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Why the super-rich are good for us

Cliff D'Arcy
by Lovemoney Staff Cliff D'Arcy on 09 April 2012  |  Comments 40 comments

Here are five reasons why we should welcome foreign tycoons to Britain!

Why the super-rich are good for us

It’s fair to say the world's super-rich have taken a bit of a battering following the financial crisis.

Groups such as Occupy Wall Street and Occupy London have been protesting on behalf of the 99% against the 1% -- the richest members of society. As a result, there have been public protests, occupations of parts of the City of London, and High Court injunctions aimed at curbing these demonstrations.

Unfair Britain

To be honest, I broadly agree with some of the stated aims of these organisations, because the wider the income and wealth equality in a society, the greater its social problems. Inequality of income or wealth is often measured using the Gini coefficient or index, with 0 indicating complete equality and 1 equating to complete inequality.

Here in the UK, our Gini coefficient has roughly doubled since the Second World War and stood at 0.456 at the end of the Noughties. This puts us in the middle of the major developed countries -- far behind South Korea on 0.334, but well ahead of Italy on 0.534.

Taking the tycoons' side

Despite being part of the 99%, I'm going to play devil's advocate and look at some benefits the 1% bring to society. In particular, I’m going to focus on those super-rich foreign tycoons who have chosen to settle here in Britain.

Through education, entrepreneurship, inheritance and marriage, the top 1% of the world's wealthy just keep getting richer. In 2005, the top 1% of earners pocketed a seventh (14.3%) of all UK income, partly thanks to reduced taxes on high earnings. Half of these high earners work in the financial sector, which is bouncing back after the taxpayer-funded bailouts of 2008/09.

To be in the top 1% in the UK, you need to earn over £150,000 a year. However, I will defend the super-rich: the magnates and tycoons with wealth ranging from the hundreds of millions to the tens of billions of pounds, dollars or euros.

Clearly, the financial elite don't come to Britain to enjoy year-round sunshine and blue skies, so why do they live here and what benefits do they bring to the table? Here are five gains that spring to mind:

1. Higher employment

The super-rich often employ large numbers of people, either in the companies they own and manage or as their personal staff. This is especially the case for those who choose to build businesses in Britain, or locate and manage their wealth here. The more people these magnates employ, the more the UK benefits from higher employment and a bigger tax haul.

2. UK investment

The top 0.5% of the world's population -- perhaps 30 million people -- own nearly two-fifths (38.5%) of its total wealth. What's more, the UK accounts for less than 0.9% of the world's population, yet has over 6% of the world's millionaires.

The super-rich are attracted to the UK for many reasons, including our solid legal system, strong property rights, and political and social stability. As a result, many decide to settle in Britain permanently, with some choosing to invest part of their wealth here. Obviously, the UK benefits enormously when foreign moguls and industrialists pour their wealth into establishing and expanding businesses within these shores, not least from job creation and higher tax revenues.

3. Spending

The rich like to dress expensively, look great and have (expensive) fun. Accordingly, they spend fortunes on luxury items, as well as paying out large sums for everyday pleasures.

For example, many of the super-rich are huge fans of British brands, so they spend freely on goods from the likes of Asprey, Barbour, Burberry, Dunhill and Mulberry. As well as splashing out on designer clothing and high-end brands, the rich spend wildly on beauty treatments, hairdressing, flowers and cosmetic surgery. Also, they like to own fast cars from marques such as Aston Martin, plus the obligatory ocean-going yachts and private jets.

Of course, when these upmarket items are bought in the UK, they attract VAT (Value Added Tax) at 20%. Therefore, for every £1 million the super-rich spend before VAT, the Treasury collects £200,000 of VAT on top.

4. Taxes

One reason why the super-rich come to the UK is our extraordinarily generous tax treatment of foreign non-domiciled residents ('non-doms'). Instead of demanding taxes on all their global income and gains, we choose to tax non-doms only on their UK-generated earnings. Alternatively, non-doms can opt to pay a yearly tax levy, which started at £30,000 and was increased to £50,000 in the latest Budget.

In 2010/11, this non-dom tax levy came to £153 million, which the Treasury would not have received had these rich folk chosen to live elsewhere. While this is only a tiny fraction of the £155 billion of income tax to be collected in 2012/13, it is better than nothing.

5. Property

According to upmarket estate agents Knight Frank, London is the most attractive city for the world's tycoons. This is partly thanks to a 25% to 30% decline in the value of sterling, which makes UK property much cheaper for foreign buyers.

Of course, living in London isn't cheap, especially if you're after a top-end mansion. Partly due to demand from Greek, Italian, Russian and Far Eastern buyers, asking prices in the City of Westminster have risen by nearly half (49.6%) in the four years to February 2012. These days, £1.5 million won't get you much more than a two-bedroom flat in the City, Mayfair or Kensington & Chelsea!

It's worth pointing out though that these sharply rising house prices are a good thing only if you already own property in Central London. If you're looking to buy, then steeply higher prices spell bad news. By lifting prices, the super-rich make owners of premium properties richer, but also make it tougher for everyone below to climb the property ladder

However, there is another benefit to their house buying, although it’s one that’s been hotly debated. Following the Government’s move in last month’s Budget to increase the top rate of stamp duty, the super-rich will now pay 7% on purchases of £2 million+ properties to 7%. There’s also the introduction of the whopping 15% for properties bought via a company or similar bodies. Although whether this raises significant extra revenue remains to be seen .

In summary, while we may dislike the super-rich and envy their lifestyles, we should accept that their wealth produces some 'trickledown effect' that benefits the UK as a whole.

