In Latvia even the opera is about nationhood

In Lativa even opera is about the national question. The magnificent Latvian National Opera next to the Pilsetas Kanals in central Riga was built when Latvia was under German occupation in 1865. It was built by and for Germans, with cameos of Goethe, Schiller, Wagner in the ornate plasterwork. Latvians would never go in the place and opera itself was seen as a uniquely Prussian and alien entertainment.

When Latvia was finally liberated from German domination in 1918, the opera briefly became a national hate-symbol - a monument to a century of foreign domination. When Riga fell under Soviet domination after 1945, the Russians rehabilitated the opera as a symbol of the cultural ambitions of the proletariat and 'modernised' it. The building was gutted, the stucco removed, neon lights were installed and the plush red seats replaced with proletarian brown corduroy. Latvians boycotted it even more. Never has a building designed for entertainment aroused such visceral loathing as the National Opera. It was a running sore.

All the more surprising then that the Latvians didn't raze the building in 1991 when they finally achieved liberation from the Soviets. Not only that, they decided to restore it to its former glory and extended the building to become a cultural centre. A team of architects and historians spent five years exploring the history of the building and then meticulously recreating its Belle Epoch splendour.

What a job. The interior is incredible - like a gold leave grotto. An enormous chandelier with 250 bulbs illuminates red plush seats - proper ones, not the kind of flip-up benches we are used to. Silk wallpaper and elaborate cornices adorn the public areas and even the wooden coat hangers have been reproduced from 1865 drawings. It is impossibly grand - a costly folly, surely, for a poor country of only 2 and a half million people.

Latvians were determined to show that they could do anything after liberation, so they decided to make their opera house an international symbol of national renewal. The opera was accorded top priority. Ex pat businessmen donated large sums of money. A suitcase of gold leaf appeared from nowhere. And the only stipulation was that it should be a Latvian National Opera for Latvians. Russians make up a third of the population of Riga, but they are very definitely not invited to perform, unless they can show that they are fluent in Latvian. Even the surtitles are in English and Latvian - no Russian spoken here.

But with Latvia on the rocks economically, what happens now? Well, they've just had to cancel a big Wagnerian epic because of cuts of a million euros. But the production of La Traviata that I saw was first class. Modernised and set partly in a bordello, complete with bare-breasted prostitutes, this was a very Latvian interpretation of Verdi's classic. Fitting perhaps for a city that has been called the "Bangkok of the Baltic" because of its reputation for lap dancing bars and women of easy virtue. Well, La Traviata is about a high class prostitute, and there was nothing tacky or sleazy about this production. Lavish costumes and sets must have cost a lot of money that this country doesn't have. Better go while they can still afford it.

Brown to go

   Last week, a jet lagged Gordon Brown headed for the exit after question time, forgetting he had a statement to make on his trip to Pakistan.  Oh how we laughed: ‘Brown to go...PM loses it... an.exit strategy at last”. He looked utterly exhausted, shattered. One hack said he was “like a drunk who can put on a fair impression of being sober until an empty gin bottle falls out of his pocket”. Hmm.

  

   Now, I hope this doesn’t sound to mealy-mouthed, but I am beginning to get just a little uncomfortable with the hounding of Gordon Brown. Yes, I know: this column has been only too willing to join the hunt on occasion.  And the Prime Minister has been very much the agent of his own misfortune recently - I mean, you just don’t take on Joanna Lumley and the Gurkhas unless you’re absolutely sure your troops will hold the line.

    But it isn’t pleasant to see a figure who used to be respected, certainly in Scotland,  for his intellect and his integrity becoming a figure of tabloid ridicule and contempt.  The Daily Mail ran a  headline last week saying:  “If Gordon Brown was a dog he’d be put down”.  This venomous coverage is partly down to the influence of the blogosphere which has taken political ridicule into a new dimension. Everyone is falling over themselves to be cruel.  

    The Libdem finance spokesman,Vince Cable, famously described Brown as a cross between Stalin and Mr Bean, but that seems almost benign  now that the PM routinely is portrayed as a bumbling sociopath, who can barely tie his own shoelaces and spends his time plotting nasty smears with sleazy chums.  Or as the former Number Ten staffer, Matthew Tayolor put it: “digging holes to trap the opposition and then jumping into them”.  Well, you can’t argue with that.  Certainly his choice of friends leaves a lot to be desired, as the Damian McBride ‘smear-mails’ affair underlined. 

