Alf Young: ‘I feel your pain’ just doesn’t cut it

The political elite must do more than just talk about equality. Picture: AP
The political elite must do more than just talk about equality. Picture: AP
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AS Barack Obama was securing his second term in the White House, we were embarking on a road trip to Cornwall, helping our younger son, Jamie, and his partner, Rhiannon, in their long-distance move from Poolewe in Wester Ross, to a new life in England’s most south-westerly county.

As we headed south, a little local difficulty was erupting in St Ives.

Someone had put five parking places up for sale at £50,000 a pop. Before the financial crash, one such space in the town had sold for £24,000. Banking meltdown certainly hasn’t undermined demand in the premium car parking market. In an area where the average worker earns just £22,000 a year, someone had already made a firm offer of £100,000 for two of these new spaces. In all, there had been some 60 expressions of interest. But the seller, scenting even bigger bucks, had decided to put all five up for auction, hoping to entice even higher bidders.

A local councillor was expressing dismay at the mismatch between a year-round population subsisting on low wages, while second-home owners could shell out more than two years’ average earnings locally in order to park with ease less than a minute from the town centre.

Clearly, the growing material inequality that is a dominant feature of modern life takes many forms.

In recent days, Income Data Services has revealed that, despite the crash, in the past year alone, top executives in FTSE 100 companies have enjoyed a 27 per cent hike in their total pay and benefits. A bit more on basic pay, a bit less on controversial bonuses, but a lot more on long-term incentive plans. Meanwhile, the Office for National Statistics has demonstrated how mere workers, at every level of the wage scale, have endured real terms reductions in their earning power over the past five years.

The stark contrast between who gives and who takes in our material world doesn’t stop at individuals. In the corporate world, especially in the world of transnational corporations, paying as little on your profits as your tax advisers can finesse is the name of the game. We know that, collectively, Google, Amazon, Starbucks and Facebook paid just £30m on combined sales of £3.1bn in the UK in the past four years. Starbucks has paid nothing at all in the last three years.

And everywhere outside the United States, Apple paid just £445m on profits of £23bn in the year to end September. A corporate tax rate of just 1.9 per cent, when the headline US rate is 35 per cent and that in the UK 24 per cent. Even Mitt Romney pays more than 1.9 per cent on his mega earnings! Our own HMRC has identified some £25bn of unpaid corporate taxes that may have been wrongly withheld. Of that total, a whopping 44 per cent share is being disputed by overseas companies.

There is plenty of evidence of mounting public distaste for such antics. Organised reaction like the Occupy movement is only one manifestation of the growing signs of mass dissent. The multitude of media pundits who were describing the US presidential election “too close to call”, right up till Tuesday’s polling closed, clearly hadn’t been reading Nate Silver’s “FiveThirtyEight” blog in The New York Times.

Nor were they listening to the mood of blacks and hispanics, women and young people, who were appalled by Romney’s grotesque 47 per cent comments and came out to vote in unanticipated numbers, seeking corrective action on the grand-canyon-wide inequalities in contemporary American society. One recent academic study put the share of that nation’s income enjoyed by the top 1 per cent of households in 1774 at 7 per cent. By 1860 it was 10 per cent. In 2010 it had nearly doubled again to 19 per cent.

In 1965, top American CEOs enjoyed, in annual salary, 24 times the average production worker’s wage. By 2000, that multiple had ballooned to nearly 300 times the shop-floor average. It’s an escalator that seems to keep on rolling, in booms, and now in slumps. The great unanswered question is what politicians – whether Obama or any other aspirant leader around the world – are going to do about it.

Telling voters you “feel their pain” no longer cuts it. Even the new leadership in Communist China sees rapidly growing material inequality as one of the biggest challenges facing its continuing hold on power.

George Osborne and his German counterpart are seeking ways to force multinational corporations to pay their fair share of taxes in the countries in which they operate. But if they are to appease a darkening public mood, they will be judged, not on warm words, but by effective action.

The evidence of such resolve so far is, at best, scanty. President Obama has talked eloquently about how the “ultra-wide chasm” between the super-rich and everyone else is dragging the whole US economy down. But in his own first term, income inequality across America got worse than it had been under his Republican predecessor, George W Bush. Now re-elected, Obama has to do much better on this front over the next four years than he did in his first four.

Here in the UK, and even in pre-referendum Scotland, politicians of all stripes seem as blithely relaxed as Peter Mandelson once confessed himself to be at some people becoming filthy rich compared to the hard-pressed masses. Even Alex Salmond, one-time bosom buddy of the preposterous Trump, courts Amazon because of the jobs one of its plant’s can bring, despite its aggressive tax avoidance. And the First Minister boasts a man who lives in the tax haven of Monaco among his Council of Economic Advisers.

Ed Miliband has tried to promote the concept of predistribution, advocating more action on the distribution of power and rewards even before governments get to the stage of raising and collecting taxes and paying out benefits. That ultimately means much better wages for the many, but Labour, under his leadership, has yet to spell out how it would predistribute, in advance of growing inequalities.

Converting the national minimum wage into a living wage will remain a slogan unless private sector employers embrace such a shift too.

One recently elected leader of a major western economy has tried to address these issues head-on. In France, President François Hollande came to power legislating for higher taxes on corporate profits and the incomes of the already rich. He also pledged to cut VAT to protect the buying power of workers in an age of austerity.

Assailed by dark threats about what his plans might mean for French competitiveness, Hollande is now proposing a U-turn – a €20bn a year cut in corporate taxes through a complex system of rebates, pruning 6 per cent from employers’ unit labour costs, and a VAT rise and spending cuts to pay for it.

Politicians may feel their people’s pain. But addressing the yawning inequalities that lie at the root of the problem is still much more about warm words than hard action.