Disagree? Tell us why in the Comments box below.

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Comments (40)

  • d0nnyoz
    Love rating 5
    d0nnyoz said

    Although I agree with most of the comment about having the super-rich in the UK, there is a massive assumption that the taxes you quote are actually paid. I would suggest that these super-rich people have other methods of tax avoidance, and can afford to pay large sums of money in order to devise methods of tax avoidance.

    My gripe with these people is that sure, enjoy your wealth and thanks for staying in the UK and helping our economy, but play by the rules like the other 99% of us have to!

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  • Mike10613
    Love rating 626
    Mike10613 said

    It begs the question. Why doesn't the 99% invest in Britain; why is it the rich. Why do the rich get good education and the rest get comprehensive crap? Why do they have all the power but none of the work?

    We need to educate our young people to be different and introduce financial education into schools. They need to understand that investing for the future is more important than the latest designer trainers, a burger at McDonalds or a Iphone. We need to instil a little pride in Britain and hope they buy British rather than always going for foreign crap. We need to get rid of socially divisive practices and forget about racial discrimination. We need to stop discriminating against the workers of this country who actually get their hands dirty. Dopey Cameron has never done a hard days work in his pathetic life; who is he to lecture the miners of Yorkshire or the steel workers of the Midlands? Not that there are many miners or steelworkers left after the decimation of previous Tory governments. It's all minimum wage stuff now, working on a checkout at B&Q.

    No we won't bow and scrape to the super rich; the days of servitude are long gone.

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  • PoorTeacher
    Love rating 0
    PoorTeacher said

    Provided the hyperich are paying GB experts to devise their tax dodges, and these GB experts are themselves paying some tax on their earnings from providing such services, then one has to suppose that the creaky UK tax system does in fact receive at least a 'trickle-down' benefit. But somehow I doubt it ... !

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  • Talent
    Love rating 79
    Talent said

    Buy British? Not that easy.... these super rich have moved everything they can to a cheaper labour environment so they make even more loot!

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  • MK22
    Love rating 169
    MK22 said

    Sadly, every reason you have given as to why they should be here is actually a reason why we don't want them! Time and time again research shows that the countries people most enjoy living in are those where there is the least difference between the poorest and richest. If the super rich REALLY thought the UK was an ideal place to live, rather than the place full of mugs that it actually is, they would donate enough of their wealth to pay off the deficit so the country they think so highly of could continue to function without the government having to take everything a way from all but the (super) rich. This won't happen of course because the super rich are arrogant, selfish people who care about nobody but themselves.

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  • SeaBee
    Love rating 15
    SeaBee said

    The country with the lowest Gini index is North Korea. Anyone who wants complete equality should be invited to go there. We could make a start with Trenton Oldfield and if he doesn't want to volunteer then he should be persuaded.

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  • electricblue
    Love rating 769
    electricblue said

    @Mike

    How many politicians of any colour have ever had worthwhile business experience as blue collar workers - but even if they had, why would we assume that they would not soon be out of touch with the rest of society? Prescott was an ultra-left union agitator who was brought into politics because he was too dangerous even to a Labour government. As a fat, greedy and duplicitous oaf he cost the country billions but his various family enterprises somehow managed to make a lot of money on the backs of the very working classes he supposedly represented. Please list all Labour politicians who have done 'a hard day's work' and please define exactly what you think hard work is. Is Alan Sugar a shining example of Socialism? Where do Amstrad manufacture?

    Mike, you certainly seem clueless as to the underlying strength of British manufacturing. Steel production is ten times more efficient than in the past and the UK concentrates on high value special steels which we can still export around the world. Automotive and aerospace manufacturing is at record levels (though of course the media loves to trumpet job losses in certain plants like Brough and ignore investment and growth in others). Rolls-Royce Aero Engines are still the most respected anywhere and at all levels of industry there are plenty of British companies exporting like crazy.

    As for those who did not make their wealth in the UK, why should they pay any more tax here than they absolutely have to? What about all the British millionaires domiciled in Gibraltar or the Isle of Mann who pay a fixed tax regardless of their overall wealth?

    As any of us writing on here are in the top 5% of the world's wealth status I think that those hypocritical enough to want to bring down the 'wealthy' should ask themselves what a Somalian or Kashmiri subsistence farmer would think of the wealth of the average 'working man' in the UK and just what they define as a 'hard day's work'.

    The 'Super Rich' don't have to play by our rules but their money has to be spent somewhere. Ask yourselves what you would do if you won the Lottery and had millions of pounds which you could pay plenty of UK tax on or less than £30K a year if you were spending six months in Gibraltar.

    Parents need to educate their children on the value of wealth and working for material possessions. We all need to respect engineers and designers and promote 'proper' jobs instead of numpty degrees in 'Sports Nutrition' and other such crap. Ask the Co-Op why they blab on about the UK farms they own but yet have never invested in a UK manufacturing plant to produce some of their non-food items. It costs 5p more to make a 2 gallon bucket in the UK as opposed to China. Are the owners of the Pound Shops all super rich or are they just not very patriotic?

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  • Alan14
    Love rating 16
    Alan14 said

    The super rich?

    Such as Leona Helmsley, real estate billionaire, famous for her quote that "We don't pay taxes. Only the little people pay taxes..." convicted for tax evasion, sentenced to 16 years, but only served 19 months?

    Of course only little people serve full prison terms, don't they, just as only little people pay full surcharges, don't they lady Porter?