  Comparisons are being made with the dying days of John Major, the Tory Prime Minister in the 1990s, who became a cartoon character with his pants over his trousers and a peculiar fascination for peas.  But Major was portrayed as an amiable and essentially harmless figure - a kind of political Chauncey Gardner, who’d somehow been mistaken for Prime Minister.   Brown is seen as a ruthless control freak, a vicious party infighter, a humourless issuer of vainglorious five year plans.  I don’t actually believe Brown relaxes by studying tractor production figures - he’s much more likely to be watching football.  But the image has stuck.  

   And he can be certainly be accused of being preoccupied with tactics rather than strategy.  The budget tax increases on the rich were seen as an attempt to wrong-foot posh David Cameron, rather than an attempt to revisit Labour’s fundamental egalitarian values.    I don’t think there was any political subtext to the Gurkha defeat, which was simply a failure to read the public mood.  Jacqui Smith, the beleaguered home secretary, is being blamed for not circulating concessions early enough to head off the revolt by Labour MPs.  And the expenses fiasco was another old fashioned political own goal.   Brown had tried to bounce parliament into accepting his pet scheme for flat-rate allowances, and it failed.  He had to withdraw the crucial motion to avoid two defeats in one week.  He just wasn’t on top of events, and now events are piling on top of him. 

   What happens now is fairly predictable, I fear.   Labour MPs are getting a taste for rebellion, just as Tory MPs did under John Major in 1995-7.  The fear is gone because the Prime Minister’s authority is gone.  They sense that Brown is finished, and that they are too, so why bother toeing the line anymore?  Current cabinet ministers are briefing against him, and will continue to do so. Former ministers, like David Blunkett and Charles Clarke, will seek attention by reprising their hand-wringing media interviews urging Brown to ‘up his game’. Clarke said he was “ashamed” to be in the Labour Party under Brown. There will be renewed muttering about Brown’s "psychological flaws".  

 The European Elections in June are going to be a bloodbath.  The opinion polls suggest a massive swing away from Labour, possibly mitigated by a very low turnout.  The party is bracing itself for losses in the south to the British National Party, who will be standing on a platform of “British jobs for British workers”  - a platform fashioned for them by Gordon Brown himself.  How he must regret making that pledge to the Labour conference in 2007.    

    In June, Brown will try to draw a line under the euro losses by reshuffling his cabinet.  Jacqui Smith is likely to go and possibly Blairite stalwart, Nick Brown.  There have been rumours that John Reid, chairman of Celtic and former Labour cabinet minister, could be due for a political comeback, replacing Harriet Harman as party chairman.  That would be a shock to the system,certainly,  but it seems unlikely that Brown would bring yet another of his old enemies into his tent to join Peter Mandelson.   Alistair Darling seems to have survived following his competent handling of the worst budget since the war.

    The reshuffle will be dismissed as ‘deck-chairs on the Titanic’.   However, the machinations might throw up a stalking horse candidate to stand against Brown at the party conference in October.  The last time Brown was on death row Charles Clarke made clear that he could be persuaded, and he looks persuadable again.  But with Labour MPs in their current enfeebled state, it seems  unlikely that they’ll have the bottle to go for a change of leader in 2009.  Most are just hanging on for the pension rights and to give them time to look for other jobs - not an easy task right now in the current depressed labour market.  For the next twelve months, the commons is going to be rather like a job creation programme for politicians.

   So, Gordon Brown shows every sign of hanging on to the bitter end, and losing to David Cameron in May 2010 - the only question is by how much. The Tories are 18% ahead in the latest Yougov poll, enough for a comfortable majority - though that could be cut to a few seats. As defeat looms Brown’s final task will be to place a poison pill in the Number Ten chalice to ensure that Cameron’s love affair with the voters is brief. People are already saying that this is a good general election to lose because whoever enters Number Ten faces years of cuts and tax increases. But there is one other consolation:  defeat will at least put Gordon Brown out of his misery and allow him get a night's sleep. 

Scrappage: it could catch on.

