Looking after the super-rich

There are lots of ways a country can help earn a living - it can build cars like the Germans, make movies like the Americans or sell oil like the Saudis.

And what does Britain do?

Well, we might have once been the workshop of the world; but now we're butler to the global super-rich.

And we don't just provide butlers for them; we have company headquarters here running their businesses, shops serving their every whim, and lawyers settling their divorces. It's not enough to employ us all, but every little helps!

Why did we develop such pre-eminence in this sector? The industries that countries flourish in reflect the resources they have and the markets they're suited for:

- The Saudis export oil because they have oil.

- Thailand does tourism and its "related services", because it has sun and tourists.

And Britain sells services to the super-rich, partly because we are traditionally strong at services, but mainly now because we have the super-rich.

They come to the UK for many reasons. The English language for example. But it's not just that - they can speak English if they want to wherever they go.

No, perhaps the main reason they come to us is because we don't charge them nearly as much as other countries.

In most parts of the world, if you reside in a country, you pay tax in that country. And you pay it on your whole income, wherever you make your money.

In the UK, we only charge you UK tax on your UK income, but not the income you make elsewhere in the world, unless you bring it into the UK. It can make quite a difference.

And all you have to do is prove that although you are resident here, you are not "domiciled" here. You live in Britain, but your roots are in Russia for example.

This enormous tax concession plausibly costs us nothing - because if we didn't offer it, none of them would come and we wouldn't get anything from them anyway.

But equally plausibly, we might get some of them anyway even if we did charge them more tax: after all, most of our competing tax havens are less interesting places to settle.

So it really comes down to whether we like our role as butler to the world's elite.

It is certainly cleaner and more glamorous than some other jobs.

But it has its potential drawbacks.

- Do the global super-rich make our home-grown rich feel relatively poor, to the point they start thinking of five million pounds a year as an inadequate salary?

- Is it secure as an economic base for the country - or will they up-sticks and move to Dubai if that offers a better deal?

All one can say is that you want to build your economy around servicing the business activities of the super-rich, you'd better have some super-rich around.

Comments   Post your comment

  • 1.
  • At 11:46 AM on 09 Aug 2007,
  • Andrew Symington wrote:

I believe that this cash stream was the basis for the Blair/Brown Miracle and as such it will merely take one country; and you are correct in pointing out Dubai as the likely candidate, to offer similar or better benefits and our economy will be in tatters. We no longer manufacture, unlike the rest of Europe and the U.S. and we have no natural resources left. I believe that thanks to a lack of support for U.K. industry we could be on the verge of witnessing the collapse of the U.K. economy.

  • 2.
  • At 11:49 AM on 09 Aug 2007,
  • Stephen S wrote:

I thought this was disappointingly superficial. There are important issues here about inequalities,the equity of there being one law for the rich and one for the rest of us, and economic knock on effects to name just a few!

  • 3.
  • At 11:55 AM on 09 Aug 2007,
  • Anon wrote:

I work in this "butler" industry for a well-known private bank (these days called a Wealth Manager). I can't agree more, everyday I dread the our leftist government deciding to decimate this industry by taxing further our clients. They will just up and leave, I and thousands of others will lose their jobs. The City will lose £B's invested here, commerce will lose their custom. They may well pay a tiny fraction of their wealth in tax. But these Ultra-High net worth individuals are very few in number and even if heavily taxed will contribute little in proportion to the value of their investment here. They are more like a business, an industry themselves than a single person and, although it may seem unfair at a human level, their presence and investments here brings a net benefit to the country. Many of them also donate significant sums to national and local charities.

  • 4.
  • At 11:59 AM on 09 Aug 2007,
  • Mark wrote:

"All one can say is that you want to build your economy around servicing the business activities of the super-rich..."

Oh, for God's sake - little bit of an exaggeration, wouldn't you say?

How reliant is the British economy on the super-rich, really?

Well, given that they pay little tax, seemingly earn little in the UK (so little direct investment?), and more importantly the fact that the British economy somehow miraculously survived before their arrival in large numbers (not that long ago), I would say that we have almost no reliance on their residence at all.

I am guessing that should they all up-sticks and move on tomorrow, we'd barely notice - well, perhaps Chelsea fans might notice!

I think a *serious* analysis of their contribution to GDP by an economist - such as yourself! - would reveal almost no significant contribution as a percentage of GDP....

But, given that you are also a journalist, and this is just a blog, perhaps a little exaggeration is forgiveable.

  • 5.
  • At 12:08 PM on 09 Aug 2007,
  • Ted wrote:

I would be happy if the super rich left London, where I live. I work for a productive export industry and if the super rich left I would be better off. They push up costs, clog the roads with their absurd cars and ruin my peacful Saturday afternoons when they fly over my house in their helicopters. Also, if they're paying little tax directly we can't even argue that they are paying for teachers and nurses. Finally, all this foreign money (some if it clearly dodgy) pouring into the UK is pushing up the pound and hurting the business that I work for, just so that a Saudi Prince or ex-KGB oligarch can buy himself half of Park Lane. I really don't think these people are making Britain a better place to live for the majority.

  • 6.
  • At 12:14 PM on 09 Aug 2007,
  • Alex wrote:

That "related services" remark is below the belt and not worthy of yourself or the BBC. I imagine Thais would find it quite insulting.

  • 7.
  • At 12:24 PM on 09 Aug 2007,
  • Andrew wrote:

both the above comment and the article present a rather one-sided view. firstly, the uk is good at doing things other than being "butler" to the super-rich, for example, exporting financial services. The comment about how britain "no longer manufactures" is also wide of the mark, given that the uk is the sixth largest goods exporter in the world. how about balanced, well-researched claims for a change, rather than sensationalist doom-mongering.

Do you have any figures for the super-rich industry's contribution to the UK economy? I have difficulty believing that they contribute more than a tiny fraction to the UK economy.

  • 9.
  • At 12:25 PM on 09 Aug 2007,
  • Tony McGough wrote:

I do not know which country Symington is in. You get loads of uninformed drama queens on this website saying all is doom.
Figures for 2006 show over 3.25 million employed in manufacturing and over 5.5 million in production overall(Source:Experian). A lot more of this high value added now, thankfully, not so much sweatshop stuff. we are still also a major producer of oil and gas.