    And big people such as Rupert Murdoch have as many as 800 companies which enables an alleged tax payment of just 6% for corporation tax.

    http://en-gb.facebook.com/note.php?note_id=10150266736008996

    One further point Cliff - the Gini coefficient for the UK has doubled since WW2 - but it didn't begin that change until we had Thatcher as our leader. It was further compounded by Blair, so that whilst the Gini stood at 0.25 before Thatcher, it is now well beyond the bounds of developed countries, and massively unequal compared to the likes of Norway and Sweden. And now we have Cameron - takes it off pensioners, adds tax to pasties, and gives it to those on £150k plus.

    Shall we ever again have as leader one committed to reducing inequalities?

    I wish!

    And one last point - The Gini coefficient only measure income, it does not measure wealth.

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  • Robjon100
    Love rating 5
    Robjon100 said

    I do not think anyone has a problem with there being a section of society who hold large amounts of wealth, it is the differential of the wealth spread which is the problem not to mention the obvious corruption that prevails. The class system and the old boys network still soldiers on regardless. Even minority groups have been able to form an elitist attitude toward the will of the majority.

    Yes of course there are benifits to society, given that so much of the wealth has now been allowed to be held by the few, but there are also far reaching social problems being allowed to fester especially if the trend continues.

    We can bury our heads in piles of cash but all of us ignore the events of history at our peril.

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  • Henry-GBG
    Love rating 57
    Henry-GBG said

    The super-rich are collaring monopoly advantage of some kind, usually rent of land or patents. These monopoly advantage is derived from government and is the natural source of public revenue. If governments fail to collect it they are force to resort to that system of legalised robbery know as tax.

    The existence of a class of super-rich, alongside a class of poor and unemployed, is firm evidence that governments are failing in their duty to collect the rent of land and use it as the principal source of public revenue.

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  • Aquasponge
    Love rating 38
    Aquasponge said

    In the UK we heavily tax income and lightly tax wealth. This creates runaway welfare and idle assets whilst reducing social mobility.

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  • mikecunliffe
    Love rating 24
    mikecunliffe said

    Today's Daily Mail reports that an unnamed Tory party donor worth millions avoided being fully taxed as a result of being in the UK for more than 90 nights.

    He/she jumped on his/her private jet and was flown out of Luton before midnight and back in after midnight. He/she apparently slept during the journey. This was undertaken many times and saved him/her a fortune.

    Not exactly green is it. I'd like to think he/she paid air passenger duty though.

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  • hopefultom
    Love rating 50
    hopefultom said

    Hi Cliff

    I note that you include yourself in the 99% " non- rich ", yet it is less than 12 months ago that you were bragging, in one of your articles, that you were worth more than a million pounds.

    If I were worth so much, I would certainly consider myself rich. I would be interested to know what the minimum asset value is ,for someone to be included in the " 1% "

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  • Aquasponge
    Love rating 38
    Aquasponge said

    Its very difficult to move land and buildings offshore;income on the otherhand can easily be declared anywhere.

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  • LandOfConfusion
    Love rating 67
    LandOfConfusion said

    From the Article:

    1. Higher employment

    I would suggest the super-rich often employ most or their workers in other countries, like China.

    2. UK investment

    "The top 0.5% of the world's population -- perhaps 30 million people -- own nearly two-fifths (38.5%) of its total wealth."

    There was a study done by a US professor who looked into wealth distribution and spending. He found that unlike what 'Reganomics' suggests, wealth actually trickles upwards where it pools and becomes locked in assets. The super-rich don't tend to spend like the other 99%, instead they place most of their wealth in various asset classes like real estate which effectively locks that wealth away.

    In fact this is probably the main reason for the shift in the Gini coefficient .

    "The super-rich are attracted to the UK for many reasons, including our solid legal system, strong property rights, and political and social stability."

    Or do you mean:

    The super-rich are attracted to the UK for many reasons, including a favourable legal system, strong property-owner rights (over tenants (think BTL)), and a highly supportive political system coupled with a highly apathetic population.

    "Obviously, the UK benefits enormously when foreign moguls and industrialists pour their wealth into establishing and expanding businesses within these shores, not least from job creation and higher tax revenues."

    Such people will always choose tax havens or at least the most economically viable place to live. Now you say they "settle" here, but do they settle here for tax purposes or somewhere else? And by "expanding businesses" is this because we grant some large companies favourable tax status? And how many companies have only their UK headquaters or satellite office here?

    3. Spending

    I think you'll find that the percentage per pound 'earned' spent on luxuries is less than the equivalent for the other 99% of the population. And that's not to mention that they tend to spend much of their money abroad.

    Also see my point about 'trickle-up' above.

    4. Taxes and 5. Property

    Of course, living in London isn't cheap

    You're assuming that they spend most of their time living & spending here.

    "By lifting prices, the super-rich make owners of premium properties richer, but also make it tougher for everyone below to climb the property ladder"

    The super-rich are major buyers of assets. In some cases that can have no overall effect or in a few cases it can even be good but not when it comes to land in a country where this isn't taxed.

    The value of land is inherently created by the community. By allowing people to hold land and enjoy the benefits created by the community (both material and monetary) we are effectively subsidising the rich at the expense of the poor.

    The super-rich come here, buy land (properties), push up prices, charge ever increasing rent and yet pay nothing for the value created by the community. No wonder they like living here.

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  • electricblue
    Love rating 769
    electricblue said

    @

    LandOfConfusion

    Very few of the super rich have anything whatsoever to do with manufacturing, in China or anywhere else.

