Simon Jenkins: The rich are still having it far too easy in London

Compared to cities such as New York, attempts to get acceptable levels of tax from the wealthy are feeble

Roller coasters: Knightsbridge has long been a favourite playground for the super-wealthy (Picture: Mark Richards)

Mark Richards

13 May 2014

So London has more billionaires than any other city in the world. It has 72 compared with 48 (sterling-equivalent) in Moscow, 43 in New York, 42 in San Francisco and 34 in Hong Kong. It is dripping billionaires, packing Harrods and Harvey Nicks, booking out the Michelin-starred restaurants, jamming school runs with 4x4s and driving therapists and personal trainers wild with excitement. We have won an Olympic gold for plutocracy.

I read this over my toast and marmalade and wonder how I should react: with amazement, pride, envy or anger? I have no objection to those with lots of money, provided they earned it and pay their taxes. But almost all these billionaires are non-domiciled foreigners. Few are in any sense Londoners. They are “based in” London for the money.

For the world’s footloose rich, a corner of central-west London is a golden tax haven. It has great shopping for their wives and great schools and nightclubs for their children. But these people are essentially visitors, tourists with cash to burn. Even the British names on the list, such as the Duke of Westminster, Earl Cadogan, the Barclay brothers and Cameron Mackintosh, make their money mostly out of catering for other super-rich people, largely by selling them houses and entertainment.

Knightsbridge is now little more than a first-class transit lounge for fiscal refugees. Their advisers scour the world’s tax tables, seeking to ensure their clients never have to pay for anyone else’s defence or welfare, health or education, roads or sewers. They are phantom citizens of nowhere, easing their conscience by giving occasionally to “a favourite charity”. They may deserve their place in the sun but for them London is merely Monaco or Grand Cayman with added attitude.

I am of course delighted that my home city is popular to those lucky enough to be able to choose where to buy houses. London bond yields may be poor but as long as things back home in Russia, the Gulf, China, Malaysia or Kazakhstan are dodgy, a London house is as good as a gold bar. Whatever happens to the pound, West End property is a global reserve currency, moving in response not to the rate of demand for room space but to the need for a bolthole for funk money.

I appreciate that rich people sometimes spend money locally, some of which trickles down to decorators, builders, drivers, cooks and cleaners. I am still glad that foreigners find London’s architecture and visual character charming, its properties graceful and historic. They might acknowledge how hard some people had to fight to keep it so, often against the same businesses from which they profit.

The greatest privilege of wealth is nowadays the freedom not to pay taxes. After Labour’s indulgence of the super-rich, George Osborne has tried half-heartedly to clamp down on tax evasion. He has made company buyers at least pay stamp duty on houses. London’s council tax is a bad joke. Yet the Mayor, Boris Johnson, can call the capital’s rich “a put-upon minority” who should be protected from any further “bullying” from the public.

The chief reason for London overtaking New York as domicile for the super-rich is America’s non-nonsense approach to income tax. If you live in the US you pay your taxes wherever the money is earned, like any other citizen. For reasons that escape me, London makes no such claim. You pay tax only on “remitted” income, which is notoriously hard to collect. Modern London, as hotel magnate Leona Helmsley once said of New York, is a place where “only the little people pay taxes”.

Chunks of central London are not just ghost towns, they are no-go areas for tax gatherers. Mayfair, Kensington and Chelsea are tax shelters. Yet its properties are part of the city and their occupants should be contributing to its public services. When I travel out of London, notably to northern cities, I am shocked at the gulf that divides us from them.

Of course there are parts of London that are poor, as there are parts of Manchester and Leeds that are rich but overall the comparison is desperate. And this is not just the private sector at work. Londoners get £2,700 a head spent on them each year on transport investment, against just £5 per head in the North-East. London pays a large share of Britain’s total tax revenue but it certainly gets it back.

What cannot be right is that a sizeable proportion of the capital’s inhabitants, be they British or foreign, should escape any serious contribution to the fiscal commonwealth. I do not care if they are Gary Barlow and Jimmy Carr or most of the super-rich list. They should pay local and national taxes.

If there is to be a local income tax in Scotland and perhaps Wales, there should be one in London, as there is in New York. Equally, London must find a way of packing more houses into its boundaries to increase the tax base. It is still among the lowest-density big cities in the world.

But the quickest way to extract more tax revenue from super-rich London is to raise the upper council tax bands. It is plain wrong that a million-pound house pays the same in tax as a £10 million pound house. It is wrong that a house left empty makes almost no contribution to utilities, services, employment or local retail elsewhere in the city.

This is the sign not of a booming world city but a fiscal banana republic. We can welcome the rich, from anywhere and everywhere. But tax them like normal London residents.

Simon Jenkins: The rich are still having it far too easy in London

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