Pay Peanuts, Get….Old Etonians
Fat-Cat pay stories took an unusual twist over the last week in the wake of the Panama Papers leak and the UK media’s determination to find a story worth reporting.
Having seen that both the Prime Minister & Chancellor of the Exchequer have declared all income, and paid all due tax (in excess of 40% of their respective incomes), the media have then moved on to the Prime Minister’s income; £200,000 per year, including rental income and profits/dividends from investments.
This for the Prime Minister of the United Kingdom; the man who runs our country. That puts him in the lower quartile of his Eton alumni. And we wonder why most modern-era Prime Ministers have been independently wealthy.
…and yet, the media, the opposition and increasingly the more susceptible members of the electorate continue to slam him for it and seek to find any and every angle to find wrong-doing. Politics of Envy?
Such attitude and behaviour will only lead to even fewer talented people entering public life than they do at present.
The same thing happens in business. Three years ago I interviewed a FTSE-100 CXO with a view to considering them for a similar business stature CEO position. She was perfect for the job. Natural-risk-aversion, complementary sector, perfect skills-match and great chemistry fit with the rest of the board. However she immediately ruled herself out. Why? She just didn’t need the hassle. She had no need to turn her £7-figure annual remuneration into a larger £7-figure remuneration and certainly didn’t need the increased stress, hassle and intrusion into her life. Her quote? “I don’t need the Ego-trip and extra trappings of becoming a CEO enough to offset the intrusion into my life”
This lady was already earning well into £7-figures, not a paltry £200,000. And she was one of 11 people running a £9bn business, not the leader of a £1.8tr nation.
Vilification of execs for no other reason than being high-achievers and high-earners is already dissuading increasing numbers of execs from climbing the corporate ladder to the highest levels…..and is one of, if not the key drivers behind poor representation of Women on Boards – as I discussed here.
Back to Cameron. Simply because of who he is, or more so, because of the role he has, he becomes vilified by the left, the left-wing media, and by millions who believe the headlines that such people broadcast.
From what we can see, Cameron has never taken any backhanders, he’s a loving/devoted husband, and he’s always been scrupulously honest.
The closest he has (as it stands at least) come to unscrupulous dealings, was the now infamous £19,000 profit he made from selling the shares he owned in his father’s offshore company in 2010, but he paid income tax on that in full.
However, to listen to his political opponents talk, you would think he was Al Capone.
Former Mayor Ken Livingston stated ‘He shouldn’t just resign, he should be sent to prison.’
What successful/intelligent leader would consider a political career in light of such groundless vitriol? And regardless of fact, be treated as no better than a common criminal?
But this is not just the preserve of the Right-hand side of The House.
Take Hilary Benn, the next-generation great white hope of the Labour moderates. His 2013/14 reveals he avoided paying substantial death duties on the £5m estate of his late father, ‘people’s hero’, Tony Benn….all thanks to the Socialist Firebreather’s careful tax planning.
Chuka Umunna, the smooth-talking, self-titled ‘British Obama’ accepted just under £3,000 from a company specialising in tax avoidance, at the same time as calling on George Osborne ‘to close in on tax avoidance, close in on tax loopholes and deliver greater tax justice’.
David Miliband, still talked about as a future Labour leader despite being dumped in 2010 because the Unions preferred Wallace, his brother. He set up a company called ‘The Office of David Miliband’ through which he channeled his non-Parliamentary earnings. By doing so, when he received a fee of £25,000 for a public speaking engagement, he only had to pay 20% corporation tax, rather than the 40/45% income tax he’d have to pay as a higher-rate taxpayer.
Ironically…this was the same dodge used by the blood-baying, anti-capitalist witch-hunter of Tory tax dodgers, Ken Livingstone. When forced to publish his tax return during the 2012 London Mayoral campaign, it emerged that in he’d routed £238,646 through his personal company, thereby saving himself £54,000 in tax! Ken bayed for The Prime Minister to be imprisoned after making £19,000 profit (and paying all Income Tax due); what would Red Ken think his own punishment should be for tax avoidance of £54,000?
Up until fairly recently, being a Member of Parliament was deemed a high status, aspirational occupation (or vocation?). MPs were seen as altruistic public servants who made huge sacrifices, personal and financial, in order to serve their country. They were rightly and duly respected.
They have brought large parts on themselves with their underhand dealing and (usually soft) corruption. Expenses anyone? But if we are going to pay them less than a Secondary School Headteacher, but still expect high intelligence, we need to expect bright people to know how to maximise their own finances, with the law.
Nowadays, MPs typically have a dire reputation and very minimal respect, ranked somewhere below Estate Agents (and Recruiters). Even proffering squeaky clean tax returns (even if filed late Mr Corbyn, and with no evidence of the income received from a well publicised lodger…!) will just provide the media and militant haters with more ammunition….as the disclosure of income and in particular, in Dave & George’s case, investment income and family wealth has already shown.