    Not really a single valid point in your rant. In particular those 'super rich' around the world including the new Chinese and Russian billionaires are spending a fortune on imported goods from the UK and Europe which is why Rolls, Bentley and Jaguar-Landrover are flat out in production right now. I can't think of any in the super rich category who concentrate manufacturing in China. Chinese manufacturing is largely to supply Western corporations with cheaper consumer goods and components ranging from the pound and dollar store tat to airframe sections for Boeing. Tata is investing £1.5 BILLION pounds a year into JLR and their biggest export market is now China.

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  • Bob0055
    Love rating 4
    Bob0055 said

    @ electricblue

    LandOfConfusion's points were all very valid. Suggesting manufacturing hasn't been concentrated in the far east is one of the silliest statements I have seen in years, and you have nothing to say about the enormously important point that wealth trickles up, not down. The rich use their power to make themselves richer at others' expense.

    The article points out that the mega rich control businesses which employ a lot of people, but that doesn't mean the rich owners have created those jobs. Very often they have destroyed jobs, buying firms other people have created and asset stripping them, leaving fewer workers working longer hours for the same or less money. The only people who benefit are those same super rich, effectively sponging off the creative efforts of previous generations. And that's just the companies they buy: they've come up with a much better scheme over the last three decades: get your friends in government to hand over (privatise) state services to you, then run them, almost invariably, less effectively and at higher cost (as more people are beginning to realise: private sector efficiency is a dangerous myth). Private firms have to a large extent stopped innovating, just want taxpayers money handed over to them, and they are getting their way.

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  • LandOfConfusion
    Love rating 67
    LandOfConfusion said

    @ electricblue

    "Not really a single valid point in your rant."

    Then please feel free to attack each point, rather than make sweeping statements without backing.

    "I can't think of any in the super rich category who concentrate manufacturing in China."

    So, off the top of my head where does Apple, Foxconn & Nike manufacture the majority their products? Is it (a) a place with criminally low wages which is also the manufacturing centre of the would or (b) some rich developed country?

    Also, thinking of those companies as assets who are the ultimate majority owners? Your “average citizen” kind of person or a richer kind of specie?

    "which is why Rolls, Bentley and Jaguar-Landrover are flat out in production right now."

    Good examples. They all produce labour intensive, high volume, "everyday" items that are widely brought by the population. I mean I was worried that our manufacturing sector was dwindling down into niche & low volume luxury markets.

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  • electricblue
    Love rating 769
    electricblue said

    The majority owners of most of the global brand corporations are the people who started the companies. Where or how they manufacture is for them to decide. If you have a conscience then don't buy their products. I clearly stated that manufacturing in China was instigated by corporations which has s*d all to do with the individually mega rich referred to in the article. Corporations are owned by shareholders including Pension funds and all levels of investors. The mega rich involved in manufacturing have mostly created the businesses and the jobs and whilst I consider it misguided that Apple manufacture in China, that has nothing whatsoever to do with the article relating to taxes on the super rich as all of the Apple executives are domiciled in the USA and pay taxes there. Slating the UK car industry as insignificant is moronic at whatever level of income consumers the vehicles referred to are destined for. What part of a £1.5Bn a year investment in the UK was not understood. Is that different because Rajan Tata is Indian super rich? Ford produce 2.5 million diesel engines a year in the UK for export worldwide and the UK is a huge manufacturing force across many product sectors. The logic of ranting against inherited wealth is absurd because if you want to look at global inequality, why is it that simply by virtue of being born in the UK we are thousands of times wealthier than many in Africa or in reality most of the other nations on the planet? The stupid argument is that by making the rich poorer you will improve the lives of those at the bottom levels of income. Greed and envy have always been the tools to mobilise the gullible into rising up against some particular group which can be branded as overly successful. At one time it was the Jews who were blamed for everything, but clearly there has to be some new group on which to concentrate misguided envy.

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  • krustallos
    Love rating 45
    krustallos said

    @electricblue As for those who did not make their wealth in the UK, why should they pay any more tax here than they absolutely have to?

    Because if they lived most other places that's what they would have to do? If they want to live here they should do so under the same rules as the rest of us I would have thought.

    What about all the British millionaires domiciled in Gibraltar or the Isle of Mann who pay a fixed tax regardless of their overall wealth?

    Of course the USA (to take one free-market paradigm) taxes all its citizens on all their income, no matter where in the world they live. It would certainly be a good idea for us to adopt that policy, given the significant gap in our public finances....

    Unlike some of the commentators above, I wouldn't characterise the super-rich as greedy or selfish except when, like the Kochs or Murdochs, they seek to influence the political process in their own narrow interests. All other things being equal, people will always try to maximise their income and minmise their taxes, and relying on the goodwill of the rich to balance out the inequalities in society is hopelessly naive. No, the primary mystery about our society is why the rest of us let them get away with it, and why there are a significant minority of us (see contributions above) who actually cheerlead for wealth passing from the majority into fewer and fewer hands.

    You'd think some tiny flashes of enlightened self-interest would penetrate the carapace of bourgeois propaganda which makes up their image of the world, but apparently not.

