The wealth gap is widening

The UK economy has tunnel vision, focused on the current ‘debt mountain’ and the housing market. What it is overlooking is the number of people who are enjoying wealth they would never have dreamed of a decade ago.

There is a vast number of people in London who are not spending their city bonuses on houses, or paying down their debts. They are spending their money on basement renovations which include mini cinemas, game rooms, swimming pools and other extras.  Others are buying homes in the Mediterranean, or investing in wealth building programmes.

These ventures do not come cheap.  A basement renovation can cost £800,000 to £1 million. A house in Spain can easily cost more than that.

The London of the early 21st century is a tale of two cities. Luxury abounds in and around the Square Mile, with many people turning their dreams into empires. And, you don’t need to be self-employed, or a CEO to share the wealth.  Between 3,000 and 4,000 bankers, traders and executives recently received city bonuses that exceeded £1 million, from an overall bonus pot estimated at almost £9 billion.
And, the fantasy could continue if the Square Mile could collectively put their heads together and eliminate their ‘country cousin.’ 

The rest of the city is being stretched to the limit with rents doubling, and then doubling again, in a matter of months.  People are now paying more than £1 million for a loft that would have been considered a bedroom, or a small sized parlour a quarter of a century ago.

Move to an affordable neighbourhood, and the chances of landing a well-paying job drop substantially.  The opportunity of sending your children to a good school is decreases to nil. However, the cost of living remains prohibitive.

The 30 something generation is feeling the pinch.  They are still paying off university loans, because they must choose between a good salary, and unbearable cost of living, or a family, and making a mediocre annual income.

Peter Hain, from the Labour deputy leadership race, expressed the disquiet about the modern plutocracy: "There’s a real problem of people on average incomes feeling there is some kind of super-rich class right at the top."

It’s not an illusion, it’s true. The gap between the top earners and the rest of the country has widened to pre-war levels after decades of convergence.

The Sunday Times Rich List will offer a painful ’slap in the face’ as they highlight the annual list of the super rich. The list expects to include 65 billionaires, up from 54 last year. To become a member of the 1,000 + Rich List you must live in the UK and be worth at least £70 million.

Dr Philip Beresford, author of the list, explained: "London is such an attractive place for the very rich, not just tax wise but because they have the city, the culture, the safety and the security. New York has shot itself in the foot with its onerous regulation."

Unfortunately, the mega rich are leaving their foot print on everything from schooling to housing.  Each time someone reaches the level of rich, or super rich, they drive a wedge into the London economy, forcing the gap to widen even further.

Even though the economic trend of ‘wealth breeding wealth’ is apparent in London, the elite population of London are working hard to keep the money ‘in their neighbourhoods.’

City pay has experienced increases of 30 per cent between 2003 and 2005. Some people are making £55,000 or higher to start .

The second ‘London’ has seen an average earnings increase of only 3.6 per cent in the three months to February, below the current RPI inflation rate of 4.8 per cent. .  The average UK income is around £30 000, depending on the area. Many of those who grew up in the private education system, and expected to see their children educated privately, are now priced well out of the system.

Michael Meacher, who is a possible challenger to Mr. Brown for the Labour leadership, accused Tony Blair and the Chancellor of nurturing the "staggering degree of inequality" in the UK. He compared the weekly pay of a FTSE 100 chief executive at £46,155, to the £400 a week of the average earner.

No one is complaining that the world’s wealthy are turning London into one of the major banking capitals of the world.  What is the problem is that the government is doing nothing to protect the general population from the backlash that has been seen in other cities.  Consider New York where the average middle class family can look forward to owning a flat, and if they are lucky, their daughter may aspire to becoming chambermaid for a 5 star hotel, or a nanny for the super rich.

There are those who are warning the government that London’s economy attracted the wealthy in the first place.  To let the average worker suffer, working harder to gain less, is a sure way to destroy the vibrant, and self sustaining economy that attracted the wealthy in the first place.

And we know who will be the first people leaving if that economy crashes.