Rich Britain [Hardcover]

Under Labour, from 1997 to 2002, the number of Britons with more than £5 million in `liquid assets' rose by 13% a year. Between 2002 and 2004, the number rose again by 50%.

The richest 45,000 people, 0.1% of the population, now own a third of all liquid assets; the richest 1% own 62%. From 1979 to 1999, the richest 1%'s share of gross income doubled from 6.5% to 13%. While their share has risen, that of the bottom 5% has fallen, from 10% in 1986 to 6% in 2002. The rich stay rich, and get richer; the poor stay poor, and get poorer. This growing inequality makes British society less mobile. The USA, Britain and South Africa, the world's most unequal societies, have the least social mobility.

Stock markets boom, interest rates and tax rates fall, top salaries, land values and property values soar. The gainers are a few thousand chief executives, City dealers, property developers, investment fund managers, landowning aristocrats (80% of the EU's £36 billion Common Agricultural Policy funds go to the richest 20% of landowners), commercial lawyers and bankers. This whole process is part of the counter-revolution started by Thatcher and continued by Blair.

From 2000 to 2004, the pay, including bonuses and long-term incentive plans, of top executives at Britain's biggest companies more than doubled. By 2004, the average remuneration of a top 100 chief executive was £2.5 million - some 113 times that of the average British worker. They claim that their private greed benefits us all.

But this soaring pay is not due to greater entrepreneurialism, tightening global or national markets, exceptional skills, or better company performances. Over the same period, from 2000 to 2004, the FTSE 100 index fell by around a third while average earnings rose by only 13%. Britain has a lower rate of innovative activity within firms than France, Germany or Spain, and in productivity growth we are only 15th out of the 30 richest countries.

"Welcome to the City - the biggest crooked casino in the world." In the last 20 years, the City and Wall Street have creamed off £100 billion by rigging capital markets. In this a corporate cartel, the top 50 fund managers control three quarters of London's stock market. The best way to raise share prices is to sack staff. As the Daily Telegraph put it, "fat cats get fatter while the savers suffer." Financial firms' fees from mergers and acquisitions, which destroy value and jobs, are known as `the croupier's take'. A City `star' admitted, "I could not believe that anyone would want to pay me so much for creating nothing."

The capitalists' last line of defence is to claim that their tax contribution justifies their wealth. Yet Britain is a tax haven for the very rich. The revenue stolen from Britain through tax avoidance is possibly £85 billion a year. The accountancy firm KPMG has 400 off-the-shelf tax avoidance `products'. Only Britain and Ireland allow non-domiciliary status to the rich, whereby they only pay tax on domestically-derived income. Other countries collect tax on all their residents. Our tax system has been regressive since 1985. In 2002, the richest fifth of the population paid 35% of their income in tax, the poorest fifth 37.9%.

For the very rich, tax is voluntary. For example, the owner of Harrods, Mohamed Al-Fayed, made a secret tax deal with the Inland Revenue in 1985 that he would pay just £240,000 a year - he should pay £6 million! The state lets him steal £5,760,000 a year. On top of this, Al-Fayed arranged for £100 million to be paid him in dividends, between 1995 and 1998 alone, to a tax-free offshore trust in Bermuda.

There are millions of similar offshore companies designed to avoid tax. They hold an estimated $11 trillion. Rupert Murdoch, Richard Branson and Bill Gates all use them. A third of the world's entire GDP flows through them.

The working class produces all this wealth, creating the income of the rich. In return, the capitalists steal their cuts from every aspect of life - work, housing, saving.

The rich get richer, the poor get poorer. In our cynical, ever more unequal world, this old saw seems to convincingly describe the eternal way of the world.

But the world doesn't necessarily always work that way, as Stewart Lansley helps us understand in his absorbing new book, Rich Britain: The rise and rise of the new super-wealthy. In the mid 20th century, Lansley relates, the British rich actually became distinctly less rich and the British poor distinctly less poor.

Now that situation has reversed, and that reversal raises a question that desperately needs asking: Was the "Great Compression" of the mid 20th century some sort of a never-to-be-repeated accident of history -- or an inspiring example of what any society, given a deep enough commitment to greater equality, can accomplish?

Rich Britain explores this question by focusing in on the economic, social, and political evolution of the contemporary UK.

Advocates for justice, Rich Britain contends, need to recognize that decency demands more than "a minimum living standard below which it would be socially unacceptable for people to have to live." Decency may well also demand a "ceiling at the top," a "norm" about what constitutes "an acceptable limit" of income and wealth.

Without such a limit, the wealthiest in Britain -- and any other deeply unequal society -- will continue "to lead segregated lives, unaware of the reality of everyday life, increasingly divorced from common experience and independent of the society that enabled them to build the wealth that gives them the choices denied to most of the population."

Rich Britain discusses, in its final pages, a variety of approaches that could impact this "issue of distribution." But Lansley offers his countrymen and women no guarantees for success should his specific policy initiatives be followed. Events may simply be moving too swiftly in the wrong direction.

"It may well be that we are already on course for creating a detached and insular super-class, a parallel at the top to the `underclass' at the bottom," he concludes. "That is certainly a strong and possibly irreversible trend in the United States, a society where the very rich exercise considerable political power for their own benefit."

For our own benefit, in the UK, the United States, and across the world, we need to expand the discussion Rich Britain so potently encourages.

[Excerpted from a longer review that originally appeared in Too Much, the online weekly newsletter on excess and inequality [...].