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  • bobmattfran
    Love rating 59
    bobmattfran said

    Some very weak arguments regarding taxation. I have no problems with owners of companies who have risked their own capital, pay decent wages have decent working conditions and pay their taxes. I was never a great believer or fan of VAT or purchase tax as it attempts to validate the one size fits all idea. VAT discriminates against the poorest in society and encourages both black and grey markets in the economies where it operates. The fairest tax is income tax where the taxpayer is taxed or should be taxed according to their means. That means everyone with an income should pay tax irrespective of the level of their wealth. I don 't buy the idea of trickle down economics it is far too open to abuse, and failed totally in the UK under the Thatcher government. The greatest offenders in my book are those companies who use cheap labour and avoid their responsibilities by moving their profits around usually at the expense of the country of manufacture as well as the country of sales and distribution.The revenues being remitted using both shell and parent companies balance sheets to avoid taxation. To mention the banks and the City generating wealth is absurd only the bankers and the City believe that, any economist looking at the true cost of funding the losses would argue that they all should have gone to the wall, it would have been far cheaper for everyone concerned. Real wealth is generated and produced by industry, not shifting worthless paper assets around in a fixed market. Some of the very wealthy do have a social conscience, but many of them have a total disregard for both their work force and in some cases their paying customers. The disparity in wealth in the UK will in the medium term cause serious social unrest, it may amuse the present government to reduce taxation for the wealthy, and I am one of its beneficiaries, but in the present climate when the majority are suffering austerity measures contributed to by the excessive greed and downright dishonesty of both the City and the banks, then the government is risking a lot more than losing the next general election. One thing in favour of the US, they tax every US citizen on their earnings world wide, there are very few loop holes, something that the UK should consider doing.

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  • LandOfConfusion
    Love rating 67
    LandOfConfusion said

    @ electricblue

    The majority owners of most of the global brand corporations are the people who started the companies.

    Like Shell, Nestle, Proctor & Gamble, Goldman Sachs...

    Where or how they manufacture is for them to decide.

    Cliff stated higher employment as a benefit but how can that be if they effectively export jobs from this country?

    Corporations are owned by shareholders including Pension funds and all levels of investors.

    Rich people like assets. They provide tax advantages and as others have pointed out can be asset stripped or even moved abroard. I think it was a former US president who once said something like:

    "Corporations should move on to barges and float around the world going to the provider of the cheapest labour."

    the UK is a huge manufacturing force across many product sectors.

    Our manufacturing (what there is of it) tends to be comprised mainly of small and medium-sized enterprises. And as for car manufacturers, they build here (a) to avoid European import duty (TARIC) and (b) because of our economically co-operative government. We tax them less and they come here.

    The stupid argument is that by making the rich poorer you will improve the lives of those at the bottom levels of income.

    One thing we tend to see is that as income equality (rich vs. poor) falls, so does the quality of life for the many.

    Now I've already pointed out why this is and calling the argument names without providing any proper retort is just plain silly.

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  • electricblue
    Love rating 769
    electricblue said

    @LandOfConfusion

    The article was NOT about the behaviour of corporations but about the Super Rich. The super rich who have interests in manufacturing at the highest level either started companies or are descendants of the founding families. The vast majority of automotive manufacture in the UK is for export therefore import duties do not have any bearing whatsoever on the reasons why manufacturers are in the UK. What do you think Ford do with 2.5M engines they build here? The article was defining the 'Super Rich' . All you want to do is spout your own ill-founded opinions, apparently on anyone who has more money than you. The majority of manufacturing in all major manufacturing nations (apart from South Korea) is by small to medium enterprises so what was your point on that issue? The UK is one of the top manufacturing nations in the world and your baseless rants won't alter the fact. You can't seem to make your mind up what level of wealth and wealth creators you are against and the clear implication in all your rants is that those controlling businesses are just lining their own pockets. Pathetic.

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  • MikeB55
    Love rating 6
    MikeB55 said

    The superrich are experts at avoiding paying taxes. That is why they are superrich

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  • zzwilson
    Love rating 0
    zzwilson said

    I am glad there is such a divide in our country. If everyone had loads of money they would all be living a lavish lifestyle, spending loads of money on big houses, big cars and lots of gadgets and using up all the Earth's natural resources. At least the way it is now only a few people can substantially polute the planet. In my opinion the recession is a real bonus!

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  • LaurenceSt
    Love rating 4
    LaurenceSt said

    Whoever is going to believe this story should read "The spirit level" first (http://www.equalitytrust.org.uk/resource/the-spirit-level) This book shows that there is a very strong correlation between unequality and social problems. Obvious Mrs. Thatcher never understood this principle. Compare UK living with Sweden, the Netherlands end Switzerland and you know what I mean.

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  • LandOfConfusion
    Love rating 67
    LandOfConfusion said

    @ electricblue

    The article was NOT about the behaviour of corporations but about the Super Rich.

    You seem to be once again evading my points. I've already mentioned the kind of person who tends to either own or hold significant shareholdings in large and multinational companies as well as how wealthy their senior management is. The two are linked and as others have quite clearly pointed out, this country now not only has multinational companies but also multinational nationals who can use their wealth to avoid paying tax.

    Now Cliff was defending the super-rich and all I've done is point out apparent flaws in what he says. And an important part of that involves how they get their money and where they put it. I cannot possibly talk about that without talking about the activities of their investment "vehicles" (i.e. companies).

    The super rich who have interests in manufacturing at the highest level either started companies or are descendants of the founding families.

    In that case please provide some examples of such companies.

    The vast majority of automotive manufacture in the UK is for export therefore import duties do not have any bearing whatsoever on the reasons why manufacturers are in the UK.

    At the risk of being called a 'ranter' lets use my current favourite car company as an example.

    Honda has a plant in Swindon. Most of the parts the factory uses are manufactured abroad and are assembled here (probably for import tax reasons). The cars are then sold both here and 'exported' to Europe. By assembling here they can avoid import duties on the finished product both in the UK and also when exporting to other European countries (because we're part of the EU).