    Next week the government's cunning plan to revive the motor trade gets underway.  It's called scrappage: destroying things that are perfectly serviceable in order to keep people employed replacing them.  The government is effectively giving people £2000 to scrap their ten year old cars and buy a new one.  Banger prices have rocketed on Gumtree.  This will make lots of money for Britain’s Arthur Daleys as they exchange dodgy trade-ins in exchange for new motors. 

   So why not extend it?  If the principle of scrappage works for the motor trade, why not fridges and freezers and flat screen TVs?  Why not get people to junk their entire kitchens.  True, most white goods are imported, so it wouldn’t help British manufacturers, but then 85% of new cars are imported so the government’s scheme isn’t doing much for for British manufacturing either. 

 

   And why not vegetables?  The government could order that the sell-by dates on carrots and potatoes should be brought forward so that we have to buy more sooner.  The waste would be appalling, but think of the boost to Tescos.  We could pay vandals to go around the city breaking windows and smashing phone booths  and then employ them at public expense to repair the damage.   The great economist John Maynard Keynes once suggested that the government should pay people to dig holes and then fill them in again. Nowadays this is called the 2012 Olympics.

   Clever Edinburgh and Glasgow councils have already applied the scrappage principle to housing - knocking down thousands of council houses and then replacing them with dinky executive flatlets that are too expensive for anyone to y buy. The Edinburgh Tram scheme could be scrapped even before it has been built - why wait?   And if we need more shovel-ready projects to get the construction industry back to work, the Scottish Parliament building is getting a bit long in the tooth after nearly ten years. Then there's the Millennium Dome and the London Eye.

   About the only scrappage scheme the government isn't interested in is Trident, presumably because that would actually save money. .  To work properly, scrappage has to involve acts of pointless vandalism which only benefit our trading rivals.   £300 million, enough for a hundred hospitals, is literally being thrown away on the junk car scheme.  But the government should watch out.  As David Cameron observed at Prime Minister’s Questions, you take something ten years old, completely clapped out, pumps out hot air, pollutes its surroundings, it is absolutely ripe for the knackers yard.  “What a brilliant idea”.

   

The paradox of foresight. Vince Cable and the crash

"The Storm - the world economic crisis and what it means"  By Vince Cable. 

   We’ve heard of the paradox of thrift, but there is also the paradox of foresight.  People who see things coming are very rarely rewarded for their presience,  in fact they’re usually dismissed as a bit looney, much as Vince Cable was back in 2003/4 when he was telling anyone who’d listen that the housing bubble was out of control and would lead to economic disaster.  He was firmly put down by Gordon Brown then chancellor, for “writing articles in the newspapers that spread alarm, without substance, about the state of the British economy”.  Well, now we know.

   Cable wasn’t alone in being vilified for stating the obvious. Professor Nouriel Roubini, of New York University, was and  still is  called “Dr Doom” for his forecast that the credit bubble was going to collapse. In my own small way I was dissed by estate agents and economists for writing articles in this newspaper in 2004-6 criticising the banks for handing out mortgages in excess of 100%  at five or six times salary.   Nonsense, I was told, how else can people get on the “housing ladder”?  Irresponsible to talk the market down. 

    Cable is right to locate the origins of the financial crisis in the housing market, rather than in the inverted pyramid of exotic derivatives built upon it. It was the greatest asset  bubble in human history, a global madness,  fuelled by government subsidies and Asian lending, that led to the tripling of house prices, and the creation of trillions of in imaginary wealth.  This became securitized into toxic financial instruments,  like the infamous collateralised debt obligations,  which were sold on to other banks.

     People often ask why banks handed mortgages to people who couldn’t afford to pay for them.  It was because the prevailing wisdom, in financial institutions and in government,  was that house values always rise; therefore if the householder defaults, the property can simply be repossessed and sold on at a higher price.  It was a no lose bet. Until everyone lost when gravity reasserted itself, house prices collapsed, and all those myriad bonds based on mortgages became impossible to sell. 

    People in Scotland still get very angry if you say that house prices are  too high. Incredibly, local authorities like Edinburgh and Dundee are now offering 100% mortgages to first time buyers rejected by the banks who are now - rightly - demanding 25% deposits.  Utter madness. Actually using public money to lure people into negative equity.   The continuing decline of the housing market - Cable believes UK house prices have another 20%-30% to fall -  ensures that the banks and local authorities will have more write downs, more toxic assets, more losses which the public sector will have to pay for.   

