It is fair to say that since Boris Johnson became Prime Minister, his personal finances have become subject to much closer scrutiny, denying him the option of falling back on anonymous billionaire donors to repay debts or, as has become clear in the past week, even making up the difference for the decoration of a Downing Street flat.
Mr Johnson may one day be a very rich man but for the moment he is cash poor. He has money but it is mostly tied up in property and investments, some of which he only jointly owns. Mr Johnson is the most high-profile example of those relatively high-earners who are struggling to get by at the top. His public earnings are failing to keep up with his considerable outgoings.
The pandemic, which has brought about pay freezes and public cutbacks, has made the problem more visible – especially when you want someone else to pay the bill for plastering your flat in gold wallpaper.
Get financial advice and industry news, to you help manage your money
Mr Johnson is far from alone among top Tories in public life who are feeling the pinch. His fellow old Etonian and former prime minister David Cameron has his own money woes, forcing him to take on a role with a supply chain finance firm and then demean himself by secretly lobbying former colleagues, the Treasury and the Bank of England.
Like Mr Johnson, Mr Cameron is asset-rich and cash-poor. After leaving office in 2016, not all of his business ventures have worked out, putting considerable pressure on his finances, which now include paying the salaries of the staff employed at the Office of David Cameron, as well as meeting the mounting private school fees of his three children.
While Mr Cameron’s wealth is tied up in his properties and investments, he retains expensive tastes which have included the purchase of two £25,000 shepherd huts, an £8,000 log-fired hot tub and a wooden “man cave” in his £2m Cornish holiday home.
By taking on his lobbying role with Australian Lex Greensill’s finance company, the former prime minister was reported to have stood to profit by £22m from the proposed flotation of the business before it collapsed earlier this year.
Greensill’s corporate failure, costing hundreds of jobs, was another bitter personal financial disappointment for Mr Cameron. Making his way in the business world outside politics, he has found that trading on being a former premier can only take him so far.
Expensive tastes: Johnson’s finances
In the days before Boris Johnson became Prime Minister in July 2019, fellow Conservatives were questioning whether he could afford to take the top job in the land.
The Tory’s leadership contender’s outgoings, they noted, were conspicuous while his new salary of £157,372 (on which tax and national insurance amount to about £63,000, leaving him roughly £95,000 a year) would represent a considerable drop in income.
It hasn’t taken long for the maths to catch up with the Prime Minister.
Less than a year into his premiership, Mr Johnson, determined to govern and live in the style to which he has become accustomed, commissioned work worth £88,000 (£58,000 more than the Prime Minister’s allowance) on the lavish refurbishment of his Downing Street flat which he shares with Carrie Symonds and their son, Wilfred. It has turned out to be a bill too far. After trying to arrange for someone else to bankroll the bulk of the redecoration he has been forced to repay the “loan” from his personal earnings and ignited a public scandal that risks prematurely ending his premiership. What will surprise millions of people getting by on an average salary of £30,000 is just how Mr Johnson has got himself into such a desperate financial mess.
In 2018 he owned a multimillion-pound portfolio of properties and was earning £275,000 a year writing a monthly column for the Daily Telegraph. Three months after becoming Prime Minister, he sold his Islington townhouse for £3.7m and last month started renting out his £1.2m four-bedroom Oxfordshire home for £4,250 a month. According to the parliamentary register of members’ interests, he still receives a 20 per cent share of a family property in Somerset and last year was paid £19,000 in royalties from his books.
On the face of it, Mr Johnson appears to be a very wealthy man who can afford to write cheques for £58,000. But his expenditure is even more considerable.
Top of his outgoings is the financial provision for his families; the six (or seven, depending on which reports one believes) children, most of whom are privately educated or still in need of post-education financial support. Last year he settled a costly divorce bill from his marriage to second wife, Marina Wheeler and is rumoured to continue to have financial obligations to the mothers of his other children. Full-time childcare for one-year-old Wilfred is estimated to cost £2,000 a month.
The Sunday Times reports that Mr Johnson and Ms Symonds are said to have a mortgage on a £1.3m property in Camberwell, south London. Although the couple do not have to pay rent to live in the No 11 flat, Mr Johnson must pay a £7,000 tax liability for heat, light and maintenance plus council tax of £1,655 a year.
Then there are his lifestyle costs – the five-star hotels, first-class flights and customarily expensive holidays must be properly declared or paid out of his own pocket. And while he can stay for free at Chequers, he has to pay to entertain unofficial guests, with food and drinks estimated to cost £75 per head.
High-rolling politicians such as Mr Cameron and Mr Johnson simply cannot compete with the super-rich class with whom they are now doing business and from whose tables they must pick up consultancy crumbs. For example, the wealth of industrialist Sir James Dyson, who Mr Johnson was texting about his tax treatment during the early weeks of the pandemic, is valued at £16bn.
The truth is that being rich is not the same as being wealthy. While wealth is a state of permanent riches, being rich is transient. The genuinely wealthy do not need to do anything to generate an income – their assets (properties and investments) do that job for them. The rich, however, are dependent on a salary or a business to make their money.
In Britain, the gap between the rich and super-wealthy has been growing since the credit crunch of 2008. By 2018, the wealthiest 1,000 people in Britain had nearly trebled their combined wealth to £724bn.
And during the pandemic, the gap has widened further. According to Forbes magazine, two-thirds of the world’s billionaire class amassed greater fortunes in 2020, with the biggest gainers reaching unprecedented levels of wealth, helped by the trillions of dollars in Covid recovery programmes. Forbes, which tracks publicly known fortunes, estimated that billionaires were 20 per cent richer in 2020 by mid-December last year.
For the mere millionaires, such as Cameron and Johnson, their stock has not risen at the same rate and may not even be counted among the top 1 per cent of earners in the UK.
The Institute for Fiscal Studies (IFS) has identified a group of 310,000 individuals who make up the very top 1 per cent of income taxpayers in the UK. To qualify, you require a taxable income of at least £160,000. And those already in the top 1 per cent look up enviously at the top 0.5 per cent and 0.1 per cent of income taxpayers, who respectively earn £236,000 and £650,000 in taxable income each year. Cameron and Johnson are caught somewhere in between the two income brackets
Danny Dorling, an Oxford University professor and author of Peak Inequality, says that a couple with two children must earn £200,000 to scrape into the top 1 per cent of well-off families. The average earnings for the top 1 per cent of families is £369,000.
Further down the pay pile, the squeezed upper-middle class includes senior managers, lawyers, accountants, BBC executives, hospital consultants and university vice-chancellors.
Professor Dorling says: “Those in the top 10 per cent but not in the top 1 per cent – crucially, a group that traditionally votes Conservative – have been losing out relatively for 25 years to those both better off and worse off than them.
“This is the group that Thatcher looked after but that Tories have since taken for granted on the grounds that they had no one else to vote for if they wanted to protect their accrued wealth, primarily their house prices.”
Few ordinary earners will shed a tear for the financial woes of Johnson or Cameron while many more may wonder why politicians, especially those in office, can’t cut their coats according to their cloth.
Robert Verkaik is the author of ‘Why You Won’t Get Rich: How Capitalism Broke its Contract with Hard Work’ (Oneworld, hardback, £16.99)