    Now other than the luxury car makers I'm not aware of any car manufactuer who produces here and who exports from this country to outside Europe.

    What do you think Ford do with 2.5M engines they build here?

    I'd have to look up the TARIC code for a diesel engine but I suspect that Ford manufacture here (for tax reasons) so that they can sell here and export to Europe. You should also bear in mind that car engine manufacture is largely an automated process so this “investment” is hardly going into job creation.

    The article was defining the 'Super Rich' .

    The majority of manufacturing in all major manufacturing nations (apart from South Korea) is by small to medium enterprises so what was your point on that issue?

    How many small and medium-sized manufactures have super-rich owners do you think?

    The UK is one of the top manufacturing nations in the world

    Oh really?

    "Last year the UK was responsible for 2.6pc of world manufacturing output"

    Source: http://www.telegraph.co.uk/finance/newsbysector/industry/7857941/UK-slides-in-manufacturing-rankings.html

    You can't seem to make your mind up what level of wealth and wealth creators you are against and the clear implication in all your rants is that those controlling businesses are just lining their own pockets. Pathetic.

    I've already made it clear that people from the super-rich, that is upper class and to some extent upper-middle class, tend to have a negative overall effect on the UK's wealth. Now I have no problem with real wealth creators but there don't seem to be very many of them in the “super-rich” bracket. Working-class and middle-class certainly but when you reach a certain level of wealth it would appear it becomes much more profitable to avoid paying tax and much easier to extract wealth than create it.

    Multinational businesses are in it for the profit, which is fine. What isn't fine is when they use their size and monetry power to extract an unfair advantage over other wealth creators and even the nations it which they operate.

    These companies are usually owned either in part or whole by very wealthy "super-rich" individuals who use their control to extract as much as they can from the land and the people of the countries in which they operate.

    Report on 10 April 2012  |  Love thisLove  1 love
  • coloratura
    Love rating 81
    coloratura said

    Well, well - even Mr. Osborne thinks they are getting away with it i.e. the super-rich only paying 10% tax - or am I being cynical if I say that this acting tough and saying that he will "take measures" to prevent it, is just Mr. O trying to appear fair after his appalling budget which now means that I, along with loads of other pensioners, are in the trap where it doesn't pay us to work (I have now started to wind down my company which will mean less jobs for the unemployed) as he has frozen the limits at which we pay tax. Although we have a small pension rise of £5-00 (whic will only pay for a few rolls of toilet paper at todays rates) he has done away with any second pensions we might have (which in effect means that I won't get the £5-00 rise but an actual decrease in my pension) and where any money we have saved in the bank over a lifetime of hard work (in my case 46 years plus 45 years my late husband did but unfortunately didn't live to receive) we receive little or no interest unless we spend every few months changing all our accounts i,e, they diminish after one year and the fixed rate payments are meagre. Rip-off Britain still survives and I am someone who has always believed we need business to create wealth and I certainly didn't believe in 90% tax even for the super-rich but taking the money off pensioners and giving it to those who have the most via a tax break is appalling.....but then Mr. O knows the divide and rule rule - give tax breaks to just enough people and they won't care about the pensioners as they will be better off. Congratulations to the presenter of "The Wright Stuff" who admitted he was a higher paid tax payer but said he would prefer to continue paying 50p in the £1-00 and not take it off the pensioners. Some of us will NEVER forget your actions Mr. Osborne.

    Report on 10 April 2012  |  Love thisLove  2 loves
  • electricblue
    Love rating 769
    electricblue said

    @LandofConfusion

    If you don't know what the hell you are talking about, why do you comment?

    Ford UK supply most of their engine production to the USA and rest of the world. Ford UK is their worldwide design and technology base for ALL diesel engines and the manufacturing base for ALL four cylinder diesels. Nissan export worldwide, even back to Japan. Toyota in the UK again supplies worldwide and again, even back to Japan. The UK auto manufacturing industry is now concentrating on more premium models because the differential in underlying overheads is the greatest part of the equation, particularly wages. The quality of vehicle production in the UK is now so good that we can justify overheads and export profitably. Your favourite example, Honda, is a piddling little assembly plant by the standards of the other car producers in the UK. BMW produce the MIni in the UK (I'm at their plant next week) - and most of their production goes to the USA. They produce here because of 'Britishness'.

    American citizens only pay tax on worldwide earnings (to USA IRS) for those countries which do not have a reciprocal tax agreement with the USA and again, only if the US citizen is still deemed to be a US RESIDENT. Same applies to UK citizens.

    The UK currently rates around 17th position as a manufacturing nation and in certain important sectors is easily in the top five.

    Report on 11 April 2012  |  Love thisLove  0 loves
  • Bob0055
    Love rating 4
    Bob0055 said

    @electricblue

    If you can't express yourself courteously why do you comment? The only person on this thread ranting is you.

