Can The Wealthy and the Bankers Pay For the Crisis?
by Raphie De Santos - 18/04/2010
The bankers and government caused the crisis by creating a massive credit bubble economy. The wealthy have benefited most from this financial bubble. Could they both pay for it rather than making the majority of us do it through cuts in public services, jobs and wages?
The Institute of Fiscal Studies* have found that Britain is more unequal today since records on income distribution started in 1961 and over the last thirteen years of the Labour government these inequalities have continued to increase. The average income before taxes and benefits of the poorest 20 of households was £4,600 per year while the equivalent income of the richest fifth of households was an incredible 16 times larger at £72,500**. A progressive rising income tax that hits the wealthiest in society the hardest could raise an extra £75 billion to cover any deficit in spending and have plenty left over to provide badly needed services.
At the same time over the last two years the government has pumped £375 billion into the banking system through bailouts and quantitative easing. Little of this has flowed back into the real economy. This figure is almost half the total public deficit. The UK banks have £560 billion in capital (cash) and £5 trillion in assets. At the same time UK banks for calendar years 2008 and 2009 have paid out £13.7 billion in bonuses. Taking these banks under full public ownership and control could wipe out the deficit entirely and act as an engine house for the creation of useful, jobs for young and old alike.
The alternative is to make the majority of the population pay for the crisis. As the Financial times pointed out on 15 April 2010 this is massive cuts. They found a short fall of £30 billion in all the three main parties target deficit levels and their proposed “savings”. This is the equivalent to 25% of spending on the NHS, halving the state pension or an extra tax of £1,100 per year on each household in the UK.
We say there is a rational alternative and that is to make the wealthy and bankers pay for the crisis of their making.
*Inequality in the UK, Institute of Fiscal Studies, 2009.
** Office for National Statistics, 2007/2008