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Growing wealth gap in Blair's Britain

Jonathan Freedland

IF YOU want to be deeply unfashionable, just read on. If you want to enter terrain so wildly out of date that mere mention of it has become taboo, then you have come to the right place. Brace yourself. Late in October two bankers strode into Umbaba, one of London's most modish watering holes, and asked the bartender to fix them a drink. He set to work, blending a Richard Hennessy cognac that sells at £3,000 a bottle, Dom Perignon champagne, fresh lemongrass and lychees — all topped off with an extract of yohimbe bark, a West African import said to possess aphrodisiac powers. He called it the Magie Noir — and he charged £333 a glass. The bankers ordered two rounds for their table of eight. Their final bill for the night: £15,000.

Those same men, or their colleagues, may well have invested £200,000 in a Bentley or an Aston Martin, or they might have paid celebrity hairdresser Nicky Clarke £500 for what the salon describes as an "aspirational haircut." They are the customers sought by the London estate agent who offers a three-bedroom flat in Kensington as a "starter home" for £2.25 million. They are the target reader of the newly launched Trader magazine, with its ads for private jets or five-storey yachts (complete with submarine).

Nothing new in all this, you might say. The rich, like the poor, are always with us. But that would be wrong. Robert Peston of the Sunday Telegraph estimates that this year no more than 200 to 300 hedge-fund managers in the U.K. will carve up $4.2 billion of pure profit between them. These sorts of payouts are on a scale unimaginable in the past, at least outside the handful of individuals who either invented a new product or owned a tangible resource.

To my mind, there is something deeply wrong here. If one man can spend £15,000 plying his pals with a syrupy cocktail, while another lays out blankets for his child to sleep in the kitchen then we know the system is broken. This is not some narrow criticism of the Labour Government, but rather a challenge to our assumption that we are a civilised society at all.

For we imagine such gross inequalities to come tinged in sepia. They belong to the Dickensian dark ages, a cruelty so distant we render it now only as nostalgic entertainment: Oliver Twist at the cinema, Scrooge on the London stage. But the truth is that the injustice of extraordinary wealth alongside desperate poverty is no museum piece. It is alive and present in 21st century Britain.

The United States got there first, of course. U.S. economists and others have long been worried that their society is returning to the Great Gatsby days of the 1920s: they note that great mansions converted to public use, as nurses' homes and the like, after 1945, are now reverting to private residences once more, as if the pre-1929 plutocrats are back. You can see the same process in Notting Hill in west London: huge structures that would have contained 10 flats a decade ago restored to the single homes of the Victorian age.

Leo Hindery, the multimillionaire chairman of HL Capital, told the BBC last year: "You're setting up a class system the likes of which we've never seen in the world. The most obvious precedent is the French revolution, where the gap between the extremely wealthy and the middle class grew to be so acute that social unrest ensued."

Relative inequality

He may be on to something. Experts have long known that relative inequality, not just poverty, adversely affects the health of those at the bottom: by seeing those so much better-off than themselves, people feel excluded, even blaming themselves for failure. Others wonder about the prospects for social mobility when those at the bottom cannot even see the top. The evidence also shows that the spending habits of the super-rich trickle down, so that those with little money feel pressured to spend cash they do not have (a phenomenon reinforced by the Posh'n'Becks celebrity culture of constant, conspicuous consumption).

Talk to anyone in politics about this and they will look at you blankly: this is the deadest of dead letters. The British Labour party won't touch it for fear of seeming like anti-wealth, socialist dinosaurs. Few yearn for a Maoist-style cap on salaries, but there are other options. One would be for everybody who has a pension to realise that they are, through their pension funds, shareholders in big companies — and can therefore demand a change in the behaviour that currently sends cash flowing into the pockets of the Magie Noir-swilling classes. Another would be to raise the basic rate of tax on the very rich: not to 80 per cent or 90 per cent, but perhaps to 50 per cent.

Above all, we need to start talking about it. Like wearing flares or tight tank tops, people will mock at first. But this issue is coming back — just watch. —

© Guardian Newspapers Limited 2004

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