The rich are threatening to leave the UK, again.
They won't. They keep saying they will, but they never do.
First, let's note why they won't. That's in part because they could already. After all, they're rich. They could live anywhere. But they don't. They choose to live here. And that's because it's the coolest country for them to be. It's the place to be, and to be seen to be. And when you're rich being seen really matters, a lot. Nothing will change that.
Then there's the fact that their children are here. And they won't want to change schools, leave their friends, or board.
Plus the fact that their in-laws are also here, and also don't want to move.
And they don't want to disrupt the whole delicate social infrastructure of life that makes them feel really important. There is simply no guarantee they'll recreate that anywhere else. And that matters a great deal when you're rich.
What is more, and like it or not, most of the rich are remarkably like other people: there have extraordinarily good reasons for not moving far, and for regretting it when they have. So they don't, in the main.
Second, there's the problem of where to go. Tax havens are intensely boring. And proving you really live in one is even more tedious because the first thing you want to do when living in one is get out.
Go beyond tax havens options and the big issue to consider is the tax rate. The UK will remain pretty friendly even with McDonnell's reforms. Candidly, the UK's rich are not, in most cases, going to find that many better places to live that they could bear to live in.
Third, let's also be clear that even if these people move the real question to ask is ‘so what?' By which I mean, what is the consequence? Less than they want to suggest, is the obvious answer.
In the first instance that's because these people and their supposed wealth are only loosely physically related in any case. Just because they leave the UK does not mean that the companies that they own and their investments will necessarily do so as well. The idea that they live over their shops and the shop moves with them is for fairy tales. So, in reality, almost any wealth they have in the UK, excepting their houses, is unlikely to leave the country with them.
So let's deal with that issue of their houses. Let me say straightaway that I am, of course, aware, of the problem of foreign buyers acquiring homes here and disguising the fact. But what we're discussing here are people resident in the UK who might leave. And under current tax rules leaving without selling is pretty hard. That's deliberate: I was involved in the reviews that gave rise to this law. So to become non-resident in the UK the rich must not just go, but they must also usually sell up here. But the homes will still be here. The wealth in them will not move. It will just be owned by someone else. And whoever buys those piles will still maintain them, pay for all the services that the existing owners use, and so on. And if the price falls? So what? We need house prices to fall, and decline at the top end will do not harm. This nonsense about the cost of these people leaving their homes at cost to us all is just that: nonsense.
Finally, let's look at the economics, albeit briefly. Here the facts are simple: billionaires are a sign of market failure. As anyone who knows anything about economics, markets and efficiency will know, if markets work properly then whenever profits go above a ‘normal' rate new entrants should come into the market and reduce the profit rate to normal again. So, the trend should be for lots of smallish firms making acceptable profits. But we don't have that: instead we have massive firms that accumulate wealth for a tiny number of people who earn exceptional, super-normal, profits. And that is the surest sign we have that we have inefficient markets that are not working in the common interest. Which is true, of course: they don't. The aberrations come from limited liability, patent and copyright laws, trust laws, and inherited wealth that is exceptionally lightly taxed so that it passes from generation to generation concentrating wealth. Anyone with an interest in efficient markets should object to this: the system we have denies opportunity to millions of potential entrepreneurs by locking them out of markets.
So, in conclusion, maybe a few rich people will leave the UK if Corbyn come to hold office. And maybe a very little bit less income tax will be paid in the short term as a result. Maybe. But my answer is, so what? The tax the very rich pay can be more than made up, if necessary, and the benefit of the reduction in inequality in this country will outweigh any such cost.
The reality is that the flaunting of wealth and the stress it creates undermines social cohesion in this country, undermines fair markets and denies opportunity to many hundreds of thousands of people to whom markets are closed. We can, and should, do without the system that generates this wealth in that case. A society that tolerates the gross and growing inequalities we now suffer is toxic.
Is Labour right, then, to target wealth of this sort? I say yes. And we'll all win from it doing so, including the wealthy. Which is the other reason why they will stay: they can afford to do so.
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Great article, but you forgot to mention that as taxes don’t fund government spending, we don’t need rich peoples money for the public purpose, either to pay taxes or indeed to buy bonds.
Let those who can and want to, just go. We don’t need you. Bye.
At the moment the UK is a destination for people on aggregate – some people who are rich in terms of personal capital ( which is often overlooked as a form of capital ) leave every year, also people with good incomes leave for places which often even better incomes e.g. the exodus of trained doctors and nurses. Those coming in are numerically greater, and that’s even with the many barriers to entry to the UK.
A major problem with Corbyn is that the countries he praises have net emigration ( rich, poor, middle class, if there’s a better life elsewhere then they go ), and people would rather not take their chances living in a country with a PM who lamented the end of soviet communism. He wants to implement soviet policies such as collective ownership where the individual is so small they have no meaningful stake as an owner and don’t get serviced as a customer either.