As the Financial/ Insurance centre of the world, we employ over 8 million in Finance, Business and Services. A tiny amount of this is for butlers! I look out on HSBC headquarters, Citigroup European headquarters, Reuters (as we sell news and analysis around the world). Economies change and ours has moved onwords in the world.

  • 10.
  • At 12:29 PM on 09 Aug 2007,
  • Paul Grey wrote:

This is partly correct but totally ignores the multi billion £ contribution the financial services industry makes to the UK economy (banking,insurance, acountancy, derivatives, hedge funds, pension and investment houses etc). London has now overtaken New York as the world's financial services capital.

We are not butlers, we are bankers.

What other options do we have apart from catering super rich and big businesses? protectionism and reluctance to join EU and USA on any front have already left us alone for any venture of entrepreneurship and innovation.
May be we can think about going back to Stone age? coz we are too arrogant and risk averse to become world's workshop again :(

  • 12.
  • At 12:47 PM on 09 Aug 2007,
  • James Melrose wrote:

Given our prominence in the financial sectors, I'd say we are not so much the butler to the world's rich, more, the burglars emptying their safes!

  • 13.
  • At 12:58 PM on 09 Aug 2007,
  • Paul wrote:

Interesting and very relevant as always.

Could it be that the super rich are actually far more fickle than we currently anticipate? They certainly don't have the same affinity (or financial barriers) to moving their domicile at brief notice, so the butler could very easily find himself masterless.

I also worry about the crowding effects of the combination of rising mortgage debt and being and serving the super rich when we could be using our resources better. Being a butler doesn't have much long term career prospects ...

  • 14.
  • At 12:59 PM on 09 Aug 2007,
  • Mark wrote:

I am a Thai and feel very insulted by that remark. The vast majority of tourists do not go to Thailand for these "related services" - most tourists are actually families. Plus, you fail to mention Thailand's position as the world's top exporter of seafood, as well as a major player in agricultural products, computing equipment and cars.

  • 15.
  • At 01:06 PM on 09 Aug 2007,
  • Malcolm wrote:

I agree wholeheartedly with Alex. A completely unnecessary remark on the Thai tourist trade.

  • 16.
  • At 01:09 PM on 09 Aug 2007,
  • Adam wrote:

Yes, but I bet even the super rich find it hard to get a good plumber when they need one.

  • 17.
  • At 01:12 PM on 09 Aug 2007,
  • Senar Bass wrote:

Spot on. Who needs terrorist attacks, when super-rich Arabs, who contribute little or nothing to British society (not to mention the tax base), can simply buy up all of London (and now the countryside) tax-free, with ill-gotten wealth and impoverish the rest of us through the ripple-down effect of catastrophically rising property prices? They, along with their Russian mafioso comrades (see Dubai, where the big deals go down), are literally laughing all the way to the bank.

This might even be acceptable if we were free to purchase property, practice our religion openly, or our culture, in their countries. Fat chance.

  • 18.
  • At 01:14 PM on 09 Aug 2007,
  • Scott - Glasgow wrote:

Slighty off the debate here, but is somesort of global taxation on the super-rich not the answer to most of the worlds money problems? I'm not talking about people who've done well and have a few million in the bank. I'm talking about people with millions and millions if not billions, sitting in their bank accounts doing nothing but accumulating more money. Half of the world is crying out for money that would make a real difference and these people are sitting on it, nobody needs that much money. In my oppinion earnings she be capped when you start getting into rediculous figures. I swear the majority of the super-rich spend thier time accumulating more and more money purely as a status symbol so they can be on whatever rich list. Why should they be allowed this when so many are suffering?

  • 19.
  • At 01:27 PM on 09 Aug 2007,
  • Harry wrote:

Evan, well said. If we start taxing the rich they will just up sticks. Then we will be a more equal country statistically but worse off as they will take their contributions with them.

On another note - any chance you can do a piece on the US Dollar? It's twin deficits and massive welfare liabilities etc are pushing it in a precarious position it seems. I suspect the Dollar has only retained its strength from historic confidence in the currency which is slowly sapping (well, that and tha fact oil is traded in dollars). What might the effect be on the world economy, ours and the Dollar if investment flees dollar assets, seeing it as a currency with an entrenched lower value?

  • 20.
  • At 01:32 PM on 09 Aug 2007,
  • David Solomons wrote:

Having a 'leading role in financial services' is not enough to sustain the entire economy of the UK and ensure that all its citizens have reasonable incomes that support them and access to social mobility. True those working in Canary Wharf benefit nicely, but do we just accept this income inequality as an acceptable given and let other parts of the UK become unslightly sink hole estates as a price worth paying? Football is a classic playground of these super-rich now - a corrupt human rights abuser can seemingly coast through 'Due Diligence' checks - and a great metaphor for what's being discussed here. Whilst the super-rich become the Manchester Uniteds and Chelseas, what price all the small clubs slowly withering away? The 'trickle down' effect is largely a myth.

I'm not advocating socialist revolution, merely that we cannot afford such huge levels of social inequality, and that our national economy needs to be based on more tangible than mirages such as this.

I wonder if Evan really understands the concept of "Global Economy" and how his super rich, many of who are British (of a sort) fit in with this. I don't believe that UK inc. is the world's butler, rather that as we grasped the industrial revolution, we are the first to really take advatage of the Global economy! (A business has an HQ and factory - who cares where the factory is) its the HQ that takes in and processes the profits, needs the banks and the associated marketing and business skills! As long as the HQ is in the UK, that is the part of commerce we must cater for rather than supplying iron ingots! Perhaps our school should also take note and teach our kids how to count!

  • 22.
  • At 01:43 PM on 09 Aug 2007,
  • Adam wrote:

Alex and others are right about the 'related services' insult to Thais. In a sketchy blog analysis like this, it's unacceptable. I suspect you didn't mean it that way, but you are demeaning the people and the nation.

Edit that line out BBC - now.

  • 23.
  • At 01:50 PM on 09 Aug 2007,
  • Julian wrote:

- Thailand does tourism and its "related services", because it has sun and tourists.

Eh? Thailand already has tourists? I guess we won't need to go there anymore.

And Britain sells services to the super-rich, partly because we are traditionally strong at services, but mainly now because we have the super-rich.

I can't wait for your next article concerning the sale of sweets, which I'm sure will include a similarly vaccuous statement along the lines of 'corner shops sell sweets to children because they have sweets, but also because we have children.' Fascinating stuff.

