We have all been riding the same storm, but we haven’t all weathered it the same way. The super-rich have had a great coronavirus crisis. To those who already had much, more has been given. The stock market crash at the outset of the pandemic was just a bump on the road to more wealth for them. The Swiss bank UBS calculates that the already vast fortunes of the world’s billionaires had surged to a record $10.2tn by the end of this July. They will have gained many more billions since, thanks to the bounceback in global markets that has recently taken the major US indices to fresh highs.
The merely affluent, while not sitting as prettily as the super-rich, have generally done just fine. If you and those you love have avoided being a victim of the virus and you’ve kept a well-paid job that can be performed from a comfortable home, the worst there is to complain about is Zoom fatigue. The rise in the savings ratio suggests you have probably been accumulating money. Your financial safety net will have improved because you haven’t been able to spend as much as usual on nice meals out, evenings at the cinema or theatre or going on holidays.
We also know who is having a cruel crisis. It is dreadful for those seeking work or in precarious or marginal employment. It is ghastly for those whose livelihoods depend on areas of the economy, such as hospitality and retail, which have been crushed by lockdowns and travel restrictions. It is dismal for the young, who have been asked to make great sacrifices to control a disease that presents little danger to the vast majority of them.
Not only has this epidemic shone a bright light on existing inequalities, it threatens to make them more stark. The International Monetary Fund, not renowned as a nest of Marxists, argues for “absolutely crucial” social spending, expanded public work projects and more progressive tax policies to “mobilise revenues in an equitable way”.
In the early weeks of the crisis, quite a lot of Conservatives gave the impression that they agreed with the case for rewriting the social contract. The “key workers” without whom we wouldn’t have got through the epidemic would be more fairly rewarded. Intergenerational inequality would be addressed. Those who had done well could expect to pay the larger share of the post-crisis bill. We would be “all in it together”.
That language of social solidarity, which once flowed so smoothly from the mouths of ministers, is now curdling on their lips. Witness Rishi Sunak’s most recent financial statement. A dark warning that “the economic emergency has only just begun” was accompanied by forecasts that Britain will endure the deepest recession since Queen Anne was on the throne, while government borrowing will reach the highest level in peacetime history. It was grim stuff, but much grimmer for some than for others. He broke a promise Britain made to the poorest people in the world when he announced a £4bn cut in international aid. This comes on top of the £3bn reduction that was already going to happen because the aid budget is linked to the size of the economy and that has shrunk. This cut triggered a rare united protest from all five living former prime ministers, three of them Conservative, and the condemnation of the archbishop of Canterbury. Four billion pounds per annum is relatively trivial in the context of a deficit running at around £400bn this year. While a small sum for our wealthy country, it will have heavy consequences in some of the most impoverished parts of the planet.
Andrew Mitchell, international development secretary during the David Cameron premiership, contends that what he calls “a massacre” of the aid budget will have many victims. They will include nearly a million girls who will be deprived of an education, more than 7 million losing access to contraception and family planning advice, nearly 4 million people being deprived of clean water and 5.6 million fewer children getting vaccinations, leading to 100,000 avoidable deaths. Those deadly consequences flow from a decision based on the cynical reasoning that cutting aid is popular with rightwing newspapers and the “charity begins at home” argument went down well when Number 10 sampled it with focus groups of voters.
This severe squeeze on support for poorer people abroad came accompanied by a freeze on the pay of many public sector workers at home. This decision was made on another cynical assumption, this one that it won’t cost the Conservatives politically because no one in the public sector votes for them anyway. That’s wrong, by the way.
I don’t particularly quarrel with the idea that Mr Sunak has to give some indication that he is thinking about how to pay the colossal bills for the crisis. The big reveal was that he did it at this time in this way. These were highly ideological choices from a chancellor who once said he would not be bound by “dogma”. He had little to say about how the affluent will be expected to contribute. There’s no shortage of ideas around. We know that the Treasury has been looking at making tax relief on pension contributions less generous for the high earners who currently extract most benefit. There is a compelling case for windfall taxes on the lucky companies that have made swollen profits from the pandemic.
Gus O’Donnell, a former cabinet secretary, is among those who have suggested that the case for wealth taxes has been greatly empowered. Serious attention should be paid to clawing back cash from companies that have drawn on the government’s business support schemes, only then to shovel the money out to shareholders in dividends. It surely cannot be beyond the wit even of this government to recoup from pandemic profiteers who have guzzled on taxpayers’ money in the first-class dining car of the coronavirus contracts gravy train. It is possible that some of these measures and others that affect the wealthy do happen in time. What’s instructive is that the chancellor’s first instinct is to take away support from the impoverished abroad and key workers at home.
This is not the Mr Sunak of the early stages of the crisis who attracted praise from trade unions and Labour MPs. During his “whatever it takes” period, he almost persuaded people to forget that he is a Conservative. His most recent statement was a strong signal of his true ideological identity. When he hoped no one was looking, he slipped in a £10bn cut to other departmental budgets. He has repeatedly refused to guarantee the £20-a-week uplift to universal credit beyond April. This is a reminder that he is not only a Conservative, but one who chose to pursue a career as an MP during the George Osborne era of austerity. His latest performance was accompanied by the strong whiff of a chancellor with a keen ambition to be his party’s leader. “These cuts are popular with the right of the party,” remarks one senior Tory. “I think it was all about courting the right.”
I hear you wondering why anyone would be surprised. Is this not a Conservative government doing what Conservative governments do? Their default is to cut support and services for the less well-off rather than to raise more revenue from the affluent. Yet even Tories ought to be wary of going down a road we have travelled before and very recently.
The less affluent suffered while the wealthier did extremely well after the last global emergency, the financial crisis of 2008. The cheap-money policies adopted by the US Federal Reserve, the Bank of England and other central banks helped avert a depression while fuelling rises in financial markets, property prices and other assets. To those who already had capital, more was given. It was the less well-off who saw their incomes stagnate or decline while the public services and social assistance they depended on were cut.
This was not just ugly from a moral perspective. It was also economically damaging. Inequalities widened, society became more polarised and politics turned toxic.
At the outset of the coronavirus crisis, the prime minister and his chancellor seemed alive to the dangers of repeating that experience. Mr Sunak solemnly declared: “No one will be left behind.” Boris Johnson remarked: “We all remember what happened in 2008. This time, we want to make sure that we put the people first.”
The remembering does not seem to have lasted terribly long. A further sharpening of inequalities accompanied by even deeper feelings of unfairness is a formula for more of the corrosive bitterness that was already disfiguring society before the epidemic began.
• Andrew Rawnsley is Chief Political Commentator of the Observer