  This is where it gets messy for Vince.  The paradox of foresight means that you  are called upon to give solutions for the very problems you sought to avoid.  In trying to get to a solution for the world economy Cable - like the Irishman- wouldn’t start from here.  Unfortunately he has to.  And he has to stick to Liberal Democrat party policy, which which is against nationalisation of the banks.   Cable says banks will have to be regulated “as if they were nationalised”. But he goes on to doubt whether the public will continue to finance the failures of this radioactive private financial sector with its obsession with bonuses.  He should grasp the nettle: either banks are part of the market economy, in which case they must be allowed to go under, or they are “too big to fail” in which case they should be nationalised.  The moral hazard is too great to allow banks to carry on speculating safe in the knowledge that the taxpayer will come to the rescue when things go wrong.  As he says, this is “socialism for the rich”. 

  Which brings us back to the paradox of thrift. Cable is torn between orthodox Keynsianism - borrowing to spend - and the realisation that we are all spent out and need to save.  “The longer term need will be to boost savings for pensions, long term care and the financing of mortgage deposits. There is a long period of austerity ahead”.  Damn right there is, but the Liberal Democrats aren’t calling for it. Their policy, when last I looked, was for tax cuts, increases in spending and yet more subsidies first time buyers.  

   Denial over housing has been replaced by denial over debt - public and private.  No one wants to tell the truth: that we have been spending beyond our means for decades and now have to face the reckoning. The great danger, as Cable warns, is that  democratic governments will not be prepared to tell the voters what they don’t want to hear.   Foresight is a terrible thing.  

    

Whatever happened to the moral compass

 You know things are really bad when Blairite ministers start attacking Brown for not being left-wing enough.  This week we had the extraordinary spectacle of one of the apostles of New Labour, the former Transport Secretary, Stephen Byers, calling on Gordon Brown to scrap identity cards and shelve the Trident missile system - in so doing joining an unlikely front with the SNP. Perhaps he had advance warning of the story from my colleague, Rob Edwards, about the latest radioactive discharges from the submarines in Faslane on the Clyde

The continuation of Britain's "independent" nuclear deterrent was a key issue for Tony Blair and he made sure that he secured a vote on the renewal of Trident before he left office. Biometric identity cards were also a touchstone for New Labour, seen as an indispensable weapon in the "war against terror". Stephen Byers coming out against these policies, even as economy measures, is a bit like Tony Blair saying he supports the tax increases on the rich - which, incidentally, he has made clear he does not.

Earlier, the Blairite old guard has emerged from the woodwork looking for payback.The Damian McBride smear e-mails affair allowed former Blairite ministers such as Alan Milburn and Charles Clarke to attack Brown by association.There is something tragic in this turn of events for a Prime Minister who made such a virtue of his "moral compass" when he took over. Most of us thought that Gordon Brown really was a "pretty straight kind of a guy", to echo Tony Blair's self-assessment, and that he had roots in Labour's social democratic traditions. "Best when we are Labour", as he said at the 2006 Labour conference.

 Everyone in Westminster knew that Brown had long supported a 50% tax on higher incomes but had been over-ruled by Blair. Similarly, his deafening silence on the Iraq war and on Trident replacement before he took over from Tony Blair gave many the impression that he was not thirled to Blairite defence policy either.

Perhaps if Brown had really followed his moral compass, and had had the courage of his convictions, he might have been able to renew the Labour project when he took office in the same way that Barack Obama has changed the climate of opinion in America. Brown could have taken the initiative and offered to put Trident on the negotiating table, not just to save money, but to stop nuclear proliferation. It is no longer the cold war shibboleth it was in the 1980s.

Last week's Budget tax increases looked like a political tactic designed to wrongfoot David Cameron by making him support the super rich. Yet it has been highly popular with a public which is sickened by the wealth and irresponsibility of bankers such as Fred Goodwin. If Brown had raised taxes as a matter of principle, he might have been on to a winner; unfortunately, it has been seen as just another exercise in the politics of spin.The McBride e-mails affair confirmed that, as far as the black arts are concerned, Brown is no different from his predecessor, and possibly a lot worse. No-one believes that he didn't know what his closest aides were up to.