  • 24.
  • At 01:55 PM on 09 Aug 2007,
  • Somkiet wrote:

I expect more from the BBC than that remark about Thailand. Shame on you Evan Davis and the BBC.

  • 25.
  • At 02:05 PM on 09 Aug 2007,
  • David wrote:

So can we take it that all the other countries have got it wrong and we have got it right? I dout it. Like immigration and the housing boom its business, politicians and the rich telling everyone else how good it is for them, sorry I meant the UK economy.

  • 26.
  • At 02:05 PM on 09 Aug 2007,
  • Michael wrote:

I agree with the implication of this "business model" but in my eyes (as an immigrant from the continent) the main reason is the lack of skills. Working in the automotive industry as program manager I can say from experience that English manufacturing is among the worst I have come across. Absenteisme and who cares attitude do not go down well with TQM and "0" default policies!

But for mid and high incomes (as my wife and I) it is a nice place to live as we can afford housing and private golf clubs.

Best regards


  • 27.
  • At 02:14 PM on 09 Aug 2007,
  • Rick wrote:

Being an Interior Designer (designing hotels for the super rich btw)I really know very little about economics so forgive my ignorance. One thing however seems apparant to me: Somehow or other, whatever the global weather, the UK economy seems to find a place in there and survive, often quite well adapting & changing with the wind. 15 years ago who would have predicted the current situation we are discussing. If the super rich up sticks and leave who knows what next is round the corner but we are not going to disapear in a puff of smoke so i am sure we will find something to do with our time.

Although the super-rich might not pay much in income tax they presumably pay quite a lot in VAT - particularly since they consume high value items.

Whether they are paying for flower arrangements, gardeners, interior designers, vintage wines, private school fees, nannies, private GPs, private hospitals, tailored suits, restaurant meals, hotel stays, golf trips, shooting parties, fast cars, big yachts, chartered jets or simply the heating and lighting for their mega mansions - in effect, every time they spend a penny they pay VAT. That must be worth something to the economy - aside from all the employment opportunities.

That said, it still does not get over the fact that we should all be paying less in taxes.

  • 29.
  • At 02:36 PM on 09 Aug 2007,
  • Matt wrote:

Poor blog entry.

  • 30.
  • At 02:42 PM on 09 Aug 2007,
  • jj wrote:

some very ready-to-be-offended people here.

The 'related services' comment could mean anything, but so what if you're all correct: is anyone denying that Thailand doesn't have a certain reputation which maybe feeds on itself?

  • 31.
  • At 02:49 PM on 09 Aug 2007,
  • Amir wrote:

We need more investment in Northern cities and towns. Not just London, London, London.
Come on super-rich, come up here and trickle down your wealth.

  • 32.
  • At 02:51 PM on 09 Aug 2007,
  • Simon Maynard wrote:

Is there such a thing, these days, as a secure base for an economy? An economic sector shouldn't be lambasted because it is insecure. The trick is not to find a secure base for the economy, but to have an array of sectors that we excel at so that if one collapses, we are not too adversely affected.

In otherwords, we shouldn't put all our eggs in one basket.

  • 33.
  • At 03:22 PM on 09 Aug 2007,
  • james newman wrote:

Instead of asking "do we benefit from the super-rich?" why don't you ask, "would we benefit more from doing something else?" How much does it cost our economy in lost taxes each year and how much do we gain?

  • 34.
  • At 03:47 PM on 09 Aug 2007,
  • Andrew wrote:

Lots of people without a sense of humour on today.

Hint: when the entire article is written in an offhand style, when comments like the ones about Thai tourists are made, when flippant comparisons between countries are prominent, IT'S NOT ENTIRELY SERIOUS.

Sheesh. It's a blog entry, not a piece of news. The purpose is to write on an interesting offshoot of modern global capitalism, without being too dull about it.

  • 35.
  • At 03:53 PM on 09 Aug 2007,
  • Watcher wrote:

The super rich like the gigantic city bonuses, cause powerful waves in their wake re-inforcing their impact on London and the nation as a whole.

I can not see any impact I can count as benign or beneficial on social services, transport or the environment.

Taxation of the super rich and of the quite-rich city gentlemen appears to be more of an anethma to New Labour than it is or may have been to the Tories. This left both parties over time to try ever more ingenious, costly and risky experiments ranging from PFI's to PPP's,to juggle budgets rather than seek to apply equitable taxation to govern the nation.

Is it not time to consider re-introducing the 60% tax instead of the present 40% to the very and super rich and to close the tax loopholes?

Afterall, weren't the rich then at 60% taxation still rich enough to pursue their lifestyles without being stifled? Is it not reasonable to say that they would be now at least as well off as they used to be (even after taking inflation etc... into account) if not better even within a 60% tax band?

May be the above is considered to be difficult, unfair or just plain politically suicidal for any government of the day, any day, to conjure. Yet on the other hand,we have seen the present PM/past Chancellor easily and happily dabbling with the 'Masses Taxes', but not with the 'Superich Taxes' to run the country.

And then New Labour, 10 years on, unashamedly go about portraying themselves as socially sympathetic to the nation putting at the top of their agenda tackling social issues such as education, health etc... as if it would be the last thing they would do. Perhaps it is.

  • 36.
  • At 04:15 PM on 09 Aug 2007,
  • Alex wrote:

Seems to me that lots of overly sensitive people have chosen to get offended by Evan's perfectly innocent remark about "related services". This could mean anything - SCUBA classes, golf, shopping for bargains, or handicrafts, for example. What on earth can these people be thinking of that has got them so uptight - and why I wonder do they associate this (whatever it is) with Thailand in particular? I'm sure it hasn't occurred to the rest of us!

The Skids wrote a song in 1979 entitled 'Working for the Yankee Dollar'. Not much has changed then?

  • 38.
  • At 04:28 PM on 09 Aug 2007,
  • phil wrote:

Ahh yes Britain, one of the few places where the poor pay more tax to subsidise the super rich. Inflation...up. house prices...up up up and away! Who gives a damn if 10 million British people can no longer afford to live in their own country eh? long as a dozen billionaires are happy thats ok in Rip Off Britain!

