The Capital Levy again
The Labour Party National Executive, with an eye to the next General Election, is issuing a series of discussion documents to form the basis of policy to be recommended to the Party’s Annual Conference this month. The first of these, Labour’s Economic Strategy, covers a wide field, much of it already familiar in Labour Party propaganda, including government direction of investment in industry; limitations of dividends and top salaries; regulation of conditions of employment.
It proposes a “Workers Charter” giving the individual worker a legal right to training and retraining and assistance in moving jobs, transferability of pension rights on change of jobs and a new redundancy payments scheme. Special arrangements are proposed to raise productivity and wages in industries with particularly low wage levels.
Although the Report says that the Labour Party’s attitude to “public ownership” has not changed and that “more and more of Britain’s industries must move inevitably into public hands” the specific proposals relate only to the aviation industry, drug manufacture, North Sea Gas and a State Building Corporation and most this is for government shareholding, or the setting up of a government body competing with private companies, not the creation of new government monopolies. The Times (21 August 1969) reads into it “further evidence of a swing away from Nationalisation policies in favour of greater intervention by the State in the control and shareholding of British industries”.
The item in the Report which drew most attention in the Press is however a proposal for an annual Wealth Tax, a tax levied not on income but on accumulated wealth. Fortunes of less than £50,000 would be exempt and the scheme would start with an additional annual tax of £500 on £50,000 rising to £20,000 on a fortune of £400,000. The rate above £400,000 would be 5 per cent. It would raise an additional £250 million a year.
This is not the first time the Labour Party has advocated a tax on wealth. Under the name Capital Levy the Labour Party’s election address in 1918 proposed a levy starting on ownership of £1,000 and with steeply graduated rates “so as to take only a small contribution from the little people and a very much larger percentage from the millionaires.” They later raised the proposed exemption limit to £5,000 but the whole scheme came to nothing as the Labour Party lost the election and it was not seriously revived when the first Labour government took office in 1923.
The outstanding difference between the 1918 proposal and the present one is that in 1918 it was intended to use the money raised by the levy to pay off the National Debt,, thus reducing the government’s annual payments of interest to investors holding Government securities. This time the wealth tax is to provide additional government revenue without reducing taxation.
Quite unintentionally, but with devastating effect, this new Labour Party proposal vindicates the Socialist Party of Great Britain’s argument that trying to reform capitalism by gradual inroads into the wealth of the propertied class (not that Labour are trying to do this anyway) is utterly futile. In the 1918 Labour Party election address it was stated that “one tenth of the population owns nine-tenth’s of the riches of the United Kingdom”, and at that and every subsequent election the Labour Party has declared its intention to get rid of this inequality. Now, half a century later, it is frankly admitted that all of the measures supposed to bring about equality—death duties, steeply rising income tax and sur-tax, social services and nationalisation among them — have left: a condition of “extreme concentration of wealth”.
On the official figures quoted in the new Labour Party report, the degree of concentration appears to have changed to that now the top ten per cent own only 74 per cent of wealth, but the Report itself challenges the accuracy of the figures. Being based on death duties these figures “under-estimate the degree of concentration” because they ignore wealth which evades death duties by gifts made during the individual’s life time, or by the setting up of trusts and family settlements and the like.
The Labour Party suggests new measure to stop the leaks and evasions but it is well-nigh certain that new devices for tax avoidance will be discovered and the inequality will go on. An example of what does happen as capital accumulates and income from rent and profit increases is the Ellerman family fortune. In the nineteen thirties it was cut from £40 million to £18 million by death duties but within four years it was back to £40 million. (Evening Standard 8 & 9 September 1937), and an article in the Sunday Telegraph (17 August 1969) estimated that it is now £150 million.
Many workers will no doubt be persuaded that new measures to tax the rich will weaken capitalism and benefit wage earners.
The Labour Party Report provides an answer to this too, for in the desire to prove the practicability of a tax on wealth, it states that a wealth tax of this kind is already operating in a large number of countries, including the whole of Scandinavia as well as Luxembourg, Holland, Germany and Switzerland and capitalism is not “weak” in any of these countries.
Proposals of this kind have nothing to do with Socialism, nor do they help to raise working class living standards. As in the countries named, the introduction of a wealth tax in Britain would be just one of a number of alternative methods of meeting government expenditure in the interests of capitalism.
The broad aim of the Labour Party is admitted to be that of raising productivity and efficiency, increasing capital investment and in general to maintain the competitive position of British industry. If they had the opposite intention, that of improving the financial position of the workers at the expense of the property owners, they could quite simply take off wage restraint and encourage wage claims.
Socialism is not a better way of running capitalism but a world wide system of society in which the private ownership of the means of production and distribution would be replaced by social ownership. Not some promised encroachment on private ownership but its abolition.