Severe Shortage Of Millionaires

Wrong message - we need more millionaires

With Red Ed at the controls, we can expect Labour to target the undeserving rich just as stridently as they ever did back in the day. But the middle class, no, they won't be squeezed. Labour under Ed will cherish and protect the middle class. It's those rich bastards who'll have to pay.

But who exactly are those rich bastards, and are there enough to go round? Robbing from the rich to give to the poor is one thing, but robbing from the rich to give to the teeming middle class requires the rich to have an awful lot of riches in the first place.

If we define the rich in terms of income, then the official stats tell us that the top 10% of households get 30% of the income (ie gross market income going to the personal sector before taking account of government transfers - welfare etc). Which at first blush might sound like an ideal target for Ed's Robin Hooding.

But he needs to understand a couple of key points. First, the top 10% are already paying more than their share of the taxes - 27% at the last count - and they might not take kindly to paying even more (like, they might down tools and leave). And second, the gross income level that takes a household into the top 10% is around £50,000 pa, which in London and the South East at least is viewed as a middle class income - certainly not "rich".

If instead we define rich in terms of wealth rather than income, we find an even greater concentration in the hands of the top 10%. According to the ONS, immediately pre-Crash, total household wealth amounted to £9 trillion. And of that, nearly £4 trillion (well over 40%) was owned by the top 10%:

A concentration like that looks much more promising for Ed. Taxing wealth is arguably less damaging to growth than taxing earnings, and those rich bastards would surely not miss the odd trillion.

Except that when we look closely, we can see that the biggest single chunk of this wealth comprises the value of pension entitlements, a golden pot that already took a severe walloping from Ed's mentor, the Great Helmsman. With occupational pensions now a thing of the past (at least outside the public sector) it has become a wasting asset.

What's more, the second biggest chunk of wealth comprises property assets, which again, have taken a serious walloping since the ONS compiled its numbers.

In fact when you focus in on the actual cash and other readily realisable assets owned by the rich - ie the financial wealth that Ed could actually grab and redistribute - you find it is very much smaller, at around £0.5 trillion. What's more, because it is so liquid, any attempt by Ed to grab it would swiftly result in its disappearance out of harms way.

The real problem is that there simply aren't enough millionaires to go round. According to the 2010 World Wealth Report, the UK has around 450,000 so-called High Net Worth Individuals (HNWIs), which sounds like quite a few. But a HNWI is defined as a dollar millionaire in terms of cash and other reddies, and these days even the average punter earns more than that over his lifetime. In terms of robbing the rich , it's pretty slim pickings.

No, whatever Ed may claim, robbing the idle rich could not possibly raise enough cash to protect the middle class from the squeeze. The reason that successive governments rob the middle class is simply because that's where the money is.

In  the real world outside Ed's fantasies, the only way the middle class can even hope to escape is if Cam and George push on with their spending cuts.