Britain’s wealthy are having a glorious summer. There’s been the usual season: Gala Night at the Chelsea Flower Show, then the Derby, Royal Ascot, Henley Regatta and Wimbledon. Still to come: more racing at Goodwood, yachting at Cowes Week, Cartier polo, and Lord’s Test cricket. Meanwhile, Glyndebourne continues along its merry way.
What’s a bonus (no pun intended) this year is the mood. The weather is so-so – pretty good, but occasional heavy showers. The positive change is in the spirit. Everyone is jolly and buoyant; the good times are here again.
To reinforce the sense of joie de vivre, there have been parties – not small affairs but big, rest-of-the-world-get-lost, we-don’t-care spectaculars. The Tory City kingpin Michael Spencer flew friends out to Morocco to celebrate his birthday. Goldman Sachs vice-chairman Michael Sherwood held his birthday bonanza in Sardinia, with performances by Boy George, Blondie and the cabaret performer Kit Hesketh-Harvey.
There have been many other, albeit lesser, extravaganzas in the past few weeks. “People are emerging from their austerity holes,” is how Hesketh-Harvey summed it up. In truth, the sort of people who host and attend these bashes have probably never endured recent hardship. Nevertheless, he is correct: the sparkle is back.
But what’s altered? As we heard from the Chancellor in his Budget, Britain is still bringing down its deficit; cuts are being imposed on government services; Greece is close to triggering possible worldwide economic contagion, similar to that when Lehman Brothers went down; the Middle East is in turmoil, with Isis continuing to appal; the future of Ukraine remains undecided. And yet they party. The reason is the election victory.
Ever since that exit poll was announced, the champagne corks have been popping. I went to two parties that night – at one, attended by City high-rollers, the mood was sombre until the prospect of outright Tory victory flashed up. Then, all hell broke loose. They were celebrating the ditching of the mansion tax, promised by both Labour and the Lib Dems. Except at this gathering it was not one lot of mansion tax they were crowing over, but two – their country houses as well as their London homes would have been well over the threshold.
In Graphics: Budget 2015 analysis
At the other party, given by a very senior investment banker, the atmosphere was the same: what had originally been billed as “an occasion to commiserate” with him and his wife at the arrival of the mansion tax turned into a celebration at its non-introduction. As the evening wore on, the claret he produced from his extensive cellar became ever grander and more expensive.
Doubtless, those glasses have been raised again at George Osborne’s Budget, his first that was “pure Tory”, without the shackles of his Coalition partners. It’s a reaffirmation of all things Tory. Imagine how different the reaction, had Ed Balls delivered the speech.
This was billed as the “higher-wage, lower-welfare, lower-tax” Budget. No wonder the super-rich are delighted: welfare cuts do not affect them at all, but lower taxes do, and so do higher wages. That’s if their wealth is located here. Judging by Osborne’s increasing vagueness in this area, having threatened to move against them on tax avoidance, he’s finding the task difficult.
Yes, he quoted a target of £7.5bn in owed tax to be repatriated; and he’s scored some individual victories and has pushed hard against tax avoidance schemes disguised as film financing. And HMRC is trawling over files relating to HSBC accounts in tax-sheltering Switzerland.
But progress is terribly slow. The rich are not quaking at the prospect of a visit from the Inland Revenue any day now. The number likely to be caught in his dragnet is relatively small, as are the bills they will be asked to pay. These, don’t forget, are the HNWIs or high net-worth individuals beloved of hedge funds and investment managers. They can easily afford to settle with the tax man.
Likewise, non-doms. Osborne’s declaration that he was going to bring an end to the permanency enjoyed by those who possess this privileged status may seem tough, but again, the total affected is small. Besides, the perks of non-dom status are often overstated anyway: the non-dom is still liable to tax on their UK earnings.
If Osborne wants to know who to blame for the fact that the wealthy are not consumed with terror in this area, he need only look in the mirror. It’s no good hitting the rich for putting their cash into convoluted structures – all most of them are doing is exploiting, perfectly legally, loopholes in what remains probably the most complicated tax system on Earth (more so than India’s). Until he simplifies taxation and shuts these doors, his attempt at a crackdown will be very much hit and miss.
As the famously insensitive New York heiress Leona Helmsley might have said, much of the Budget was aimed at little people; most measures, such as a new living wage, do not begin to touch those at the top of the income and asset scale. Or, if they do, the downside is of little consequence.
One long-awaited Tory bonus to cause their wallets to bulge further is inheritance tax. Osborne has stuck to the manifesto pledge of a special inheritance tax allowance of up to £500,000 each – granting relief of up to £1m for a couple with property.
That’s how they see it: the Tories are in charge now, not sharing power with anyone else. It’s their politicians, people who speak the same language, who enjoyed the same expensive education, who have the same aspirations. This never was going to be a Budget designed to clobber the rich.
To the delight of the wealthy, it was a speech for business – and they own businesses. Cutting corporation tax was a gift to them, as much as it was intended to attract overseas investors. Not for nothing does David Cameron say it’s his intention to make the UK “the most open, welcoming, business-friendly country in the world”.
That’s music to the ears of the rich who are already here, as well as those who are coming. There’s plenty of champagne left in this bottle.Reuse content