Surely the amount they pay in tax is a plus compared to them not being here. They pay VAT on their local purchases, they contribute to the economy through simply living here and using the facilities. What they do earn here is taxed. This is all a plus. They employ local and tehy dont drain the welfare state.

It also tells teh world that teh UK is a place to do business. This bodes well for long term investment and keeping us at the top of the finacial world.

Dubai wills truggle to get close and New York is on the decline.

I have been to both recently and walking through London is like getting into a Rolls Royce in comparison. If we keep up the standards we can only win.

Dont invite them in then ask them to pay for their dinner. Certainly not when the Chef is on their pay roll anyway!

  • 40.
  • At 04:40 PM on 09 Aug 2007,
  • fromthehip wrote:

Britain is now a third world economy. A third world country. Look around you. It's right out of Human Geography, Introduction, O Level texts, circa mid-to-late 1970s. Oh the days when pupils, i.e. me, got taught about faraway, hot countries where there was nowt but an enormous 'capital' city thronged with migrants serving an entirley separate first-world elite. Rio de Janeiro, Mexico City, Johannesburg, Bombay, Calcutta, (etc.,etc.) anyone?

Funny that too how up to the late '70s, UK still had a manufacturing activity to speak of. Coincidence I think not.

Britain, not UK, forget N.I., that's now more in the orbit of the EU cash-bloated celtic tiger on the same island, is an oddity, always was, only more so now than ever. It's just a megalopolis, Greater London, with the financial centre, 'The City', being served at the centre of that.

Britain now we are told is tremendously reliant on the fantastically enormous wealth generation of the 'City'(City of London). Or is it the case that the vaunted tax receipts from this financial dynamo end up not in the UK Exchequer but off-shored in Caribbean tax havens or out of reach by virtue of non-UK domiciled status. In return, the UK 'benefits' from the 'London House Price Asset phenomenon', apparently the last major unpricked non-stock market bubble in the whole wide world: price inflation rates of conservatively 60% a year for properties in the over £2 million bracket. Britain's a booming I hear you say! So in return, the BofE is compelled to escalate interest rates for all citizens to subdue year-on-year 10%+ house price inflation averaged out across the UK.

Where is Britain's equivalent of Lyon to Paris or Munich to Berlin or Milan/Turin to Rome, even St. Petersburg to Moscow? As I say, a one-megalopolis, non-manufacturing/financial serving(whatever that means), effectively otherwise third world country with a third world economy(metric: Government spending as a proportion of populace's total income, a half or greater).

  • 41.
  • At 04:55 PM on 09 Aug 2007,
  • Mad Max wrote:

Don't forget a collective British electorate as super rich. It must be so because they have borrowed more than 1.4 trillion mostly set against property values. Who will keep the drip fed drug of credit going? New Labour will!

It a relationship not unlike a crooked employee stealing from their employers till. If they go on vacation somebody will notice the theft so they have to keep working hoping that somebody will find them out and end what started as a perk only to become an unbearable torture.

New Labour and the electorate, a marriage made in hell. New Labour and the super rich, a marriage made in heaven. You know how to vote!

  • 42.
  • At 05:03 PM on 09 Aug 2007,
  • Matt Munro wrote:

I thought it was proved a long time ago (the 1980s Regan era in the US) that "trickle down" economics doesn't significantly benefit the wider economy as the bulk of the super riches' spending just ends up in the pockets of other super rich people, i.e money doesn't trickle down, it circulates sideways.
Even if it did, it is simply immoral that someone who earns millions a week pays less tax than a nurse, what does that say about us as a society ?

  • 43.
  • At 05:17 PM on 09 Aug 2007,
  • Martin wrote:

The article seems to have been written for young schoolchildren and as the postings here show, it is poorly researched and contains a rather regrettable insinuation about Thailand.
Can the BBC please aim for high standards?

  • 44.
  • At 05:19 PM on 09 Aug 2007,
  • david holroyd wrote:


The real problem in the financial markets is that the 'bankers' have not been charging enough for 'risk'.

You cannot blame 'private equity' for borrowing as much as possible at cheap rates if the money is there and good companies can be bought at below the private equities cost of capital. If I thought I could by a company with 5 % equity and 95 % debt and the company could JUST pay the interest on the debt ... buy the company.. all the risk is with the debt. All the gain is mine !

I was taught that as the % of debt went up the cost of borrowing went up. This seems to have been forgotten in the current scrum to lend money. There used to be an optimum amount of debt to equity, be it private or plc so the cost of capital was lowest.. what happened to the curve ?

The result of nice but dim bankers with their sandwiches in their briefcases lending in such a dim way may well end in tears for us all. It would be nice for the EU bank to lend me 63 billion pounds if I had made a few bad fridges and my customers did not want to pay for them !


  • 45.
  • At 06:13 PM on 09 Aug 2007,
  • Ian Kemmish wrote:

>> The Skids wrote a song in 1979 entitled 'Working for
>> the Yankee Dollar'. Not much has changed then?

Oh dear me. The only version of that song I know is a recording by the Andrews sisters from the 1940's. I think it's from an earlier musical about pre-revolutionary Cuba (hence the "rum and coca-cola").

I do hope the Skids never claimed to have written it, otherwise I sense that a super-rich media lawyer is about to get a whole lot richer....

  • 46.
  • At 06:48 PM on 09 Aug 2007,
  • Kenneth wrote:

Since the end of the second world war, Britain's industrial might has withered away; the older industries of cotton, wool, iron, coal, steel, heavy and light engineering and ship-building have declined to such an extent that we no longer compete with the developing far eastern nations where labour is much cheaper. However, the manufacturing base in Britain has not been replaced by sufficient new industries and technologies to enable us to continue to compete in world markets, indeed, it can be suggested that financiers, industrialists, engineers and entrepreneurs have failed significantly to establish and invest in an industrial base.

As an example, in the European Index of the top 250 companies Britain has approximately 70 listed of which only 15 are manufacturing companies; Germany, for example, has only 50 companies but half of them manufacturing providing significant economic returns from exports. It means that Britain is now obliged to import more and more manufactured products, from Europe and from India and China, and this is the root cause of the increasing balance of trade deficit for the last 10 – 15 years.

And, since 1980 the number of people employed in industry and manufacturing has fallen from more than 13 million to just over 3 million; our oil reserves are gradually but inexorably running out and we are, increasingly, reliant on importing gas and oil from Russia and the Middle East to meet the demand for power generation.

