Plaid calls for tax changes to help ‘coping class’

Mar 10 2008 by Martin Shipton, Western Mail

MAJOR new policies aimed at helping the “coping class” are to be devised by Plaid Cymru in the run-up to the next general election, we can reveal today.

The party has dubbed the middle classes the “coping class” because it feels they are struggling to cope with a rising cost of living which has not been matched by salary increases.

Senior Plaid figures like Carmarthen East and Dinefwr MP Adam Price believe there is increasing anger that while those on middle and low salaries are seeing a decline in their disposable incomes, a relatively small number of top earners in the City of London are seeing gigantic rises in what they are paid.

In an attempt to tackle this, Plaid is setting up its own Fairness Commission to draw up a blueprint of measures that could radically change the tax system.

Mr Price, who is Plaid’s economics spokesman, said yesterday, “There has been a massive explosion of injustice, with a small number of super-rich individuals working in the City being paid huge amounts of money. This has accelerated over the past 10 years, since New Labour came to power. It is something we have to face up to.

“Over the last couple of years it has become clear that the question of redistributing wealth has fundamentally shifted. It used to be argued in terms of middle class wealth being redistributed to the working class, but now middle class people are increasingly finding it hard to make ends meet themselves.

“Professionals working in Wales and people earning the average wage are also feeling a degree of exasperation at the unfairness of a small number of people in the City earning vast sums and often paying little tax.

“A sense of fairness is engrained in us as human beings as a basic organising principle of society. People who work hard deserve to be rewarded, but the super-rich earn so much that the average person finds it difficult to believe that they work 1,000 times as hard as they do. In some cases people are coming straight out of university and being paid £100,000 a year. It’s unsustainable and it’s wrong.”

Mr Price said “astronomical” sums were being made by those involved in financial “deal making” that had nothing to do with the underlying economy, where the vast majority of people living in Wales make a living.

“Companies are bought and sold, generating huge incomes in the City, but doing nothing for the long-term security of employees in the wider economy. This encourages a short-termist approach, the opposite to what happens in Germany, where banks have shares in companies and representatives on the board who take a more long-term view.

“The political background to this is that some of the big donors to New Labour have done very well out of the incredibly lax tax regime that has been allowed to develop. There is a sense that he who pays the piper calls the tune.”

Mr Price acknowledged that Plaid was making a conscious move to appeal to middle class voters – but he stressed that both the middle class and working class would benefit from changes to the tax system he hoped would be proposed by the Fairness Commission.

He said, “There is a fair chance that Plaid and the SNP in Scotland will hold the balance of power at Westminster after the next general election. Clearly tax changes we will be proposing would have an impact right across the UK, and we think it right that people should know that for us, fairness is an absolute value.”

Mr Price would like the Commission to consider a range of possible measures:

Radically revising the tax relief given to higher rate taxpayers on their pension contributions and redirecting the money saved to help those on lower incomes by increasing their pension contributions;

Ending Capital Gains Tax avoidance by private equity firms – but rewarding genuine entrepreneurs who offer generous share incentive schemes to all their employees;

Making lifetime personal gifts above £2m taxable, but also offering more generous tax incentives for charitable giving;

Make the tax returns of the mega-rich public documents as they do in some European countries, to help close tax loopholes;

Creating a High Pay Commission (alongside the Low Pay Commission) to look at gross excess at the top of the pay-scale, creating national guidelines for executive pay and rewarding companies that close the income gap between workers – from shop-floor to middle managers – and senior management;  

Creating a Living Wage for All (including the most under-paid section of society, single mothers) by allowing the minimum wage to rise faster than inflation;

Introducing a US-style wealth tax on super-expensive properties (£1m plus), the money raised allocated to help others buy their own property through a National Life Chances Fund;

Creating a Work Inspectorate with real teeth, to crack down on exploitative employers employing illegal workers below the minimum wage;

Increasing the rate of income tax on high earners, with tax bands at £100,000 and £500,000.

The Fairness Commission will be chaired by Plaid’s economics adviser Eurfyl ap Gwilym, who has been nominated for a seat in the House of Lords following an internal party election.

Dr ap Gwilym said, “The key issue we need to examine is the natural tension that exists between wealth creation and the extent to which the wealth created should be redistributed.

“Obviously it’s a question of striking a balance, but there is increasing concern not just in Wales that the balance is not right, and that a small group of people is making huge amounts of money unfairly.

“It is important in a well-functioning market system, you have a high level of consensus in society about the way money is distributed. More and more people are starting to feel there is an unfairness, with the levels of remuneration at the top of the private sector getting out of hand. If this is not addressed, it could undermine the foundations of market-driven capitalism.”

Case study of the coping class in action

Jason and Emma Davies live in Garnant, near Ammanford, with their two sons Rhys, three, and Aled, five months.

Jason, 32, is a self-employed electrician and Emma, 33, is a banking adviser currently on maternity leave.

They say that they pay very close attention to all areas of their finances just to avoid debt and that “luxury money” is non-existent.

“We have cut our bills down to only those we have to pay for, so there is nothing extraneous like Sky,” said Mrs Davies.

“When it comes to things like phone bills, car or home insurance I’ll painstakingly shop around to make sure I’ve got the best deal because every penny counts.

“I’ll also do a lot of my shopping on the internet which tends to minimise the amount I’m able to buy.

“We have one car and the fuel costs are not hitting us like they could be at the moment because I walk Rhys to school and Jason’s work is around the area at the moment.

“But if we were both working in Llanelli again, like we have been, that would be a different matter.

“I’ve got friends who are doing evening bar work to be able to buy petrol to go to their day job.

“At the moment, the biggest cost is raising the boys though those costs are minimal at the moment because they are still small.

“Only Rhys is in school and that’s only part time so he can get away with a couple of jumpers and pairs of trousers for uniform so that’s yet to have its full impact. Aled can take things that Rhys has already used or worn and I sell anything that’s no use to either of them on eBay.

“It costs £100 a month to put Rhys in his pre-school group, Cylch, for just a couple of hours a day before school and that’s less than other places.”

But despite having yet to feel the full impact, Mrs Davies says there is no spare money.

“My pay goes towards basics and Jason’s goes into our bills account, we’ve nothing left that could be termed ‘luxury money’,” she said.

“Everyone should have a bit of leftover money. You need to save for a pension but you can’t save because you need to pay bills – it’s a vicious circle.

“You can’t really get away and it gets you down. My brother has bought us a weekend away, which is coming up, otherwise we wouldn’t be going anywhere and a proper holiday is out of reach at the moment.

“But there will be more money available when I’m back working full-time and Jason’s business is properly up and running.

“I work in a bank so I’m already paranoid about getting into debt because I’ve seen what it does to people and I won’t let us get into that position.”