The New Few
By Ferdinand Mount
Simon & Schuster
What went wrong with Britain? How did a relatively comfortable middle-class democracy acquire a political class riddled with corruption, an amoral business elite and rising levels of inequality?
Ferdinand Mount, a former member of Margaret Thatcher’s policy unit and author of the 1983 Conservative manifesto, has added his name to the list of commentators tackling the subject of inequality, which has spilled over on to the political Right. While conservatives have no problem with inequality of outcome, which is an inevitable result of freedom, such high levels as Britain now has are certainly unhealthy for a country’s social harmony. And it’s particularly unhealthy when the haves don’t seem to particularly deserve their winnings.
Mount recalls attending a HSBC shareholders’ meeting in 2003 when the company was about to pay £9 billion for an American lender of sub-prime loans. At the end of the meeting a cleaner called Abdul stood up and complained that his wages of £5 an hour were not enough to keep the wolf from the door. But no one seemed to question the enormous salary being offered to the “predatory lender”.
The acquisition ended up bringing down HSBC, one of several banks that had to be bailed out by the taxpayer from 2007 in a rescue bid that cost us £800 billion, crippled the country for a generation, and led to enduring bitterness against the rich.
JP Morgan famously said that no executive should earn 20 times his lowest-earning colleague, yet today the head of Tesco earns 900 times as much as the average employee, while the head of one British advertising agency earned 631 times more.
And while share-ownership was supposed to share the wealth and create a nation of stakeholders it has instead led to the market becoming dominated by trust funds. In 1963 some 54 per cent of shares were owned by private individuals. By 1981, it was 27 per cent, and by 2011 it was 10 per cent. As Mount points out: “The Stock Exchange has become an oligarchy.”
It was not always like this. The author traces the history of capitalism back to the Dutch Republic and its growth under British and then American world domination, before arriving at the golden age that followed the Great Depression. One of the things rarely recalled about the 1950s, an era of sexual repression and stuffy conservatism in popular fin-de-millénaire imagination, is how equal it was.
Mount recalls that between 1930 and 1960 the pay of top managers in US fell significantly, with the president of DuPont, Crawford Greenewalt, telling Congress in 1958 that he was taking home half what his predecessor had a generation back. And an even healthier sign is that while in 1935 American lawyers made four times the average income, by 1958 that was down to 2.4.
The greed at the top has partly been fostered by technological and practical change; the de-mutualisation of building societies allowed previously conservative institutions to lend 125 per cent mortgages. But there are also cultural reasons, which have reflected the huge inequalities even in the public sector: the chief executive of Guy’s and St Thomas NHS Foundation trust was on £270,000 a year in 2008-9, a 12 per cent pay rise in one year. The head of Ofcom now receives £400,000, and the provost of UCL is on £400,000.
Mount, whose previous book Mind the Gap is an essential look at the new class divide and the destruction of working-class institutions by the state, has written in the past of his sense of remorse for some of the Tory policies towards the poor. But the solutions are not higher taxes, he says, for “the fat cats have contributed hugely to the revenue ever since Nigel Lawson reduced their top rate to 40 per cent”.
Instead, we should focus on wages. He approves of groups such as Citizens UK, which have shamed large companies into giving a living wage in London, which for a cleaner raises their salary from £12,000 to £17,000. This will help to get people off benefits and into employment, while more spending on technical schools (which only receive one per cent of what universities receive) would help to reverse a situation where the top five per cent and bottom 10 per cent are cast adrift.