Magazine article The Spectator

Too Many People, Too Damn Rich

Magazine article The Spectator

Too Many People, Too Damn Rich

Article excerpt

POOR Peter Mandelson, victim of the curse of Notting Hill. The first house he wanted was so eye-wateringly expensive that he secretly borrowed another minister's money, and was sacked. Now he has settled for a kind of leaking bed-sit and, because it's a leaking bed-sit in Pembridge Villas, he has had to find a quarter of a million and been accused of some devilry to avoid the very stamp duty Gordon Brown imposed.

Is there no end to his house misery? What is it about these white-painted schlosses in west London, with their ulcerated stucco, that drives a man mad? What has gone wrong with the world, he must ask himself, that he, a man mindful of his reputation, has been driven to these extremities to buy a house? I will tell him.

It is a new economic phenomenon and one which is important for all of us who may be in the same perplexity. It explains why so many of us are richer, in real terms, than our parents and grandparents; and yet, when we try to pay for a decent house in central London, or for school fees, or for paintings - things they effortlessly splashed out on - we find ourselves in positions of Mandelsonian embarrassment.

Consider the Sloane Ranger Handbook, that primer of early 1980s upper-middleclass living. Anyone proposing to live in the manner of an '18th-century gentleman', says the SRH, needs 18,000 at 30 and 35,000 at 40. Taking inflation into account, that would mean today's gentleman needs a mere 34,000 at 30 and 65,000 at 40. These are, of course, jolly respectable incomes. But to use them to live the life of an 18th-century gentleman would be stretching things, especially in London; in fact, it would mean making economies that would have been unthinkable 20 years ago.

Something dark and terrible has happened to the value of our money relative to the things we really want. To see the problem, we need to go back to about 1980. Until then it was inflation that was regarded, reasonably enough, as the killer. After a slow start, raising prices just tenfold from 1300 to the Napoleonic wars, inflation kicked in hard during the first world war. It was inflation, not the trenches, which caused the extinction of Bertie Wooster and the idle rich. But if, per impossibile, Bertie Wooster had gone out to get a job, things would still have been pretty good. Earnings generally kept pace with prices, and most things the upper classes wished to buy were affordable.

All that changed in or around 1980. Rapid cuts in the top rate of tax substantially increased the disposable income of the high earners, and there were wider economic shifts. The move away from collective bargaining, the rise of a multitude of smaller employers -Thatcher's supply-side reforms -- produced a greater disparity of income across society. In 1979 the average income after tax was 215 per week, and roughly two-thirds of the working population earned within 65 of this figure. By 1996, the average income had risen to 300, but now earnings were more widely spread, with two-thirds of the population taking plus or minus 90 of the average.

The richer class began to expand, to challenge the position of those who had formerly thought of themselves as rich. In fact, the problem wasn't really inflation per se. The problem was that there were too many rich people. And the trouble with money today is not that you don't have enough; it's that other people have too much. …

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