Wind back to the great leaders of this country over the last 100 years. What would have happened to Winston Churchill, famously poor with his own personal finances, if he had been forced to become transparent? Would the Dennis Skinner of the day have berated him in a red-faced, schoolyard spat? Or if the Corbyn of the day, Hastings Lees-Smith, had forced transparency? The Second World War might not have had the same outcome.
In business as in Government, we need to return to celebrating successful people in this country, instead of repeatedly denigrating them. £200,000 is embarrassingly low for The Prime Minister of the United Kingdom. There are over 300 other public servants that are paid more than he is. 35 people working on HS2, the head of the Civil Service, 50 people in Quangos set up following NHS reorganisations plus another 60 still within the NHS (not including Trust CEOs). And those figures don’t include the Executives residing in Local Government…..
As a country, and within business, we need to return to attracting the best. Not the best within a set of falsely limited parameters, the best, outright.
Within business, every Spring, we get the throng of media attention on CEOs as their pay awards are decided and announced. Perennial target Sir Martin Sorrell is ritually denigrated for his pay packet. Despite taking just £1.2m salary from the business he founded and still leads as CEO, WPP, choosing to have the rest of his remuneration based purely on performance, he still received media vitriol for his £8-figure bonus…..despite his business’s profits now rising to over £1.5bn this year.
The average FTSE-100 CEO earns £5m in total remuneration (in return for total FTSE-100 pre-tax profits of £100bn). That means a FTSE-100 CEO earns more in a fortnight, than our Prime Minister earns in a year (and a top footballer in less than a week). Why would you possibly go into politics if you were a well-educated, high-achieving leader; When instead you could opt for a vocation and earn the rewards of that vocation, in the entrepreneurial space…..…unless you were already independently wealthy?
If we want to change that, we need to attract the best, celebrate success, and accept a basic human right and instinct is to amass wealth to pass down to our children to in-turn invest into their lives and prosper.
Great Blog Gary. Sorely unique piece of common sense in a media filled with hatred and envy.
Really well written, topical and accurate article Gary, well done. Persistent hatred of all success in this country will be our undoing. Only in this country do we hate those who do well and defend those who can’t be bothered.
Interesting opinion Gary, but how can we trust someone that gets gifted £200000 from is mother because she didn’t think his father gave him enough from his will? All in this together?
A mother that gives her son a gift. Scandalous!
For what its worth, my father (whose political position makes Corbyn look like a Thatcherite) did the same thing when his father died, making up the amount as he knew it was intended but for the passage of time.
Similarly my Father in Law has spent his life doing what he can to amass (and protect) wealth to ensure his children are well provided for. Which is what I am doing for my daughter. What decent human being/parent wouldn’t?
Kudos to all three of you. It’s what makes a man a great man and a great parent.
This notion of SKIing (Spending Kids Inheritance) is abhorrent. Live your life, but what horrid human would promote the neglecting of a parent’s own children’s future by forcibly eradicating inheritance. Especially when they themselves benefited from an inheritance of their own. Basic tax planning to avoid Inheritance tax should be an essential element in any person’s financial education.
My mother received a significant (£6-figure) inheritance from her mother, and then took great delight in living the life of a millionairess whilst bragging to the world that she was a SKIer. My sister and I didn’t need or want her inheritance (or rather, her mothers inheritance), all we wanted was some care and attention. She passed away three years ago very lonely.
My sister and I ended up giving the small inheritance we received away to charity and vowed that day to set up investment schemes that looked after our respective childrens’ future, and do so in as tax efficient manner as possible.
and now it turns out that Osborne gave himself a pay rise by reducing the 50% tax rate to 45%. He needs removing from office, that tantamount to fraud.
and gave everyone a payrise by lifting the Personal Allowance from £6400 to £11500.
His move from 50% to 45% has also raised more tax. But the left would rather have punitive taxes that don’t work, rather than taxes that actually do work.
Great Blog Gary, sums up my thoughts on the matter. The politics of envy is overbearing and the only positive to come out of it is the realisation that the British people don’t truly buy into it, witness the drubbing soft socialism got at the General Election. Corbyn’s frankly bizarre take on life and political/economic understanding is the stuff of 1970s dark Britain mixed with 1970’s loonyism. The more he regurgitates the same old rhetoric about wealth being evil, the more the nation realises he is laughable and we can keep our country on the prosperous track it sits on at present. Our media have a lot to answer for though, their notion of their own self importance in holding our countries leaders to account is ridiculous. They are just seeking whatever scandalous take they can do to try and prevent the haemorrhaging of their own customer base by pandering to the lowest, and least intelligent, denominator. They realise that attacking anyone who earns more than the average wage and branding them as the rich elite gets the coverage.
All very well and good if we actually believe their Tax returns. Knowing Cameron & Osborne they will have fiddled those as well, or got their mates at the revenue to fix them.