Corbyn’s policies are doubly ironic as so many of them are on aggregate for the few and not the many – examples include tuition fee abolition, free hospital parking and free prescriptions. I don’t think Corbyn has the intellect to appreciate that this is support for the rich, not the tax-haven sort of rich person, but certainly people of above average means.
If you can name a country that has policies understood and endorsed by Corbyn, and which has net immigration, then I would gladly be educated, but I can’t think of any.
This is so fascile I considered deleting it
But, I expect some will enjoy commenting on it so leave it be
I do however nite that John Lewis is a soviet and that free prescriptions are of course for the few (it takes the most extraordinarily warped logic on many issues to get to that one)
As to which country was successful using his logic? The West 1945 to 1975 – its most successful era
You beat me to it! I can only assume (generously) that the poster is being willfully ignorant to make a tendentious political point, probably better suited to the Express. Your moderation is respectfully moderate as always.
The West 1945-1975 is not a country. I think you are referring to a set of countries but I would like you to be specific because if taken on aggregate then your argument is blown out of the water.
Why?
Because on aggregate the West went for mainly social democratic market economies and not socialist economies, with SHI health care systems and not NHS ones.
Corbyn does not endorse SHI health care.
Torpedo, target, boom.
In 1960s terms Corbyn is a right-winger
Now stop wasting my time
This is a place for intelligent discussion and comment and you’re clearly not here to provide it
Yes, and we need a Mondragon or two here and the USA of all places has about 2 million workers in its co-operative sector with about $500 billion in revenues.
It would be good
‘He wants to implement soviet policies such as collective ownership where the individual is so small they have no meaningful stake as an owner and don’t get serviced as a customer either’.
Interesting……………
So you think that the privately owned banks who close down their bank branches and cash points and charge for using them in very poor areas is evidence putting the individual first do you?
Or how about the utility companies that close down branches and face to face contact with customers to enable ‘channel shift’ so that the ‘individuals’ (customers) have to spend their time on the phone or internet seeking out the services they need and wait endlessly whilst listening to music or frozen websites and advertisements at their expense?
All this is done BTW on behalf of the really important individuals I think that you are really talking about – the investors or actuaries of pension funds whose demands to maintain the value of their outlay mean by law they must come first – before the customer, the workforce – the planet even.
It’s modern capitalism John and it it is no better that the soviet style management other than in the soviet bloc it was the politburo that caused queuing; in the capitalist West it is investor dynamics. Either way it is the same result. Real people get a raw deal meaning that both systems fail.
If you had a smidgen less prejudice, you would see that BOTH are unacceptable and need to change.
I object to your arrogant dismissal of collective ownership. If you want to see how it can and does operate in the world today, try typing “Mondragon” into your search engine and then explain how, despite its well publicised issues, the Pais Vasco came to be the most economically vibrant and successful region in Spain, ahead even of Cataluna.
“Second, there’s the problem of where to go. Tax havens are intensely boring. And proving you really live in one is even more tedious because the first thing you want to do when living in one is get out”
I take it that you now consider the Isle of Man is not a tax haven. I’ve lived here over 50 years. Love the lifestyle and enjoy a great social life. It does lack good restaurants and shopping but that is no concern to me.
Some people think Ipswich is exciting as well……
I promised my parents I’d leave as soon as I could at the age of 12
I meant it
Perhaps Douglas should look at a twinning arrangement?
That was one of your more eloquent comments
Richard
Sorry but that’s simply not true. I’m a tax advisor in London and I have literally dozens of wealthy clients well prepared to leave. Their liquid wealth has already gone in anticipation. You are correct that their high value residential properties won’t be going anywhere, but some of them have been renting rather than owning for several years.
Where are they going? Several (Europeans) have already gone to Italy, taking advantage of Italy’s new “non-dom” regime. Some are ready to go to Jersey and Guernsey, having already bought there. Monaco features as well. Several with Asian sub-continent heritage will be going to Dubai. Florida is featuring for several fund managers.
You are quite right in saying that some will weigh up the pros and cons and decide, for the reasons mentioned by you, that they cannot replicate the lifestyle that they have in the UK. Several of my clients have indeed decided to stay (unless it gets too bad, or at least until their kids have finished their schooling).
The ones who have gone or who will go are not billionaires. Average wealth would be probably £25m to £100m. But there are plenty of them, and the reduced income tax and CGT take on from them is substantial. But I’m only with a medium sized law firm in Mayfair. The big 4 accounting firms, the second tier accounting firms and the big law firms will have many more clients leaving than I do, and much bigger players too.
So the transient hot money is leaving – thank goodness
But you do know that happens all the time, don’t you? It’s the normal ebb and flow? People go back home for exactly the reasons I noted.
Thanks for making my case for me.