But, apart from being the butler to the super-rich, just as long as they choose to remain here and pay little or no tax, Britain does not have much else to offer other than to end up as an off-shore European Theme Park.

  • 47.
  • At 11:24 PM on 09 Aug 2007,
  • Danny B wrote:

I think the super-rich are what is wrong with this country. House prices are sky high. If I want to go to college/university then theres no chance I can get a 1 bedroom flat, let alone any sort of house afterwards. It's very difficult and expensive to live inside of Inner London, once quite ordanary.

Our transport is taking a hit too. Overcrowded peak-time trains nationally. Some still have a First and Standard class. While the First class have wider seats, the 'Standard' class are standing shoulder to shoulder next to each other, in each others personal space.

Sure, the super rich may spend money. But the rest of us are taking the hit for them maintaining their lives. Congestion charge, everyone has to pay if you go through London. For the super rich, it's nothing. But what about the Sales Assistant in Strand on £5.35/hour? Thats over an hours work.

There is far too much inequality. And it's growing. Private investment is killing the property market. With the rich buying massive apartments everywhere, many own several of them. While the people living in the local area are slowly getting pushed out against there will. Private investment, prrft, only on investing in the rich as opposed to the people who make the majority. After all, the majority are more powerful I'd assume. Perhaps this isn't the case...

Rant over.

  • 48.
  • At 02:14 AM on 10 Aug 2007,
  • Matt wrote:

Looks like the carry trade is unwinding faster than a red carpet at an Elton John gig...

In response to earlier comments from the 'wealth managers',perhaps it is time they learned a manual trade,as we will all need some skills when unemployment tops 4 million as the funds and credit disappears.Oh well,I know how to skin a rabbit and feed to my cave now.

Yours bearishly,Matt

It's unlikely the super-rich would head for Dubai, no matter what the incentives.

After all, then they'd have to live in Dubai, and rely on the financial services available there.

Now, if the _French_ were to offer comparable tax deals... but then again, they'd have to deal with the French. Not to mention the beurs.

Dah, If you increase tax rates I vill be forced to take football club to new country. Please keep as is. Is good.

  • 51.
  • At 12:18 PM on 10 Aug 2007,
  • Simon wrote:

"leftist government"? Ha ha! That's a good one!

  • 52.
  • At 12:21 PM on 10 Aug 2007,
  • Phillip wrote:

The Super Rich do help this economy as well as paying VAT on everything and perhaps the small amount of other taxes they are perhaps the few people who can afford to buy our British Luxury Goods, you only have to go to London to see the number of Bentlys Astons and Rolls Royces being driven, aswell as Saville Rowe Suits etc etc, it may only be a small ammount in comaprison to overall GDP but it all helps and the people who work at these places then pass on their cash where they live, with their taxes and puchases etc, People and Politicians especially all too often focus on the headline rate, if they want to make sure the Super rich pay more tax then the easiest way would be to increase high end property taxes and cut the loopholes that companies etc can have in avoiding paying property taxes. Why is it everyone in this country seems to moan about those who do well, wouldn't it be far better if we all tried to emulate them and started our own businesses instead.

  • 53.
  • At 12:24 PM on 10 Aug 2007,
  • AJS wrote:

We should certainly be taxing the super-rich, even at 100% if necessary. Nobody needs more than £100 000 a year to live on.

One thing is certain: The poor will not get richer unless the rich first get a little poorer.

  • 54.
  • At 12:36 PM on 10 Aug 2007,
  • Stephen wrote:

Not sure any of the people replying here want the UK economy return to the industrial glory days of the 70's . . .
I don't think the issue is "the rich/super/uber rich". The issue is what is the UK Gov't doing to build up a diverse wealth generating economy?

A good question to ask anyone who lambastes "the rich" is: "What have you done to help the British tax base?"

As for the Rich leaving UK. If we can make the UK a heaven on earth, the families of the Rich will never want to leave and it’s they who spend the money!

  • 55.
  • At 12:40 PM on 10 Aug 2007,
  • Nick Allsopp wrote:

After every boom there's a bust wrote John Maynard Keynes and it must have been obvious to everyone exept the central bankers that the housing boom that began - and accelerated - in 1997 when the Bank of England cut interest rates to 3% would end in tears. As house prices rocketed people maxed out their ability to service borrowing at 3% rates to get THAT house, creating a classic bubble. (It's interesting how the Bank put out statements then saying that it was not concerned with house price inflation in 1999 when houses were going up 26% a year being not part of its brief but inexplicably now in 2007 this is apparently a major consideration - where house price inflation is ' only ' 6%.

Even more alarmingly, the Bank of England's recent rises to reduce CPI inflation is being undermined by people with equity in their properties releasing cash to see themselves over the current rate hike
thereby, undermining the Bank's attempts to reign in CPI inflation. This is why the CPI response to the rate rises has been sluggish.

The result is a huge loss of liquidity in the economy as people who would have had disposable income to spend instead now have to pay enhanced mortgage payments, and risk taking lenders (not just banks) have run for the hills. This is just the beginning and it will undoubtedly spread into the prime mortgage lending area as people struggle to service huge mortgages created by an unregulated housing bubble.
This is 1992 all over again, but worse. Expect a housing crash with buy to let a major source of trouble
in the U.K.

Liquidity has been gradually drying up as the housing boom gathered pace once the first batch of remortgage money was spent in the late 1990's.

The above is based on the experience from my clients - I am a Chartered Company Secretary.

Hi Evan
I recall reading a report on employment that concluded that there were more people employed in service jobs during the height of the Victorian industrial age than in actual physical manufacturing. Can you confirm this?

The report pointed out that even though many people were employed by manufacturing companies the majority were actually in service functions, whether that was accounts, design, administration or whatever. Plus of course all the domestic servants, bankers, lawyers, etc. In fact we have probably not had a majority of the workforce employed in manual labour or making things since the agricultural revolution.

The distinction between manufacturing and service jobs is therefore a bit of an illusion. The only test of a job is whether it is wealth creating or wealth destroying (if the latter, then it presumably shouldn't last long in a market economy). Our modern economy still thrives on great designers and scientists (suits, cars, buildings, biotechnology).

