James Ashton: We are paying the price of being the rich’s playground

London has become the tourist attraction of choice for big spenders. It’s time to put up the cost of entry
Ramadan Rush: the super-rich visitors shopping at Harrods are immune to parking fines, too
James Ashton7 August 2014
WEST END FINAL

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Bankers are lolling by the pool in their Mediterranean getaways. Four-by-fours packed with Fulham families have headed down the M4 to West Country retreats.

But the capital is far from empty. Aside from gloomy workers tethered to their desks for August, a new tribe has come to town. The Arab supercars that have shattered the peace of Knightsbridge and King’s Road put the ostentatious displays of wealth of the billionaires we have come to regard as everyday Londoners in the shade.

The so-called Ramadan Rush, when rich Muslims dash here to flash their plastic to mark the end of their period of fasting and moderation, is the modern, urban equivalent of swallows flying south for winter. It is also another reminder, if we need one, of London’s status as a global metropolis, welcoming the world’s wealthiest, those who want to live here as well as those just passing through and flaunting their riches.

Where the Saudis and Qataris roam now, the Chinese will replace them in October. Golden Week, China’s national holiday, has become another highlight in London’s international calendar, when luxury-goods chains see shoes, handbags and watches fly off the shelves as another nation of big spenders comes to town.

The red carpet must be rolled out. The capital enjoyed a record summer for tourists last year. It acts as a port of entry for 40 per cent of visitors to Britain. Those driving the tank-like Mercedes and Rolls-Royces are no more intrusive than the cyclists that will close half of the capital for Ride London this weekend, only a short while after the Tour de France racers did the same — to the chagrin of cabbies.

The touring super-rich, whose private jets remain permanently on standby, recall the Thomas Piketty theory of the world’s wealth concentrating in the hands of fewer and fewer. It makes a new survey that suggests wealth has become almost commonplace ring hollow. The report from the New World Wealth consultancy comes up with the startling figure that almost 400,000 people in the capital, one in 35 Londoners, have assets of at least $1 million, excluding the value of their main home, giving London more millionaires than New York or Tokyo. If you include the value of Londoners’ property — itself inflated by foreign buyers flooding the market — there are some very down-at-heel streets that now have the right to call themselves Millionaires’ Row.

More instructive is the statistic that 72 billionaires — 10 per cent of the world’s total — live here. They are among the super-rich who face a familiar charge sheet: pricing locals out of central properties which they choose not to reside in, turning the lack of affordable housing into a crisis. Of course there is evidence that multi-millionaires do their bit to contribute to the economy. Research from Ramidus Consulting earlier this year suggested that the wealthiest home-owners spent £4 billion annually on goods and services. But the price of forging ahead as a global destination has been the growing gap between rich and poor.

It is more than that, though. London does not suffer the grinding poverty seen in the shanty towns of Bangkok or Jakarta, but it mustn’t be complacent. Not only is the distance between the richest and poorest far wider than it used to be, but the gap from rich to super-rich has expanded too.

What should the average Londoner make of living cheek-by-jowl with the world’s wealthiest? Pride? It is better to have them here than not. Or jealousy? There is a theory that the middle classes are more likely to go green at the thought of their neighbour buying a better car, not because they read about a Kazakhstan oil tycoon who spent £20 million on a Mayfair penthouse.

The Coalition has had a go at wealth redistribution but politicians are reluctant to go too far. The seven per cent stamp-duty band introduced for homes above £2 million has failed to cool the housing market. Nor will a capital gains tax on foreign owners of UK property. There could be more — but please not a mansion tax, which casts the net too wide and hobbles the wealth of those whose mansion is anything but.

The super-rich are unaffected by the same levers that affect everyone else’s economic activity. Remember Bank of England Governor Mark Carney’s point that raising interest rates would not put a dampener on London’s soaraway housing market at the top end, because so many of those properties are paid for with cash. So what can be done to generate more wealth for London from its wealthy visitors?

I have written before that because of international mobility it is impossible for any jurisdiction to wield taxes that will turn the super-rich into just reasonably rich. But I wonder if it is worth trying harder to squeeze a bigger contribution from our affluent friends. We sell short the unique attraction of London. The super-rich that crowd here, making the average City banker look modestly paid, don’t want to divert their summer break to Berlin or Paris. Whether it is shopping or the arts, nowhere else compares.

Piketty proposed a rebalancing with a progressive wealth tax of up to two per cent and an income tax as high as 80 per cent, but that would only stifle entrepreneurs intent on making money not sitting on it.

In the last year that figures were published, Britain’s non-doms paid £178 million for the right to exclude their overseas income from British taxation — a record amount. Now those wealthy foreigners are being made to stump up an annual charge of £50,000, up from £30,000. It is still peanuts.

London has worked hard to bolster its position as a rich man’s playground. Like all the best tourist attractions in the middle of peak season, we just have to figure out what is the right price of entry.

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