Britain’s rich are living in a golden era. Labour should not be scared to end it

<span>Photograph: Leon Neal/Getty Images</span>
Photograph: Leon Neal/Getty Images

For millions of Britons, this feels more and more like a poor country. Essentials such as heating and regular meals are increasingly unaffordable. Public services are struggling, and avoided by many of those who can afford to. Old infrastructure such as schools and hospitals is visibly crumbling. Even “middle-income Brits”, the Resolution Foundation reported this week, “are now 20% poorer than their peers in Germany”.

Yet for a substantial minority of other Britons, life is ever more luxurious. “The big story of the last 40 years has been of private wealth racing ahead,” says the thinktank, “rising from around three times to more than seven times [the size] of GDP.” This long boom for the rich is ever more visible: in the property prices of elite postcodes; in the proliferation of supercars and SUVs; and in the growing parts of cities and smart towns and villages given over to fine dining or designer boutiques.

Both wealth and income are more unequally distributed in Britain than comparable European countries. The result is a society that is simultaneously gleaming and worn out, booming and disintegrating. As the data journalist John Burn-Murdoch puts it, “Britain and the US are poor societies with some very rich people.”

To an extent, capitalist countries are always like this. Capitalism produces winners and losers, often more of the latter than the former. Yet for most of our modern history governments softened that distinction, through public institutions and the welfare state, so the great majority of people had at least a basic standard of living. Then, in 2010, this modest but enduring commitment to collective wellbeing began to be abandoned through the Conservatives’ austerity policies. An ageing population, high inflation and interest rates, and the limiting of tax revenues by low economic growth have made the funding crisis in public services even worse. It has become common to hear people from across the political spectrum say that services such as the NHS are unsustainable.

Where might the money come from that could prove these pessimists wrong? The answer seems as glaringly obvious as a Range Rover double-parked on Bond Street. British taxes on the rich are low by European standards, and also low by the standards of much of our past. Even under Margaret Thatcher, supposedly the great Tory tax-cutter, the top rate of income tax was 60% or higher for the first nine years of her government, as opposed to 45% now.

Yet today neither of the main parties say they want to raise taxes on the rich in a significant way. On the contrary, the Conservatives continue to hint that they may cut inheritance tax, paid by only the most valuable 4% of estates. Meanwhile, Labour, while rightly promising to scrap the tax privileges of wealthy non-doms and the exemption of private school fees from VAT, is emphatic that, otherwise, a Keir Starmer government would leave economic elites alone.

“We have no plans for a wealth tax,” said the shadow chancellor, Rachel Reeves, in August. “I don’t see the way to prosperity as being through taxation.” That higher taxes are usually seen, at least by the left, more as a way to help vulnerable people and increase equality than generate prosperity was something she seemed determined not to say.

The cross-party determination to let the rich continue enjoying a golden era in the middle of a financial emergency for almost everyone else is even more puzzling when voters’ views about inequality are considered. The latest British Social Attitudes survey found the proportions who agree that “ordinary working people do not get their fair share of the nation’s wealth”, and that “government should redistribute income from the better-off to those who are less well off” were the highest they had been since the mid-1990s – another time of entrenched inequality, inegalitarian Tory policies and public services desperate for better funding.

However, the survey also found that while 67% saw Britain’s distribution of wealth as unfair, only 49% supported redistribution by the state. This gap can be interpreted in two broad ways. The conventional explanation, generally favoured by economists and politicians outside the left, is that putting up taxes on the rich is difficult and often counterproductive. Their footloose lifestyles, frequent lack of loyalty to any country, expectation that politicians and tax authorities will indulge them, and ability to afford ingenious lawyers and accountants mean that efforts to make the rich contribute more will either bring in less money than expected or simply drive them away.

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Yet warnings about plutocrats flouncing out of Britain often avoid acknowledging that large numbers of other rich people have long resided in countries with higher taxes. Business opportunities, personal safety, the prestige and culture of a place, geographic and linguistic convenience, and social and family connections all influence where the wealthy live.

What stops more British voters from demanding higher taxes on the rich may not be the practical challenges but a kind of fatalism. Since the 1980s the wealthy have done so well here, with so little interference from governments, and so much deference from a press largely controlled by rich owners, that we have got used to their overbearing presence, like the cold shadows their new apartment towers cast across our public spaces. Like the rest of the economic system from which they disproportionately benefit, the wealthy’s dominance of our society is often seen as inevitable, even natural.

But the spell can be broken. In an anti-elite age, the rich are unlikely to escape tax rises for ever. Fourteen years ago, the last Labour chancellor imposed some on a modest scale. Faced with another public-sector funding crisis, the late, now revered Alistair Darling, like Reeves usually a cautious politician, increased the top rate of income tax to 50%.

There were dire warnings from the press. Yet polls commissioned by some of the same papers discovered the policy was overwhelmingly popular. In fact, it turned out to be one of the few popular things Gordon Brown’s government did. If Starmer becomes the next Labour premier, and his financial inheritance is as awful as predicted, then curtailing the golden age of the rich may be less avoidable, but also less politically painful, than Labour thinks.

  • Andy Beckett is a Guardian columnist