    I can't help but wonder whether this is just you, or has a wider significance. Something does seem to have changed. For the first time - years after the present catastrophpic depression they caused - the super rich and their apologists seem to be on the defensive. The most laughable result of this is the faux "shock" of Osborne "discovering" that the rich don't pay tax but there are other signs that they are less able to control dominant attitudes than they were. Your point above:

    "The stupid argument is that by making the rich poorer you will improve the lives of those at the bottom levels of income"

    is at the heart of the matter. Of course, your aggression is designed for a purpose, to bully past any examination of this. For your point, of course, is nonsense. There is ample evidence that the present inequality is terribly damaging, not just to those at the bottom, but those in the middle as well. Apart from the corrosive effects on social cohesion, it is making the economy dangerously unbalanced. As the rich get richer it seems they get greedier, and demand ever more money. They actually haven't got any purpose for it anymore, and so it goes to create bubbles, which of course burst. The worst examples of this are housing and the related bubble of derivatives. When these bubbles burst, they leave vast numbers of lives wrecked, but not those of the super rich who caused them. They have been able to demand that others bear the cost. Meanwhile the bubbles create more wealth while they last, but the wealth increase in fact goes only to the wealthy: even before the present depression middle incomes were flatlining, poor people's incomes declining, but rich people's incomes were expanding so dramatically that the overall figure showed a strong increase, and created the impression of greater wealth. The super rich have sometimes used their wealth in very obviously vicious ways, but the greater damage is from the perilous, and growing, instability it has caused. They have constantly insisted, very successfully, that they must be given everything they demand, or we will lose them.

    Well, I think it's time we lost them.

    Report on 11 April 2012  |  Love thisLove  2 loves
  • LandOfConfusion
    Love rating 67
    LandOfConfusion said

    @ electricblue

    Ford UK supply most of their engine production to the USA and rest of the world.

    That may be mostly (they have a major R&D plant in Germany) correct but:

    In February 2002, Ford ended car production in the UK. It was the first time in 90 years that Ford cars had not been made in Britain, although production of the Transit van continues at the company's Southampton facility, engines at Bridgend and Dagenham, and transmissions at Halewood. Development of European Ford is broadly split between Dunton in Essex (powertrain, Fiesta/Ka, and commercial vehicles) and Cologne (body, chassis, electrical, Focus, Mondeo) in Germany.

    Source: http://en.wikipedia.org/wiki/Ford_UK#Europe

    Nissan export worldwide, even back to Japan.

    Citation needed? I can't find details beyond those of Nissan's European exports from the UK. That said I have found this about their UK plant:

    "Although staff have been accommodating to all management changes in working practices, they have seen a steady decline in benefits over the years this has not been reflected in the wages. A 2% increase was offered to staff in 2007, with a further 2% the following year."

    Source: http://en.wikipedia.org/wiki/Nissan_Motor_Manufacturing_UK#Workforce_and_productivity

    It's good to see we aren't being ripped off by a car giant.

    Toyota in the UK again supplies worldwide and again, even back to Japan.

    Again citation needed. Also Toyota don't seem to be exactly shouting about this on their website:

    "Reasons for a UK location

    So, having established the logic behind building in Europe, why the UK? High on the list of reasons was the strong tradition of vehicle manufacturing in Britain and the large domestic market for our product. In addition, the UK offered us solid industrial transport links to our customers and our 230 British and European supply partners. Another reason was the excellent workforce and favourable working practices.

    There was also a supportive positive attitude to inward investment from the British Government at both local and national level.”

    Source: http://www.toyotauk.com/main/download/pdf/Why%20we%20located%20here.pdf

    “Favourable working practices”? “[...] a supportive positive attitude to inward investment from the British Government”?

    Now what have I been saying?

    The UK auto manufacturing industry is now concentrating on more premium models because the differential in underlying overheads is the greatest part of the equation, particularly wages.

    So low overheads vs. wages = premium models only? So you're basically saying that we only have a small car industry because the word “British” still has some quality connotations and multinationals would like to exploit this?

    BMW produce the MIni in the UK

    Well it must be a quality product. I mean the car was originally British.

    They produce here because of 'Britishness'.

    That is my point. Our reputation is something they can capitalise on. And risk.

    Your favourite example, Honda, is a piddling little assembly plant by the standards of the other car producers in the UK.

    To quote from the Honda UK website:

    · Honda of the UK Manufacturing Ltd (HUM) is a fully integrated car manufacturing facility, producing the total car (Casting, Engine Assembly, Pressing, Welding, Painting and Frame Assembly) on one site in Swindon - Wiltshire.

    · 370 acre site (1.5million m2)

    · Honda has invested £1.38 billion in its manufacturing operation in Swindon

    · Total HUM car production result for 2008 : 230,423 cars

    · Total 3,400 Associates (April 2009)

    · HUM built CR-V and Civic models exported to 60 Countries Worldwide

    Source: http://www.hondamanufacturing.co.uk/HUM00366.nsf/PageTitleLookup/Key%20Facts%20and%20Milestones?OpenDocument

    It would seem that Honda are unusual in that, unlike the other car makers, they build whole cars here from scratch and without manufacturing a lot of significant parts in other 2nd and 3rd world countries.

    And they don't even specialise in luxury cars.

    Report on 11 April 2012  |  Love thisLove  0 loves
  • LandOfConfusion
    Love rating 67
    LandOfConfusion said

    I have to agree with what Bob0055 says above and in particular with his point on the rich having a significant hand in creating the recent bubbles.

    The problem with our as well as many other western economies is that we're reverting to a much older system where the wealthy controlled the assets and the poor did the work. As Bob0055 points out, the recent bubbles in the housing and stock markets were largely due to wealthy entities, their owners and wealthy individuals buying those assets. Then when things got out of hand we saw two things happen, first one and then shortly after the other.

    The first was that for a brief time, the Gini index actually started to reverse. Since WWII it had been moving towards the rich but the near economic collapse which happened in 2007 caused this to move back – it meant that those with assets took a hit while those with cash and those who actually create wealth benefited.