@Louise. Bitterness is fine, bigotry is almost understandable when spouted from a position of ignorance, but thats getting to even Kevin Maguire levels of stupidity. Falsifying tax returns to reduce tax exposure is Evasion and is therefore illegal. No MP would try that. Avoidance, of course, anyone would given the option. But Evasion. Never. Couldn’t happen.
You start off as a working class lad. You work hard, you pay your 20% tax…plus another 12% tax (only they call it employees national insurance)
You work harder and lose 40% in tax, plus the additional 12% NI
You work even harder and lose 45% in tax (plus the NI)
You then set up a business and employ staff and get to pay HMRC another 12% of the money you pay them, called employers national insurance, just for employing them. (they also pay the above 20%, 40% and 45% tax, and 12% NI)
If you then make a profit you get to pay 20% of that to HMRC in corporation tax.
Whatever you have left you get to spend.
You’ll lose another 20% on VAT on anything deemed non-essential that you buy. And if you sell anything that you buy you have to pay another 18%–28% Capital Gains Tax on any appreciation (but won’t get to reclaim any tax if it depreciates).
Buy a House? HMRC will take a few percentage points, £15-25,000 in stamp duty tax for an average four bed house.
Then you die and HMRC will take 40% of everything you leave to your children, despite the fact it’s been taxed several times already.
So before you castigate someone for legally seeking to marginally reduce their tax bills, and looking as overseas investments, ask yourself why you think they need to.
Great blog Gary. I’m glad someone else gets this.
Please feel free to post this, retweet this and plagiarise it as much as possible. It needs to be known.
PS – I couldn’t put the figures in bold? Are you able to?
Absolutely spot on paul.
A lot has to do with the british mentality of money being evil and successful people are vile creatures…. Its jealousy.
Compare to the USA … The American dream – where they celebrate success a la Donald Trump and rich people are treated like superstars. Say what you want about the tories, but they have done inherited a bankcrupt country from Labour and have steadied the ship at the very least and done a fine job. People think they are only for the rich but thats not true – literally anyone who works and earns is better off under tories, only people who benefit from labour are unemployed. Tories at least incestivise people to earn and do well – shouldnt we all?
For me labour have no relevance as a party anymore, they are obsolete, in corbyn a 70s man in a digital world. Labour may have been helpful when we had industries like minimg and cotton mills, and a party was needed to help the lowest workers not get exploited, but in 2016 most of what labour did for people in the 19th century is either written into law to avoid it happening or doesnt exist anymore.
How can they be relevant when on the most important issue of a generation, the EU referndum they are essentially silent, but have a previoisly anti EU leader in corbyn. People may moan about tories, but they are much better than the alternative.
We should insist on seeing the tax returns of every MP. They are paid for from the public purse. It’s our right and will prevent further parasitical behaviour from the dodgy Daves and his dodgier party.
How about we insist on the full income/expenditure breakdown and publication of every welfare/benefit recipient? They are, after all, also paid from the public purse. Are you as comfortable with that?
So George & Dave are both well inside the Top 1% of earners. No wonder they are clueless about the rest of us.
And why are the Labour leaders paid less than half. It’s scandalous. Rich Rules.
Would you rather it was people with minimal education and an unskilled, minimum wage background that ran our country? And our £2-Trillion economy??
Maybe we could just borrow from Wonga when our countries debt became too onerous?
The Tax returns were from 2013/14. Corbyn was just a militant, slightly loony back bencher for that fiscal year. He only became leader of the opposition in September and for that gets £130,000 per year.
He’s likely to be back to a back-bench salary before the next tax year!
Your blog hits the right note Gary. We want our leaders to be bright, to look after our interests and to juggle this impossible position between giving and taking in a modern economy. We want to provide a utopian environment for subjects to reside in where everything is accessible, but we don’t want to tax people to highly that they leave. To do that it takes a very intelligent team of people. Intelligent people can command huge salaries and wealth creation. To expect people to forgo that is naive and would required a saintly disposition. So we have to appeal to people who no longer need to attain a great salary or financial reward for their 24/7 labours. Welcome back the old Upper Class.
We need to start paying better. If the head of HS2 is on £750,000 per year, why isn’t the Prime Minister? If 60 managers in the NHS are on over £150,000, why aren’t our MPs on that level? Their tenures are shorter (4 year fixed term contracts!), and their responsibility greater. If people had the ability to reach such levels in politics, we would attract brighter, real world members of our intellectual elite.
A final point on being clever with ones own wealth. If we want the people that can understand how to run our country as efficiently as possible, whilst maximising our position on the global stage, then we need to accept that they will also do the same with their own personal finances. Those who employ LEGAL tax minimising vehicles, and plan their onwards finances through estate planning to look after their children are EXACTLY the kind of people we WANT leading our country.