  • 57.
  • At 02:21 PM on 10 Aug 2007,
  • Mark wrote:

I find a lot of this talk about Britain's manufacturing sector very confusing...I think I may be fairly poorly informed on this, but from what I understand from history (very very briefly) Britain's growth into the industrial revolution was based on importing foreign expertise whenever we could (Dutch textile manufacturers, Jewish financiers) and assimilating their knowledge; then using strongly protectionist policies - as development economics suggests is important - to nuture our domestic market, before finally embracing free market competion when we were strong enough to flourish.
The drive behind this - as with all development was innovation, the desire for R&D and constant progression. These requiring academic enquiry, hence the emergence and popularity of sociecties like the Royal Society and then requiring the finance to develope these ideas into marketable products. Always striving for new ideas, techniques, experiences etc.
History also seems to suggest that post WW2 (another fine mess from predominantly European Imperialist and Nationalistic superiority complexes) British industry was in a huge decline and was outrageously subsidised whilst producing goods that could no longer compete.
But was that not only in certain industries such as mining etc? Have we not missed a trick in British innovation - learning to adapt to what we can do well, exploiting our comparative advantage? Are we not the world's financial and insurance centre because in these highly globalised industries (incidently globalisation being a process that our Great nation had quite a large hand in accelerating!) we are the most innovative, nuturing and importing expertise and capital. For the rest of our economic base Britain performs appaulingly in basic maths and science skills according to frequent reports by organisations such as the OECD. PM Brown wants ours to be an economy based on expertise and knowledge but with a target of 50% of young people having degrees their value constantly erodes. In order to signal interest or ability people aim to pursue postgrad qualifications for which funding is extremely limited, potential reintroducing educational inequality. Our teachers struggle, our children underperform relative to global standards and our universities struggle for money to hire excellent staff as their salaries - relative to countries such as the US and the investment they make to qualify) are dire. America's higher education system is by far the best in the world - because it has money. Huge investment is made in research at their instituations as well as in education. Britian invents so much and historically always has, amazing really. Such a shame that ideas such as the internet are then developed abroad as money here is lacking for such things. I hope this will change, we will start valuing knowledge as we historically did maybe learn to be self sufficient again rather than always pointing the finger at which ever Government happens to be there and crying for our welfare state security blanket again. It seems that historically we loved knowledge, innovation and a can do attitude - perhaps we will find that again.

  • 58.
  • At 03:07 PM on 10 Aug 2007,
  • fromthehip wrote:

@Nick Allsopp 12.40pm 10/8/07

Hear! Hear! Great comment Nick. Your analysis spot on.

Would only take issue with one thing and indeed the key thing.

You say everyone except the central bankers knew that the boom would end with a bust(in tears). Quite the contrary.

Central Banks, The Bank of England, for 300 years or so, and The Federal Reserve Bank in the U.S., since 1913 preeminently, have deliberately inflated then deflated their economies(and by extension the world economy) by money&credit expansion then deliberate contraction. If you want just one item of proof: Ben Bernanke(Fed Chairman)'s own public admission thet the Fed caused(at least could have avoided the Depression following the '29 crash, just this summer, since he took over the job.

The BofE is really no different to the private, obscenely profitable US Fed bank(courtesy of the US's ever growing 'national' debt servicing: c.$7trillion); in fact was the prototype for it in 1680s when foreign continental powers paved the way for William of Orange's accession to the English throne in return for monopoly control of the nation's finances/money supply from 1693 onwards. Hence our own sizeable national debt needing servicing to the bankers to this day.

If you really want your eyes opened further go to any of the many excellent, predominantly US sites(they still have a thing called the First Amendment: freedom of speech) right now discussing the less 'transparent', shall we say, motivations of Central Bankers at this critical time(possible 2nd Great Depression). Type in something like "The Federal Reserve" and/or "M-3 money supply abolished" into Google and take it from there. Happy reading.

  • 59.
  • At 11:39 PM on 10 Aug 2007,
  • Chris S wrote:

Alex #34 (following #22 and #23) If by "related services" Evan was referring to SCUBA diving, why put it in quotes? Thailand does have a sex industry, but it also has a huge legit tourist industry, and it's a beautiful country with the most hospitable and genuine people i've met anywhere.

From my experience, those who believe Thailand is mainly about the sex industry are either those who have only been to those areas of Thailand, or those who have never been there at all. Not sure which category Evan falls into.

  • 60.
  • At 01:25 PM on 11 Aug 2007,
  • Rick wrote:

'Thailand does tourism and its "related services", because it has sun and tourists.'

Yes and the UK has a bigger tourism industry than Thailand, because we have history and the royal family. I bet tourism brings in more money to the UK than services to the super rich.

  • 61.
  • At 08:20 PM on 12 Aug 2007,
  • de carriochella wrote:

I haven't read many of the comments above, apart from the ones from Nick Allsopp and the very first comment.

You are both bang on with your statements about the state of the economy and the fact that privately owned central banks are precipitating this economic collapse in both Europe and the US by moving the goal posts of credit rates, thus lulling the ignorant into financial bankruptcy, which they (bankers + bamks)then sell on or keep increasing their own wealth.

The UK economy over the last decade and a half has expanded in deception to most people, becasue the growth of the economy has been debt fueled by low rates, courtesy of BoE, but these loans have been taken out by people to go on holiday or increase the value of their homes through DIY, or have been used by Hedge funds to finance rediculous short term growth in M&A activity in the city. And when their are no more companies willing to merge becasue of a lack of easy credit or becasue laws are changed as MP's are proposing at the moment then we will see that B/B's years in office will expose the state of the UK economy and gearing of our economy to the service sector and the south East.

As far as I can see there are three ways in which you can stimulate a market or macroeconomic market place and they are: Tax levels, Law (legislation, and last + most importantly Interest rates. Unfortunately in the UK under B/B Tax's are at an all time high, Red tape has never been so bad, coutesy of EU membership and for the first time in its inception the most important economic factor in stimulating a market place for the UK, I-rates, was handed over to the BoE a secret and private organisation with no transparency at all.

Now back to my orginal statement, the UK's growth is debt fuelled and not productivity fuelled, like china and India, what does this mean? well when the credit expansion starts contracting like it now is, there will be at halt in high street spending + M&A activity in the city, so if there is less spending and activity in these areas it means there will be less jobs, simple economic supply and demand.