And now, incredibly, the expenses scandal has landed on the No 10 doorstep, with Brown appearing to defend the indefensible. This is doubly ironic, since no-one believes that Brown is remotely corrupt or sleazy. If only he had approached the allowances question as a moral issue, and declared upon taking office that he would make Westminster as honest as Holyrood, he could have been the PM who cleaned up parliament. Instead, it looks like the Tories who will clean up at the next General Election. I don't know about New Labour, but it looks like Gordon Brown RIP.

MPs must wake up to the age of thirft

That YouTube video of Gordon Brown trying to explain his policy on MPs' pay looks like going down as his comic epitaph. Rather like James Callaghan at Guadeloupe saying "crisis, what crisis?" in 1978, or Thatcher elbowing John Sergeant aside at the Paris Summit in 1990, it's the one that will run and run. No politician since Richard Nixon has looked so shifty on camera. Partly, it was that plastic smile that the PM plants on his face at inappropriate moments, as if someone other than he is in charge of his facial muscles.

But it was also the sheer audacity of trying to bounce parliament and his party this week into endorsing a new scheme of MPs' allowances which is actually worse than the existing discredited system and likely to cost more.

There was no way that a flat-fee system - known as "sign on and sod off" in Brussels - was going to allay public concern about the misuse of public funds. Nowadays everyone, even journalists, has to furnish receipts before claiming expenses, and the public cannot understand why MPs should be treated any differently. It was the revelation that MPs could put all manner of items from bath plugs to porn movies on expenses, no questions asked, that brought about the crisis in the first place.

 Brown has been forced to dump his own plan to stave off a humiliating defeat in the Commons vote later this week. He still appears to favour a flat-rate fee, albeit one requiring MPs actually to stay overnight when they claim it. This will not work because it still fails the test of transparency. I don't understand why they don't just introduce the system in operation in the Scottish Parliament where everything is open and above board, and where parliamentary expenses are no longer a political issue.

Instead, there is talk of resignations in July when the public finally learn what MPs have been up to. Many have been using their £24,000 second-home allowance to leverage multiple mortgages and have become property developers owning second, third and fourth homes yielding hundreds of thousands in capital gains. Hardly surprising that MPs were relaxed about the house price bubble when so many of them were making so much money out of it. I'm sorry, guys, but the party is over. Wake up to the age of thrift.

The age of thrift or the age of inflation?

 David Cameron was right to warn about the debt crisis last year,  when everyone else was talking about fiscal stimulus and the need to boost spending.  You can’t stimulate a corpse.  But note how cagey Cameron is now about how the Tories would hack back the debt mountain .  Apart from scrapping identity cards and cutting out waste, he has been as vague as the Chancellor.  

     An ordinary person, burdened by debt, can do two things: save, or go bankrupt.  Governments have a third option:  eroding the value of the debts themselves.  Saving is hard: it needs a saving culture for a start, and we don’t have one. We have been conditioned by two decades of Ponzi capitalism into taking on ever greater debts to pay off the debts we already have.  The entire thrust of government policy is to force people to take on even more debt to boost retail sales. 

    So, let’s forget about saving - like the environment, you just know the government isn’t serious about it. So, how else do we pay back the debt?  Privatising he health service and education isn’t feasible, and cutting entitlements, like public sector pensions or unemployment benefits would likely cause civil unrest. The alternative is to rely on inflation to erode the value of the debt.   10% a year would do nicely, and in case you think inflation is ancient history, remember that inflation was running at nearly 10%  as recently as 1990, during the last recession. 

  Suddenly those frightening figures don’t seem so scary. A decade of inflation would turn a trillion into five hundred billion. The financial press has been discussing this openly since the Bank of England announced that it was going to start printing money, or “quantitative easing”.   Inflation is usually good for stock markets, first because it erodes corporate debt and discourages investors from holding cash.   Inflation is also good for the housing market because it disguises falling prices and because it encourages people to take on bigger mortgages paid back in depreciated pounds.   Governments love it because their debts just disappear; inflation is a kind of get out of jail free card.

     But problems arises when the people who lose out decide that they won’t go quietly.  The first casualties are pensioners, who see their living standards eroded, but traditionally they don’t go out on the streets. Nor do savers, who effectively have their savings stolen from them by inflation.  Resistance comes from foreign bondholders and organised workers. 

