adding to their problems is that last month, in a meeting with officials, Sir John made it clear that he would protest publicly if he suspects his report is being watered down or kicked into the long grass. He also has a powerful ally in the Business Secretary, Vince Cable, whose only worry about the report is that it won’t go as far as he would like.
It is a sign of how the politics of the ‘undeserving rich’ works that the Tories believe that their only chance of being heard on banking reform is if they can show that they are dealing with the problem bankers. Plans are being hatched in Downing Street to try to claw back the bonuses of individual bankers whose actions are deemed to have contributed to the crisis, in the hope that this move will persuade the public that something has been done.
If the undeserving rich are a problem for the Tories, they are an opportunity for Ed Miliband. New Labour made a pact with the rich that they would let them do what they want as long as they paid taxes that could then be spent on public services. Bankers were allowed to take extraordinary risks in London, as long as they gave 40 per cent of their bonus to HM Treasury. This whole disreputable model collapsed with the financial crisis. But there was something else that dictated New Labour’s unquestioning attitude to the rich: a belief that attacking any group who were successful looked like an assault on aspiration, or class envy.
Ed Miliband rejects this analysis. Instead, he argues that there are now people at the top who are holding everybody else back — bankers who refuse to lend, for example, or energy companies who overcharge. Confronting the people who are holding Britain back, so the logic goes, is the duty of a national leader.
Those around Miliband argue that this is the new centre ground, because it places him as the defender of the many, not the few. There are those in his intellectual circle who believe that this argument can be expanded out to take on the vested interests that oppose reform of the state to give him a less old Labour and more rounded ‘people against the powerful’ message.
Over the next few years, there’ll be a sign of whether or not Cameron thinks he is on top of the problem of the undeserving rich — the 50p tax rate. The Tories are becoming increasingly convinced that this globally uncompetitive rate is doing real harm to Britain. It punishes the deserving rich, the acceptable faces of capitalism who are Britain’s best chance of returning to prosperity. It hits the worthy and the unworthy equally hard. But No. 10 remains wary of scrapping it because of the public mood. There are those in Cameron’s circle who are quick to point out that even now half of their voters support it. They are nervous that abolishing it would make them look like a government of the rich, for the rich, by the rich. And just as nervous that Labour would say exactly that, over and over again.
The undeservin g rich are seen by both parties as the embodiment of two of the defining problems of our age: the bubble economy and the absence of social solidarity. The scorn being heaped on them shows that both Labour and Conservatives wish to re-moralise their politics: to replace the idea of ‘what matters is what works’ with a clear idea of right and wrong. It’s not an easy dividing line to draw. But it’s clear that the undeserving rich are on the wrong side of the line.
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