In an economy that was highly diversified this wouldn't matter, but because our GDP is so highly geared towards services such as insurance legal advice etc we are at a blatant and obvious risk of economic meltdown now that the easy money era is being closed, because the UK is simply a middle man economy it will effect us horrendously.

The worrying prospect for homeowners who have taken out mortgages is that now there is a credit contraction demand drops away, with the government now saying that it wants 5 or so million houses built the price of housing is going to fall even faster exposing those who have taken out loans for lifestyle choices or buisness adventures (silly people). This also underlines how the government will exasperate the economic problems to homeowners with a mortgage, exposing a possible link between Brown colluding with the BoE, for profitable means.

Recommendations: The best way to get out of the mess is to change the monetary system, you cannot extinguish debt within a debt based monetary system which is what we are in. The power of issuing the money should be in the hands of a transparent democratically elected instituion by the people whom rate changes affect the most. The money issued should be debt free money, with this system people and the country could begin to pay of their debts. Then the UK would need to focus upon balancing it's economy in a more pragmatic way.

  • 62.
  • At 11:59 PM on 12 Aug 2007,
  • Steven wrote:

If you really want to have an overall view of Britain's standing (or any other country for that matter) by a relatively trust worthy source I suggest you go to the CIA site the World Fact Book. I think perhaps Evan was taking a particular view on one aspect of our economy, tho I think he got carried away a little. Forgivable.

  • 63.
  • At 08:44 AM on 13 Aug 2007,
  • marty wrote:

Mr Evans,

What does this mean?

"Asian stock markets saw modest rallies after central banks around the world pumped money into banking systems to ease fears of a global credit crisis."

who's money?


  • 64.
  • At 11:20 AM on 13 Aug 2007,
  • James wrote:

More simplistic comment than usual on the blog, with large doses of 1970's style politics of envy rather than economic logic. If being described as butler to the world's elite is the price we have to pay for being an advanced service sector economy producing greater returns for those working in it, then I for one am more than happy. We live in a globalised world. London is now the global capital (even the New York Times is prepared to admit it). It has a per capita GDP twice the European average, and subsidises the rest of the UK. Attracting the super rich, who spend exorbitantly, and hence contribute vastly to tax revenues through VAT etc is an element, but not the only one, behind London's economic success. Those who prefer to live in dull grey towns with lousy shopping, poor restaurants and second rate football teams as a consequence of the failure to attract the big spenders can always move elsewhere. (I could mention names, but, pace the discussion on Thailand above, do not want to cause offence to the overly sensitive).

  • 65.
  • At 03:13 PM on 13 Aug 2007,
  • Tim wrote:

the UK's tax consession whereby tax is not levied on capital that is not brought into the country may cost very little in lost tresury revenues but I think that it still harms the country as a whole becuase it acts as a disincentice for the super rich to bring serious amounts of money into the country which otherwise would be invested in the UK economy. If we are serious about trying to attract foriegn wealth into the country we should not be concentrating on the odd million here and there that the wealthy bring in to buy houses and cars, we should be encouraging the wealthy to bring serious money into thecountries to invest in factories and other business which will employ significant numbers of people.

  • 66.
  • At 02:40 PM on 14 Aug 2007,
  • Mark wrote:

In response to de carriochella (post 61, you comment 'the most important economic factor in stimulating a market place for the UK, I-rates, was handed over to the BoE a secret and private organisation with no transparency at all.'
Interesting, effective monetary policy management depends upon credibility and transparency in decision making. The aim of an independent central bankis to ensure long term economic stability, thus removing potential short run political goals, such as the long debated electoral business cycle, from this, as you say, important economic factor. Having an independent central bank is a very sensible move, for reasons extensively discussed in any modern macroeconomic text and evidenced by the trend for developed economies to make their CB's independent.
The fact that the UK is the global financial center, would suggest that the BoE is transparent and credible in its decision making, lending confidence to the agents in those industries and not the secretive and private organisation you suggest. The BoE website ( lists minutes from all of the MPC meetings, annual reports, a comprehensive history of the bank, a discussion of its role and importance, market data, statistics, inflation measures, information on the MPC and its members, etc; in short I don't understand how this equates with the charge of a 'secret and private organisation' - it certainly seems a lot more transparent than most policy decisions taken by many governing bodies, especially the Government themselves, who you seem to be implying would be better.
Moreover, could it not be the case that London and specifically the the City and its immediate surroundings should be considered separately to the rest of the UK. It seems stupid to constantly lament the success of the financial industry, whilst constantly drawing comparisons between the economy as localised around the City or, say, St Ives.

With regard to the problems of consumer debt, could it not be argued that people need to be educated early on about personal financial management? In this way they could be reasonably expected to be responsible enough to make their own decisions. The fincial sector can then offer all the cheap credit they like, they'll soon stop offering if responsible people don't take it. Surely it would make sense if all young people left school with a rudimentary understanding of the economy [and their country's constitution while we're at it], the importance of interest rates and the such like within it and could calculate things like compound interest, net present vale, future value, indexes, expectations, etc?
In this way could we not create a more financially responsible country?
Blaming banks for consumer debt is much like blaming drug dealers for drug addicts - certainly people wouldn't take drugs if people didn't sell them, but people wouldn't sell them if the demand didn't exist. Admittedly there may exist, in both cases, a rather unfortuitous cirle, but also with both you can always just say no.

  • 67.
  • At 09:50 PM on 14 Aug 2007,
  • Arthur wrote:

This has been the most interesting and diverse blog for a while. On a personal note, if the economy is due for a nose dive, can someone with the know-how advise me on what to do with my savings now that I am retiring from paid employment? Invest in housing, building society, gold bars or what? I'm sure others are thinking likewise.

  • 68.
  • At 10:08 AM on 15 Aug 2007,
  • mike wrote:

Couldn't agree more with 'Ted' (comment number 5)

  • 69.
  • At 04:04 PM on 17 Aug 2007,
  • William Lack wrote:

Surely we attract them because we have a proper legal system - you can buy a house and know it is yours and sell it when you want to - unlike the rest of Europe where thanks to the Napoleonic code - purchasing and selling property is nightmare of complexity and pettyfoggin bureaucracy. Can you imagine here in the UK unlike Spain a developer can charge you a next door neighbour for creating drains and roads?