Arrogant comment Richard.. many tradesmen earn a very good living doing building work for this type of individual, not to mention personal trainers, golf coaches, Pilates instructors and many other “auxiliary industries”. You might welcome their exodus but many won’t.
And my point is – they still will
To suggest otherwise is absurd
But, I accept we don’t need as many underground swimming pools: those who build them will find great work on the Green New Deal – and probably better paid
You are entirely missing the point
Richard
Wow – where does “transient hot money” come into it?
These are people who were either born in the UK or who have spent decades in the UK, and who have built up businesses which employ large numbers of people. The Asians going to Dubai are in their 50s and were born in the UK!
Several were non-doms who became “deemed dom” a couple of years ago when the laws changed. They were willing to stay under the new regime, but not for Corbyn.
I’ve just done a quick calculation of the liquid wealth of my clients who have either gone or are likely to go, and it’s around £1 billion (slightly skewed by one worth around £300m who employs over 200 staff in the Midlands).
That’s not what you implied
But I am still amused
Some of your clients are retiring. What’s news?
I am sorry – but I have heard this since the 80s and the technical word for it is nonsense, in its kindest form
But I do take heart on one issue: they have more confidence of a Labour win than I do
And I guarantee the 200 staff will still be in employment, won’t they?
I’m not missing your point but you have your “GND blinkers on”.. let’s face it you want a bigger state at the expense of the private sector, that’s what this is about. I am old enough to remember the 70s, when we had a big state, dark days indeed..
I remember as well
Very differently
No go away and play elsewhere with your far-right friends
Atillia says:
” I am old enough to remember the 70s, when we had a big state, dark days indeed….”
So am I Atillia. And what collapsed the nationalised industries wasn’t the Unions, it was an industrial culture of appallingly incompetent management, and a polity infected by bogus economic theories. That culture is not much changed.
But if you prefer the neoliberal fairytale, by all means stick with it. Now we have big financialisation; darker days, I’d say. If the parasites are now leaving it is only because they have sucked all the juice out of their host.
May they live in more interesting places. 🙂
Richard,
Please correct me if I am wrong, but it seems to me that the only thing ‘the big state’ does (if you can call Labour’s mild renationalisation proposals ‘the big state’) is prevent companies from making a profit from actually running a service (rail, water, NHS, etc.) Any state run service has to purchase all its equipment and supplies from the private sector and its employees’ wages are spent in the private sector. Then most of the government ‘investment’ comes back to it in tax, apart from money used for purchases from foreign countries.
I can appreciate that some in the private sector might be miffed at being deprived of their chance to profit from running a service, plus some shareholders at loss of dividend, but would that be a significant number?
P.S I think I’ve missed out staff pension schemes. Where would they fit in?
Broadly you’re right
And most pensions are not appropriately invested right now…
[…] Cross-posted from Tax Research UK […]
Those who support the wealthy presume that they are unique and that no one else is capable of fulfilling the function they do that generates the wealth. If the opportunity arises others will fill the space. True much of their wealth is retained via network effects but new networks will form. The more damaging thing for this country is the loss of market access for our businesses and that will drive opportunity out of the country not a few super wealthy owners of capital moving to New York, Milan or Monaco.
Average wealth around £50 million and worried they may have to pay more tax so we have well funded public services? Beneath contempt. Utterly pathetic individuals.
I’m always amused when people say things like … I remember the 70s or how bad nationalised industries were. Well they must have lived in a different universe to me. I worked for the CEGB and a really great company it was. It wasn’t perfect but it was far better than what we have now. We had a research division that looked at all potential issues. We had a design and construction division. We could design and build power stations from scratch. We built Sizewell B on time and cost. We can’t do that now. We have to go cap in hand to the Chinese and French. Our project management was second to none. Brian George, the project manager on Sizewell B had contractors shaking in their boots. I’d love us to return to those days. The old CEGB would have salivating at the prospect of a GND and they could have delivered the energy side of it.
I am sure my father would have agreed
On a slight tangent. Just read Treasure Islands by Nicholas Shaxson and now know about the whole dirty world of “Off Shore” and it’s corrosive effects on the whole world’s economy.
As I see it, the problem for Corbyn (well, actually anyone who wants to try and tackle tax havens) is that the UK imports more than it exports. The gap in the balance of payments is plugged by foreign capital coming in to the City of London. Without all that drug money laundering or ill gotten russian oligarch money being pumped into the London property market forcing up house prices etc etc, the economy would collapse.
Tax havens need to be shut down or they will bring the world ruin but how do you do it without crashing the UK economy?
Please someone, have an answer!!!!
The gap is plugged, bit actually there’s a good argument for saying we would be better off it was not and the pound fell instead
And the gap is not plugged by dirty money per se: it is plugged by generic hot money – financial capital of all sorts. We suffer a finance curse – see his latest work