2000s >> 2007 >> no-1235-july-2007

The Haves and the Have-Yachts

The rich are not all equally wealthy. According to an article in Times at the end of last year (4 December), a rift is opening up among wealthy Britons between the merely rich, and the super-rich. The reporter went to a West London nursery school – £1800 a term, or £5400 a year – and found the conversation mainly about the forthcoming City bonuses. “According to the centre for Economics and Business Research, a staggering £8.8 billion will be paid out in this next round, with more than 4200 individuals receiving more than £1 million each. Much of that money (around £5 billion) will find its way into property, half of it in London; and of the overall bonus, between 60 and 70 percent will go to non-UK residents – i.e., foreign nationals working in London, many of whom will not be liable for UK tax.” Many of these latter are now the super-rich, whose expenditure is soaring above that of the rich: as Rachel Johnston put it in her book Notting Hell, it is now “the Haves versus the Have Yachts”.

One of the main reasons for the rise of the super-rich is the policy of the Labour government: Tony Blair and Gordon Brown and their friends do love the wealthy. “Britain has one of the most business-friendly tax environments on the planet, exemplified by the non-domicile (or ‘non-dom’) tax laws. In simple terms, these allow wealthy foreign nationals to hold their main liquid assets in tax-free offshore environments while operating freely within the UK – largely untroubled by the Exchequer (the same is not true of British nationals).” The result is that “London’s status as the place to make and take money has only been reinforced in recent years”.

With such competition, the merely rich feel jealous about the super-rich. One City fund manager (Eton and Oxford) said “Not only do they look down on us, they have made our lives more uncomfortable from a financial point of view too, by pushing up the price of traditional wealth assets – school fees, house prices, staff.” An investment banker said, “the super-rich are fine. They either don’t need to pay tax at all or find ways of avoiding it. I don’t have enough cash to employ a clever accountant.”

The Have Yachts – people “with more than £15 million to invest” – operate on a higher level. “These are people who think nothing of spending several million on a party, or having their children picked up from school by helicopter and transported to a waiting private jet for a weekend in Gstaad. They have so much money that they pay experts to help them spend it.” For example, “at Quintessentially, the global concierge service, their ‘elite’ membership is by invitation only and costs a basic £24,000 a year. For that, members have access to finders and fixers in every major city across the world, 24 hours a day.” Among the requests they have dealt with are “finding a premiership footballer to play with a member’s son; sourcing twelve albino peacocks for a party with just three hours’ notice; completely redesigning a London hotel room; and organizing a trip to Hudson Bay, Canada, during the one month each year when the world’s largest concentration of polar bears gathers on the ice”. One service in much demand is finding appropriate houses, usually in London, or by the sea in the west country.

A director of a Central London estate agency said “super-rich foreigners” were their best customers. “Between 70 and 80 percent of our top deals are with foreign nationals.” The steady injection of largely tax-free money by the super-rich into the London housing market (prices in the “most exclusive districts” went up by 31 percent in the year to February 2007) keeps all prices rising, because the cost of cheaper houses follows the market upwards; so ultimately all the young people trying to get their own property, or giving up in despair, are feeling the knock-on effects of the Blair/Brown romance with the rich. If the specially favourable terms for foreign magnates are thought to be under threat, prices decline. “House prices in Central London took a considerable dip in 2004 when ‘non-dom’ was last under serious review; but a sustained campaign from the City and the Exchequer persuaded” the Chancellor to relent, and the super-rich breathed a sigh of relief.

Tax Haven

The International Monetary Fund has decided that Britain is now an offshore tax haven, listing it “alongside the likes of Bermuda and the Cayman Islands – unregulated jurisdictions associated with illicit funds” (Observer, 22 April). The “non-dom” people save vast amounts by largely avoiding British income tax. “The accountancy firm Grant Thornton worked out that the UK’s fifty-four billionaires paid income tax totalling just £14.7 million on their £126 billion combined fortunes” (Observer 4 March). That makes a rate of about one-hundredth part the percentage that the merely rich, who can’t wangle this particular tax-exemption, have to pay on their incomes. Among the “non-dom” Londoners are Lakshmi Mittal, Roman Abramovich, and the Hinduja brothers. The Observer (22 April) has several times asked Sir Ronald Cohen, who was born in Egypt and is now Gordon Brown’s “senior City advisor” (Brown has appointed him to several “taskforces”) whether he is lucky enough to have this “non-dom” tax status; Sir Ronald has refused to answer. If he has this status, he has something to thank the Labour Party for, and he – like Lakshmi Mittal, who tops the Sunday Times Rich List this year (20 April) – is among those who have generously donated funds to the Labour Party.

If you think that the law says that foreigners cannot contribute to British party funds, you would be mistaken: the Inland Revenue (whose regulations are laid down by Gordon Brown) says that people living in Britain under the “non-dom” rules can still be counted as residents, who can thus legally give money to – for example – the Labour Party (Observer 18 February). So that’s all right then. The authorities are less than forthcoming when questioned about this “non-dom” dodge. When asked about a month ago, Gordon Brown’s front man Ed Balls said, “Estimates of the tax foregone in the UK . . . by those not domiciled in the UK are not routinely made” (Private Eye 8 June). But when Private Eye asked about it, “HM Customs and Excise confirmed the information does exist”. However, they refused to divulge it because if they did “it would lead to less robust policy development” (whatever that means). It seems that the ” ‘non-dom’ tax exemption saves the mega-rich billions. The last figure released showed that in 2003 ‘non-doms’ were saving around £1 billion a year; and use of the ruse has multiplied since then. The benefits to Britain of hosting more billionaires and bankers are uncertain.” But Brown, “who has received campaign donations from prominent non-doms, wants to keep them happy without revealing the size of their subsidy. So much for his promise of ‘open and accountable’ government.” It’s all a long way from what Keir Hardie thought he was going to do when he helped to found the party which – he claimed – was going to establish socialism.

Like nearly all the big issues of the day which are endlessly canvassed in the papers and on radio and TV, this unpleasantness arises out of a disagreement within the owning class. Should all the members of that class pay their due taxes, to help support the state which runs capitalism for them? Or should some be allowed to get away with much less taxation than the others have to stump up? For Socialists, there is only one issue: getting rid of capitalism and all the struggles and the dubious hanky-panky it inevitably engenders, both between classes and within classes. If the non-dom ruse was stopped tomorrow, the owning class would still be obscenely richer than the rest of us.


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