    The second thing to happen was the quite unprecedented response by the authorities. Both here and in the States interest rates were cut and, in the States in particular a lot of emphasis was placed on maintaining the bubbly highs of the stock markets. But who benefits from this? Is it the little guy with only a small pot of cash savings? Or perhaps the pensioner who's only income is essentially from gilts which have just had their interest rates cut? Or is it the over-leveraged upper-class banker with most of his wealth invested in stocks, shares and natural resources?

    Although I very much doubt it it could be that we're seeing the beginning of real action to address this imbalance as people finally wake up and loose their apathy. Might we now finally see the economic emphasis moving away from the holders of assets (even if the asset is an essential one like housing) and towards the productive, wealth creating entrepreneurs and workers who actually create the things we need and drive the economy?

    Report on 12 April 2012  |  Love thisLove  1 love
  • krustallos
    Love rating 45
    krustallos said

    By the way, I think making the rich poorer is an excellent way of reducing inequality. Who better to provide the wealth for improving society than the people who already have more than they know what to do with? But more important than higher taxes is increasing the bargaining power of workers (by rebuilding the trade union movement) so we get a greater share of the wealth we create, and the 1% have to make do with only being extremely rich rather than obscenely rich. A big sacrifice for them, I know...

    Report on 12 April 2012  |  Love thisLove  0 loves
  • Mike10613
    Love rating 626
    Mike10613 said

    There are a lot of interesting comments and it seems most people agree the rich exploit the poor; except for electricblue. I talk to people in China and they are exploited too. One of my friends will work for Asus through her summer holiday for about a pound an hour. That is reasonable money, she was offered 30p an hour last year. It isn't just about money, but opportunities. Many of the super rich are the aristocracy who were born with silver spoons in their oversized mouths. We also have some rich people who have ruthlessly exploited others or the corrupt system to get their riches. The stock market is controlled by the wealthy because many ordinary people are excluded. They are also excluded from the best of education. It doesn't matter what nationality you are. The children of the rich go to Eton and Oxford; ask our esteemed Prime Minister. The children of Communist leaders in China get their education paid for by the state and they too send their kids to Oxford and Cambridge. One of the students I help in China bought a lottery ticket this week in the hope of getting enough money to become an international student and study in England this year. I bought a lottery ticket for the UK lottery and intended spending the money on exactly the same thing and helping the student to come here to study and have a chance in life.

    We want equality for all and that doesn't mean token gestures like lowered pavements for disabled people. It means jobs for disabled people and trust. Not a bloody French company judging our disabled and deciding who can work, who can get benefits and who can't. Big Society? How about treating British citizens with respect. I mean all of them, not just the super rich. Maybe, we do get the corrupt politicians that we deserve as electricblue appears to point out; but we can still ask for more. We need more honesty and integrity at the top and we need the jobsworths in the civil service to treat citizens with respect. Our elderly people are sent home from hospital in the middle of the night. The back door of number 10 is open for the rich, but closed to the poor. Police officers have free meals with the Press. The Press bugs phones and don't give a damn. Politicians fiddle expenses. The banks fiddle taxes and defraud customers. The Bank of England prints money out of thin air. This country has problems and they aren't caused by poor people. They are caused by people living in mansions and avoiding or evading their taxes.

    Report on 15 April 2012  |  Love thisLove  2 loves
  • LaurenceSt
    Love rating 4
    LaurenceSt said

    Hi Cliff,

    Why did you decide to resend this article? As stated earlier and it seems that a majority seems to agree: inequality is bad for a society. Super rich and super poor are a symptoms of this ineqaulity. So again, I would advice to read the spirit level, and may be rewrite your article. (see http://www.equalitytrust.org.uk/resource/the-spirit-level ) Note to the reader: this book shows correlations, not politics.

    Report on 16 April 2012  |  Love thisLove  0 loves
  • countingcrow
    Love rating 2
    countingcrow said

    I don’t believe that inequality, in itself, is a dirty word. I don’t want a land full of equality, since this will give us a communist state.

    Equality of opportunity is what is important, not equality of salary.

    Report on 16 April 2012  |  Love thisLove  0 loves
  • Mike10613
    Love rating 626
    Mike10613 said

    @countingcrow, there is more inequality in communist states than in this country. They need equality of opportunity and social justice and so do we. It's about morality, more than politics.

    Report on 17 April 2012  |  Love thisLove  0 loves
  • LandOfConfusion
    Love rating 67
    LandOfConfusion said

    @LaurenceSt,

    I've just read a piece on The Spirit Level. It sees like a good read so I'll be getting a copy. I noticed that they found strong evidence that income is not necessarily related to productivity or wealth creation. Well I'd never thought that.

    Report on 18 April 2012  |  Love thisLove  0 loves
  • krustallos
    Love rating 45
    krustallos said

    countingcrow, there's no such thing as equality of opportunity. Some people are naturally far more talented than others, when it comes to making money as much as anything else. The problem with an unequal society is that it allows those people to tilt the playing field in their own direction and suck up huge amounts of wealth. This leaves everyone else impoverished. The game "Monopoly" is actually a pretty accurate representation of how this works.

    More equal societies choose to place some kind of limit on people's ability to tilt the field of play in their own direction, whether by straightforward redistribution or by making naked greed socially unacceptable. This actually benefits the vast majority of people. Pretty hard to see why every society doesn't operate in this way.

    Report on 27 April 2012  |  Love thisLove  1 love
  • DLZ
    Love rating 18
    DLZ said

    Yes, high GINI is bad, but so is low GINI because it's incredibly dull!

    Report on 30 April 2012  |  Love thisLove  0 loves

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