   The last time governments tried ride the inflation tiger was in the 1970s, after the disastrous “Barber Boom” under the Tory chancellor Ted Heath.  That “dash for growth”  ended up in bank failures, collapsing house prices, and mounting debts which the government thought it could ‘manage’ through inflation. That was until workers started to resist the erosion of their living standards.  Trades union membership was high in the 70s, and the UK was a largely manufacturing economy.   Led by the miners,  workers went on strike for higher pay, and the scene was set for the great industrial confrontations that led to Thatcherism. 

  The lesson of history is that once you start inflation, it’s very difficult to control it.  Price rises peaked at 24.2% in 1975.  Imagine your salary losing a quarter of its value every year.  Rampant inflation eventually forced the Labour government to negotiate a loan from the IMF in 1976 to stave off bankruptcy.  This was because bond investors at home and abroad refused to buy government debt.  In effect, the UK became insolvent, like HBOS,  and had to cut public spending and increase interest rates to restore the confidence. 

   There are suggestions that the government is preparing for a trip to the IMF today.  An unnamed minister told the Daily Telegraph before the budget that going to the IMF for funds should be thought of as “like going to a spa to recuperate”.  Years of living on debt have made politicians believe that, like the banks, we can all be bailed out. But they will likely discover that the only thing they have borrowed is time. 

Just how bad are Britain's debts?

 A trillion here, a trillion there, and pretty soon we’re talking serious money Britain is now one of the most indebted countries in the world. We have personal debts of £1.5 trillion; national debt rising to £1.4 trillion; unfunded public sector pension liabilities of another £1trillion; and all this on top of a £1.3trillion bank rescue programme.  Britain is in deeper debt now than  after the Second World War and our children will be paying it off for most of their working lives. 

   Of course, figures like these eventually become meaningless - a trillion won’t fit on most pocket calculators. Even the politicians can’t grasp them because they are literally astronomical - the kinds of numbers used for the measurement of the universe.  But this fuzziness about value, is itself becoming an economic factor.  Psychologically, we are already entering a pre-inflationary world, where value ceases to have any fixed meaning. 

    No, we’re not there yet.  In fact, one measure of inflation, the RPI is expected to be negative for most of this year.  Deflation, or falling prices, is seen as the immediate enemy by bankers and ministers.   But the trillions of debt piling on top of each other tell us only one thing: that the next government will have little choice but to try to inflate its way out of the debt burden. The alternative: tax increases and public spending cuts would be politically unsustainable on the scale required.  No matter what politicians in all parties may say now, inflation is their plan B. 

    The surest sign of this was the way the Budget made no serious attempt to explain how the government intends to pay back the colossal debts racked up during the bubble years, other than to make fantasy assumptions about growth returning to 3.5% in 2011. This ‘forecast’ was an insult to the intelligence of the electorate, and the Chancellor has rightly been condemned for delivering it. No serious economist believes that such a “trampoline” bounce back is possible. 

    Yet even on these fantasy forecasts, the government is STILL planning to borrow more over the next five years, than the total sum of all government borrowing for the last three hundred.  There are doubts about whether the government will be able to raise even the £220bn it needs this year to keep its head above water.  Public borrowing is running at 12% of GDP the highest in the G20 nations.  Not even Ireland is in such a bad way.  Britain is now heading inexorably for a debt crisis comparable to 1975/76 when a similar finance and property crash led to a run on sterling and a dash for the IMF.  Only this time, it is much, much bigger.

Class war, what class war?

  The red flag was hoist over the Treasury last week according to hyperventilating sections of the British press.  “Return of Class War”! screamed the Daily Telegraph.  “New Labour RIP”, growled the Spectator. Even the more sober commentators in the financial pages talked of the chancellor’s “vindictive and destructive”  war on wealth which would provoke a new brain drain. “A great budget for Switzerland and Hong Kong”, according to Anatole Kaletsky in the Times. 

      And all because of a long overdue abolition of an unjustifiable tax break on pensions and a few pence on income tax for the superrich, which most of them won’t pay anyway.  As the Queen of Mean, Leona Hemsley famously put it: “Only little people pay taxes”. Big people have tax lawyers.  The Institute for Fiscal Studies questioned whether the measures will ever raise the £7bn in  revenues projected in the Red Book because of avoidance schemes. 

