Wednesday, 21 February 2024
Wednesday, 21 February 2024

Extreme poverty increases as billionaires’ fortunes balloon by £2bn-a-day

The richest 1% have pocketed $26 trillion (£21 trillion) in new wealth since 2020, nearly twice as much as the other 99 per cent of the world’s population, an Oxfam report reveals today.

Survival of the Richest highlights how extreme wealth and extreme poverty have increased simultaneously for the first time in 25 years. It shows that the 1% are getting an ever-greater share of the world’s resources, despite already capturing around half of all new wealth during the past decade. In the two years up to December 2021, the 1% grabbed almost two-thirds (63 per cent) of the $42 trillion (£34 trillion) of new wealth created.

The report is published as so-called ‘elites’ gather in the Swiss ski resort of Davos for the opening day of the World Economic Forum. Inequality is expected to be high on the agenda following the World Bank’s announcement last year that global progress in reducing extreme poverty has come to a halt amid what it expects to be the largest increase in global inequality since World War II.

Oxfam’s report shows that the super-rich have also seen extraordinary gains in the last two years – for every $1 of new global wealth earned by a person in the bottom 90 per cent, each billionaire gained roughly $1.7 million (£1.4 million).  The combined fortune of billionaires has increased by a staggering $2.7 billion (£2 billion) a day. This comes on top of a decade of historic gains – both the number and wealth of billionaires having doubled over the last ten years.

At the same time, at least 1.7 billion workers now live in countries where inflation is outpacing wages, and over 820 million people – roughly one in ten people on Earth – are going hungry. Oxfam is calling for a systemic and wide-ranging increase in taxation of the super-rich to claw back crisis gains driven by public money and profiteering.

Danny Sriskandarajah, Oxfam GB chief executive said:

“The current economic reality is an affront to basic human values.  Extreme poverty is increasing for the first time in 25 years and close to a billion people are going hungry but for billionaires, every day is a bonanza.

“Multiple crises have pushed millions to the brink while our leaders fail to grasp the nettle – governments must stop acting for the vested interests of the few.

“How can we accept a system where the poorest people in many countries pay much higher tax rates than the super-rich? A flour seller Oxfam works with in Uganda pays 40 per cent tax each month, while some billionaires’ true tax rates have been as low as three per cent. Governments must introduce higher taxes on the super-rich now.”

Worldwide, only four cents in every tax dollar now comes from taxes on wealth. Half of the world’s billionaires live in countries with no inheritance tax for direct descendants. They will pass on a $5 trillion (£4 trillion) tax-free treasure chest to their heirs, more than the GDP of Africa.

People around the world have been hit hard hit by rising fuel and food prices, which has led to an increase in both poverty and inequality, while driving relentless wealth and income growth for the richest. People living in extreme poverty are more affected by the increase in food prices because they spend about two-thirds of their resources on food. Additionally, the rise in food prices has hit several low-income countries harder than the world average, for example with food price inflation in Ethiopia at 44 per cent compared to the global average of nine per cent.

Oxfam found that 95 food and energy corporations have more than doubled their profits in 2022. They made $306 billion (£251 billion) in windfall profits, and paid out 84 per cent – $257 billion (£211 billion) – of that to rich shareholders. Oxfam’s research found that excess corporate profits have driven at least half of inflation in Australia, the US and the UK.

The gulf between the rich and the rest in the UK is also stark. Oxfam’s analysis found that the richest 1% of Britons hold more wealth than 70 per cent of Britons, while the four richest Britons have more wealth than 20 million Britons.

Rachel lives in Northumberland and had to give up her job teaching to provide full-time care for her daughter Betsy, who has Down’s Syndrome. She is part of We Care’s community network, who are calling for better conditions for unpaid carers in the UK.

She said “My husband and I are constantly stressed about how we are going to get through the month. Betsy has to have the house warm at all times for her lung condition, so our gas bill has tripled. My husband works full-time, but he is on minimum wage and despite us having absolutely no luxuries at all, we are barely getting by.

“With Betsy needing constant hospital visits, we are in fear of her needing urgent treatment with everything going on with the NHS. I need medication and have to take less tablets than I need each day to make it last longer.

“We are rarely able to afford any luxuries and order our food shop online as the supermarket has a low monthly delivery cost. But I have to add every item up to ensure we don’t go over budget. I sometimes sit stressing about whether I should have ordered a 50p packet of biscuits, that’s what life has become.”

According to a new analysis by the Fight Inequality Alliance, Institute for Policy Studies, Oxfam and the Patriotic Millionaires, an annual global wealth tax of up to five per cent on the world’s multi-millionaires and billionaires could raise $1.7 trillion a year (£1.4 trillion). This would be enough to deliver transformative action, including lifting two billion people out of poverty.

Ian Gregg, former managing director of Greggs and the son of its founder, is a supporter of Patriotic Millionaires UK and Tax Justice UK, who are campaigning for a wealth tax in the UK.

He said “I can never be happy with an economy that fosters such division in society for our children and grandchildren. Now, more than ever, the wealthiest must contribute more. For me, paying more tax would be a small price to pay to start the process of making society fairer, and reducing inequalities in both wealth and opportunity.”

The report shows that taxes on the wealthiest used to be much higher. Over the last forty years, governments across Africa, Asia, Europe, and the Americas have slashed the income tax rates on the richest. At the same time, they have upped taxes on goods and services, which fall disproportionately on the poorest people and exacerbate gender inequality. For example, a study carried out in Guatemala, Honduras and El Salvador found that hikes in VAT resulted in an increase in poverty in female-dominated households.

Some progressive governments have taken steps to increase taxation, Costa Rica increased its top rate of income tax by 10 percentage points, from 15 per cent to 25 per cent, and Bolivia and Argentina introduced wealth and solidarity taxes on their richest citizens, respectively.

Oxfam is calling on governments to:

  • Introduce one-off solidarity wealth taxes and windfall taxes to end crisis profiteering.
  • Permanently increase taxes on the richest 1%, for example to at least 60 per cent of their income from labour and capital, with higher rates for multi-millionaires and billionaires. Governments must especially raise taxes on capital gains, which are subject to lower tax rates than other forms of income.
  • Tax the wealth of the richest 1% at rates high enough to significantly reduce the numbers and wealth of the richest people, and redistribute these resources. This includes implementing inheritance, property and land taxes, as well as net wealth taxes.
  • Empower public and tax administrations to track the wealth of the richest people and corporations. Taxing the wealthiest is impossible unless public and tax administrations are supported to identify and track the true wealth of the richest people and governments take action to dismantle tax secrecy and tax offshore wealth and assets

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