Thursday 20 July 2017

New Money Old Problems

In Richard Murphy had a post on 18 July titled "Dear Gareth A Letter To A Wealthy Man In Denial" as a response to an item by a chartered accountant who seems to have done quite well in his life; very much better than the great majority of people, but does not like the implications of Inheritance Taxes.

RM discusses the issues of these taxes making the present case for them. This is not a new problem, it is over a hundred years now since it became "live" in UK politics with Lloyd George, and the debate had been rumbling for many years before that.

Among the comments is one by Leigh Caldwell who expands on the issues involved.


Apart from all your very well-made points Richard, the guy has received plenty of state services in return for his £1m. The only one he acknowledges is child benefit: currently about £1750/year for 2 kids x 16 years = £28,000. But the state also paid for their schooling: circa £5,500/year/child x 2 x 13 years = £143,000. And most of the first child’s university costs: £20,000 say.

Average NHS spending for a 4-person family is circa £8,000/year – let’s count the children only until they turn 21 years and start earning, and the two adults throughout their adult life, assuming they live to 80. He may not have spent as much in younger years, but the costs will probably be accelerating soon as most of health spending is in the later years of life. Total = £320,000.

The state has provided him with domestic and foreign security services in whose absence I suspect an accountant would not keep his £5m of wealth for long. Approximate share of Home Office, Defence and “public order and safety” budgets: £1300/year throughout an 80-year life for 2 people: £208,000.

Depending on whether he was contracted out and/or receives SERPS, state pension is hard to calculate, but at minimum it should be £6,000/year for each partner. Depending on his wife’s age this could start between 60 and 66, but let’s say they both receive it for 15 years. £6,000 x 2 x 15 = £180,000.

No doubt he has used the public roads and the odd train (£500/person/year), local authority bin collections, libraries, etc (let’s estimate £100 for the parts not covered by council tax – I’ll exclude social care and public housing as no doubt he would tell us that has nothing to do with him), the fruits of subsidised scientific research (£100), the great British countryside protected by the government’s environmental agencies (£250); and as an accountant he will recognise the value of accounting and administrative services to collect and distribute the tax, pensions etc so I’m sure he won’t mind paying his £100 share of all those overheads. That’s £1050 x 2 x 80 = £168,000.

I won’t count the services he’s received from private sector employees whose income was subsidised by tax credits, the implicit insurance policy he’s been given by the social safety net, the benefits of visa-free travel to, and duty-free imports from, Europe – and the many other more intangible gains from being a member of a stable, prosperous society.

I could have counted his own free university education instead of his first child’s, which would nudge the figures up a bit. I could have allocated a bit more of the security costs to him since as a business owner, he receives extra benefit from a secure stable society beyond just those accruing as a citizen. But let’s give him a break at this point.

All the above are calculated based on current budgets, so they may differ if spending levels were different in earlier years. In some categories this reduces the figures, in others it increases them. Gareth’s total bill for state services over his lifetime: £1,067,000.

So according to his own calculations, he hasn’t even covered his OWN COSTS from the state, let alone contributed anything in return for the good fortune of being one of the richest people in the country.

£1m of tax might sound like a lot, but over a lifetime an average couple on national average income (one working for 40 years, the other 30) is likely to pay circa £600,000 (in income tax and NI only – not counting any VAT, council tax, corporation tax).

This guy has barely paid more than an ordinary working couple, despite the astronomical assets he’s accumulated over his life. Not to mention the slightly sneaky “tax, NI, etc” in his email – does this mean he HAS included VAT, corporation tax, employer’s NI, council tax, business rates and everything else?

In which case, he has most likely managed to pay LESS tax than the average worker and it would hardly be surprising if angry voters were sympathetic to the idea of simply confiscating his ill-gotten gains.


If a man of this wealth and income in the course of a working life, can incur such costs in excess of what he pays then the implications are that few people cover their costs.

Which explains the debtor state we are in, literally, and why the levels of debt and liability are growing. Yet our politicians propose to spend more and more to get the votes.

See you in the Marshalsea.

1 comment:

  1. As has been said many times - if you rob Peter to pay Paul you will get Paul's vote.