  Which doesn’t mean the government shouldn’t try.  It’s curious that taxing the wealthy is always presented as unfair, whereas tax avoidance is seen as morally acceptable.  The taxes may not bring in a lot of cash,  but a silent cheer went up nevertheless last week from all of those little people who have lost so much as a result of the delinquent behaviour of the financial elite.  The post budget opinion polls revealed that increasing taxes on the rich is popular. Which of course is why the government did it.

   Petty and vindictive? Well, we have a tax system which has long been a welfare state for the wealthy.  I mean, why should a quarter of all the money the country spends on pension tax relief go to the top 1.5% of income earners?   Higher rate pension tax relief never made any kind of fiscal sense.  And talk of a return to punitive taxation is very wide of the mark.  Look at websites like Wealth Bulletin and you’ll find that many accountants believe the rich have got off lightly given  the current climate of opinion.  Deloittes estimates that people earning over £250,000 a year will pay £12,000 more in tax as a result of the new 50% rate and he abolition of other reliefs - that’s if they choose to pay it.   Poor old them; heart bleeds.

  But if all the little people are going to have to pay thousands more in tax to pay for the mistakes made by the financial plutocracy, why shouldn’t the very rich pay a little extra too, if only to make the rest of us feel better?  It’s a question of fairness.  In the Great Depression, Franklin D. Roosevelt increased taxes on the rich (over £250,000 in today’s money) to an incredible 90% .  He did this, not to raise revenue, but to legitimise increased taxes on the less well off.  And you better believe they are coming. 

   If the superrich are not prepared to make even this week’s very modest contribution to the cost of repairing the economy wrecked by unrestrained greed, and insist on flying away to their tax havens, perhaps we should wave a fond farewell.  I may be blinded by class hatred, but the masters of the universe haven’t exactly left the British economy in great shape.   Free transfers might be a very good thing for the footloose financial elite.  Let someone else pay for their bonuses and cope with the fallout from their inscrutable derivative trades.  We’ll be paying the cost of their excesses for the next twenty five years.

 

    However, I suspect it will take rather more than an optional fifty pence tax band to send the superrich packing. They’ve been doing very well here in the past decade. The top 1% of income earners - mainly people in finance, property and law - have seen an unprecedented growth in income and wealth,  according to the IFS.    Britain has become a deeply divided and unequal society under Labour, and the chancellor’s tax tweak isn’t going to alter that. Most of the rich set up companies and  pay themselves in dividends which are taxed at a lower rate than income tax - a loophole the government is fully aware of, but has chosen to ignore.  Private equity barons have famously been paying less tax than their cleaners.  Financiers can declare themselves as non-domiciled and, for a flat fee of £30,000, shelter their entire foreign earnings from UK tax. 

  

   It isn’t being anti-capitalist to believe that plutocracy - the unrestrained accumulation of wealth and power by this small minority - is undesirable.  The kind of entrepreneurial people who grow new businesses and develop mew products and markets don’t work in the City of London and they aren’t all that rich.  75% of new jobs are created by small businesses employing only a handful of people. Yet the crisis caused  by the parasitical superrich is causing 300 of these small firms to go out of business every day, throwing hundreds of thousands of people out of work. No bail outs for them.

  

    Last week, the IMF said that the bank rescues so far have cost the taxpayers of Britain £130bn.  Now, call me a class warrior, but given that astonishing transfer of public money to  delinquent bankers, the chancellor would surely have been within his rights to put a cap on bank bonuses and golden parachutes, as is being proposed by the EU. It’s widely accepted that the vast rewards sought by the financial superrich were a major cause of the financial meltdown.

    But no, Gordon brown isn’t interested in limiting wealth. The budget measures were the very least he could do to meet the public demand for some kind of redress for the banking  scandals like Sir Fred Goodwin’s pension.   Brown is more interested in wrong-footing David Cameron than on eating the rich.  The Tory leader, though, saw this one coming, and has wisely refused to reverse the 50p tax increase. The rich should take note. They should regard the tax hike as a symbolic gesture of collective atonement for the appalling mess that has been left by the era of low taxes and low regulation.  With their unreasonable howls of anguish it is they who are now in danger of launching a real class war.