  • 70.
  • At 03:00 PM on 23 Aug 2007,
  • de carriochella wrote:

In response to Mark's comments,14/08/07.

I'm glad you mention education. This comment underlines how monopoly over certain sectors can lead and does lead to decreased value of output. The problem with both the money supply and education in the UK, is that they are controlled by monopolies that don't have to compete to survive, hence both markets and money supply is a market, are are abused to a certain degree.

What you also do not mention in your comment is truth. We can talk about net present value, indexes, gearing etc etc, but if we as the generation, referring to the over 60's here, do not talk about the real reasons for and of inflation then it is our children who will have to pay off an almighty debt.

True, long term, inflation, which is a poorly described and therefore misunderstood economic phenomenem, is the devaluing of currency, and therefore personal wealth + purchasing power, by the person(s) responsible for issuing that particular currency. The currency is devalued through the use of printing money, this is money worth what present money is worth until it is spent into the economy where upon circulating loses it's value along with the rest of the money in supply. This is the real transfer of wealth, hidden from the eyes of the masses under the so called transparent BoE. Of course this is illegal under law, beacause it's (printing) money, but that doesn't stop bankers. Thus revealing the flaw of having one sole currency controlled by an undemocratic and unaccountable authority to the people of whom use it.

Another truth Mark, the BoE increased the monetary supply by 13% in 2006, My grandson didn't learn about that in either of his Business Studies or Economic classes, just blasted with flawed arguments of the business cycle.

These central banks are set up by and to serve the interests of elite financial institutions, multi national banks, the military industrial complex. This truth will certainly not be taught as a part of any young person's education.

As with banking on the whole, I'm now firmly with Josiah Stamp on that one.

Take away the devices and techniques bankers use to create their perosnal wealth, i.e fractional reserve accounting, printing currency, monopoly over I-rates(credit) and we would not only live in a far happier world, but the world would also not be on the edge of the most catastophic recession/depression and the collapse of the US dollar.

Recommendations: Mark, start speaking some home truths. Nevertheless, education is the (key) to having a financially responsible country, but as we both know this isn't going to happen.

  • 71.
  • At 11:04 PM on 28 Aug 2007,
  • Warren Blinston wrote:

I agree with everything that de carriochella has said. We need to replace Fractional-Reserve Banking with Full-Reserve Banking. The banks should not have a monopoly over the creation of money, but they currently do. The fractional-reserve system can literally allow a bank with a £1 reserve to create, say, £40 out of thin air and lend it out as an interest-bearing debt, hence the cause of inflation and economic cycles.

The creation of debt-free money would prevent recessions from occurring and if the process of creation was controlled properly, inflation would be slowly phased out over time.

Debt-free money would also allow the Government to reduce borrowing, increase spending and/or cut taxes.

I am no economist but I have studied the subject of banking and debt-free money has a hobby.

Many would find what I say unbelievable but they are welcome to research the matter themselves as I have done.

I would advise everyone visiting this blog to visit Google and enter any of the following terms:

- Fractional-Reserve Banking;

- Debt-Free Money.

By doing this, people will learn how the monetary system of this country really works.

  • 72.
  • At 03:21 PM on 02 Sep 2007,
  • Mark wrote:

This is a very interesting thread, thanks to de carriochella and Warren Bliston for their comments, which are very thought provoking.
I remain a little confused by some of the arguments presented. Firstly by de carriochella with regard to the issues of monopoly control of money supply and education in the UK. I believe that you overlook the problem of the existence of natural monopolies, to which competition is difficult or undesirable to apply. For instance a stable state must have a monopoly control over the use of legitmate force or of the creation of law - competition in these areas is definitely not desirable and both are important public goods. Education is licensed by the state and standardised via a national curriculum, the monopoly of the state lending education its credibility. The same is true of the money supply. The creation of money in organised economies has been licensed by the state in order to give the currency credibility. Hence stamping the Emperor's head on coins in Rome. The system of supply can become competitive, hence through public / private schools or different commercial banks, but the legitimation is naturally monopolistic.
I do not agree that a system of full reserve banking or a limitation to debt free money would prevent inflation or recession. To argue that long-run inflation is only caused by expansion of the monetary base seems ill considered to me and not truth at all. The value of any good, whether real or nominal - as in the case of fiat money - is related to forces of both supply and demand and these can be affected by numerous exogenous shocks which may generate inflationary pressures. The problem always becomes one of expectations and prudency. By having a full reserve system tied to a real commodity traded in receipts, essentially the gold standard, then a large inefficiency occurs since the (usually primary commmodity) carries a large opportunity cost in order to have it sat idle in a vault. Moreover this primary commodity is itself also vulnerable to instabilities in price.
I was surprised to hear that the CB increased the money supply by 13% in 2006. The MPC made a series of base rate rises in 2006, representing a monetary contraction. Measurements of money such as M2, M3 may have increased as these base rate changes take time to filter through the banking system. Bankers set up the system to provide credibility to the medium of exchange, 'the oil on the wheels', which is to the benefit of us all not just the few you cite. Granted individuals in such institutions may do well out of the system, but that is not sufficient causal evidence to suggest that the whole thing is designed in their favour. It seems more likely that they are better equipped to have rational expectations of the future and profit accordingly.
The truth is that all economic agents face an intertemporal budget constraint and so we all make choices based on expectations of the future. UK consumer debt of 1 trillion pound has been accepted by many agents - individuals - making choices based on their expectations of the future. It is possible that they hoped tomorrow would never come, like lenders in the US sub prime markets - an irrational expectation as tomorrow always does. If you believe that your currency is about to devalue through inflationary pressures, possibly a rational expectation, then move your asset holdings from your bank account, in fiat money with no store of value, to something like gold or silver, which does. Of course many agents do this so the extra demand will drive up the price, pushing to equilibrium.
As part of an education it seems to me that a brief overview of economic history and development, the nuts and bolts of our society would also be beneficial. As would an understanding of statistics so we can better discuss 'truth' in a probabalistic fashion. The fractional reserve system allows for the expansion of demand, credit flows, capital investment and the encouragement of economic growth. There is little wrong with the theory provided the expectations of the future are rational. Decisions of this nature are based on information which requires education to give the foundation of knowledege and the skills to learn more. When around 60% of GDP is consumer spending the ability of individuals to make rational, well educated decisions about personal finance, for today and tomorrow, are highly important.

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