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Tax and the wealthy: the tip of a very unhealthy iceberg

Tax and the wealthy: the tip of a very unhealthy iceberg

The release of the Panama Papers and the subsequent revelations that high profile corporations and individuals have been using tax havens to reduce the amount of tax they pay, has only really succeeded in putting more currently high profile names to what has long been accepted as legal – and illegal - behaviour of those with financial wealth.

For many this latest scandal is yet more proof of just how corrupt and corrosive capitalism has become. But this is not just a story about the immoral and illegal financial behaviours of the wealthy, however important as that story might be, it is also a story of the near certain perpetuation of social class inequality across generations.

The accumulation of wealth in families and across generations within families is one of – if not the most – important mechanism by which inequality is perpetuated across generations. A major part of the problem with social class inequality in Britain is that the British prefer not to talk openly about class. More importantly, the British prefer not to talk very much about class privilege; they tend to be much more animated and opinionated when the conversation turns to questions of class disadvantage or poverty.

Rather than talk about social class - which has become almost obsolete in British politics - the public, political figures and the media are much more comfortable with is the idea of deservingness. Hence, popular and political consensus tends to dictate that poverty is caused by laziness and fecklessness and conversely it is often assumed that those with wealth are inherently more hardworking, better motivated or entrepreneurial than their less wealthy counterparts. The notion that most people get their ‘just desserts’ in life goes a long way to cloud the realities of the causes of both poverty and of wealth.

Wealth tends to create more wealth, as exemplified in the Panama Papers. But having money is about more than just access to a comfortable (or lavish) lifestyle, although the health and well-being benefits of having money should not be underestimated. Financial privilege can buy life chances and opportunities. The incestuous nature of some of our most elite professions is an open secret; a small number of private schools inevitably play a role in producing some of our most senior leaders and politicians. It is no coincidence that the fee-paying Westminster school (just around the corner from the Houses of Parliament) continues to produce a steady stream of our political elite.

Professions, such as the law, media and politics continue to be dominated by those from fee-paying educational backgrounds. A recent report showed that students from richer homes earn thousands more after graduating than their less well-off peers – even if they attended the same universities and the results of the recent Great British Class Survey also pointed to a university system that is deeply class divided.

Where you study continues to matter, not just in terms of the sort of education you receive (and what currency the particular institution holds within particular jobs and professions) but also in terms of the social networks and contacts young people (or their parents) are able to make and then exploit. Upward class mobility of course, does happen but when it does it is not is not without its own challenges.

Importantly though, this sort of class mobility tends to be relatively short range and has been largely facilitated by the expansion of Higher Education and changes in the labour (and housing) markets that have taken place over previous decades. Despite the inevitable ‘rags to riches’ stories that continually do the rounds and reinforce the notion that upward social mobility is in the grasp of everyone, all the signs are that whatever gains have been made in the last fifty years are now going into reverse.

The upward social mobility enjoyed by some of the ‘baby boomer’ generation will almost certainly not be continued through the current younger generation. It is perhaps understandable that in a context diminishing opportunities that those with the most will try to hang ever more tightly to what they have. 

Moreover, relationships between generations are stratified by social class. Not all of the so called ‘baby boomers’ did particularly well and those that did may, in the fullness of time, prove to be more the exception than the rule. Little wonder then that for many, the idea that a parent can readily provide a ‘gift’ in the order of some £200,000, is difficult to compute. Whilst inter-generational inequality is important, it is intra-generational inequalities that exist within that will go on to define the real classes of the future.

Until we raise deeper and more critical questions about the sorts of practices that were contained in the Panama Papers we will continue to ignore social class inequality and, most importantly, we will continue to obfuscate about its real causes. The narratives are around ‘classlessness’ and ‘we are all in it together’ are attractive, easily pedalled sound bites that resonate not just because of their simplicity, but because they promote ideas that most people would probably prefer to believe.

But Britain is a society that operates on a deeply embedded (and frequently dysfunctional) class system that promotes extremes of inequality and that operates by its very nature to protect the rich at the expense of the rest. The Panama Papers are exemplars of how this process works in practice but in reality they are just the tip of a very large and unhealthy iceberg.