Even before the coronavirus pandemic struck, the divisions between the super-rich and the rest of society were growing increasingly extreme. But as the virus infects the world economy, plunging millions into unemployment and pushing finances to breaking point, those divisions are set to get worse.
Last week, Mark Zuckerberg’s fortune passed $100bn (£76bn) for the first time, adding him to an exclusive club of the world’s centibillionaires, after Facebook’s shares surged on news it was to launch a rival to the video-sharing app TikTok.
While redundancies are on the rise everywhere, the 15 best-paid chief executives in tech have a combined annual income of more than $83bn – which is greater than the gross domestic product of any one of hundreds of countries.
During the coronavirus crisis, lockdown and social distancing have helped many people save money – particularly older, highly educated and highly paid workers who have been able to work from home. In aggregate, household deposits in bank accounts have increased by almost £70bn since the onset of the pandemic, according to Bank of England data.
But poorer households, especially those with adults who have lost their jobs, have either saved nowhere nearly as much or suffered major damage to their finances. As much as £6bn is expected to end up being owed in unpaid council tax, utility bills and credit card bills.
History suggests wealth taxes can help repair government finances while promoting inclusive growth for the future
This comes after a period of rising wealth, with Britain’s overall money mountain – measured by financial and property wealth – standing at a record £14.6 trillion on the latest official count by the Office for National Statistics. But that sum is incredibly unevenly distributed, with the top 10% richest people controlling almost half of it. The poorest 30% hold as little as 2% of all wealth.
Given this inequality – and because young adults can expect weaker income growth than their parents – the Institute for Fiscal Studies believes as many as one in 10 of UK adults born in the 1980s will inherit more than half as much money from their parents as the average person earns in a lifetime.
It is time, therefore, to redress the balance, as the pandemic threatens to further exacerbate these longstanding divisions in society.
In the hunt for a solution, the economists Stephen Machin and Lee Elliot Major at the London School of Economics have put forward a plan for a one-off progressive wealth tax on the net worth of the top 1% richest people in Britain.
Economic history suggests that such tools can help repair government finances battered by recession, while promoting inclusive growth for the future – as was the case in Germany following the second world war.
Writing in a report published this summer, the economists said such a wealth tax would be enough to repay all the extra government debt incurred by the pandemic after 10 years. Failure to take action, however, would ensure that the coronavirus crisis ushers in a dark age for social mobility.
There are signs that countries are taking the issue seriously. The tax status of companies and their owners has been a determining factor in whether companies receive financial aid from governments in the Covid recession. The power of the state is being reasserted and its benefits demonstrated, making the environment ripe for higher taxation in recompense for the safety net that has been deployed.
There are also fewer places to hide. Wealth taxes are commonplace in countries including Portugal, Italy, Belgium, the Netherlands, Norway and Switzerland. Spain imposes taxes on assets above €700,000 (£632,000), while France raises about €2bn a year from wealth taxes paid by the 150,000 richest households.
As we come to terms with the effects of the pandemic, the case for wealth taxes is rising rapidly.
Disney turns from cinemas’ hero to villain
Last week brought another horror show for cinema owners – from a studio that could once be relied on to fill their seats. The Disney entertainment empire dominates the global box office, with blockbusters such as the Star Wars films and Marvel superhero universe to Pixar animations such as Toy Story.
Last year was Disney’s best ever: Avengers: Endgame, the highest- grossing film of all time, drove worldwide ticket sales to a record $42bn (£32bn). But now, as cinema owners struggle to recover from the coronavirus pandemic, Disney is to bypass the big screen and premiere its live-action version of Mulan on its streaming service first.
The cinema industry had been banking on Mulan – and Christopher Nolan’s spy film Tenet – to reignite cinema-going. Instead owners face a battle to protect their exclusive right to new releases for 70-90 days before films are made available on other platforms.
Disney insists the decision to offer Mulan on Disney+ first is a one-off, but admits it will gain invaluable data about how many new subscribers a blockbuster might draw, and the appetite for forking out $29.99 on top of a monthly subscription.
To make $900m, Disney would need about half its 60 million global subscribers to watch Mulan. Direct-to-digital releases are much more profitable for studios, as cinema owners take almost half of box office earnings. Analysts don’t think such experiments with “premium” video-on-demand mark the beginning of the end for the cinema experience. Hollywood studios know that their investment in blockbusters such as the James Bond film: No Time To Die still needs the billions of dollars that cinema premieres provide.
But Disney’s move is seismic. It shifts the balance of power to studios, letting them choose which films might be better-served, and more profitable, going direct-to-digital.
Sunak’s meal deal tastier than expected
Of all the economic emergency measures announced by the chancellor, Rishi Sunak, his “eat out to help out” initiative was the biggest surprise.
A scheme that offered a maximum discount of £10 a head on food and soft drinks – running on every Monday, Tuesday and Wednesday throughout August – had not been predicted in the run-up to the chancellor’s recent economic statement, but the early signs are that it has been a success.
More than 72,000 restaurants, pubs and cafes across the UK have signed up to the initiative, and many chains have reported surges in sales. Given that about half of the UK’s 30,900 or so restaurants are still firmly closed, eat out to help out seems likely to have been a lifeline for the half that have reopened.
The scheme lasts for a month only, so the long-term prospects of the British leisure industry will ultimately be determined by wider factors, such as the impact of ending the furlough scheme and whether there is a second wave of Covid-19.
But eat out to help out has given many of the 1.8 million people who work in Britain’s restaurants, pubs and cafes a chance.
Sunak will face calls to extend the £500m offer, in the same way that he has been urged to extend the furlough programme – which covers 80% of the wages of employees temporarily laid off.
The chancellor has been firm in his refusal to lengthen the furlough initiative beyond its 31 October end point. The latest official figures show that as many as 9.6 million jobs at 1.2 million companies have been furloughed since the onset of the pandemic in March, at a cost of £33.8bn to the exchequer.
Nonetheless, as with eat out to help out, a principle that is anathema to the political right has been reasserted by this Conservative government: that the state must play a strong role in the economy. Voters enjoying a 50% discount on their meals this month are unlikely to disagree.