A rich cause for resentment

A few weeks ago The Spectator ran a cover story on "The New Hatred of Wealth". A dozen years after Tony Blair called an end to the politics of envy, said Ross Clark, "it has suddenly become fashionable again to bash big business and attack people for being too wealthy". Take a flick through the papers this week and you'd fast come to the conclusion that he is right.

There are pages of anti-private equity press, for example: Polly Toynbee describes it as a "pernicious, buccaneering" industry and calls for its leaders to be "put in their place" and it's hard to find a commentator who doesn't appear implicitly to agree. You won't find anyone on London's streets with much good to say about the super rich either, which wouldn't have been helped by the full-page article in The Times this week explaining how the excesses of the super rich have pushed up property prices "even for first-time buyers".

But I don't think this means that anyone can hate the rich for getting rich. Instead, it reflects a growing unease with the way they stay rich and get richer: it's unfairness, not wealth, that we hate. And there is unfairness aplenty out there. More than half of London's multi-million pound houses are now bought by wealthy foreigners, many of whom have non-domicile status. This means that, in a system unique to the UK, they don't pay tax on any income not earned in, or brought into, the UK. It also means that they can use offshore trusts to cut the stamp duty they pay. If I were to buy a £5m house in London, I'd pay stamp duty of £200,000. If a non- dom bought the same house via a trust, he'd pay £25,000. I live here. I pay tax on every penny I earn and usually several times over but the same house will cost him £175,000 less than me. That doesn't seem fair.

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Then there is the issue of the taper relief paid on private equity carry' gains. The capital gains rules, put in place to encourage start-up businesses and the once-tiny venture capital sector, have ended up benefiting the partners of the really big private-equity funds in a way that I'm sure Gordon Brown never intended. That Guy Hands' protests notwithstanding also seems unfair, particularly given that 160 of the top private-equity partners are also non-doms. I daresay something will be done about all this in due course, but I can't help wondering if the fuss might be marking the top of the private-equity market.

After all, the fortunes that have been made might have been enhanced by low taxation, but they have been made in the first place almost entirely, thanks to the low interest-rate environment of the recent past. And this is coming to an end. What the rising bond yields of the past few weeks are probably telling us, says Roger Bootle in The Daily Telegraph, is that "we may be about to enter a period of high real rates, short and long", which would have "profound consequences for asset prices everywhere". It would also, of course, affect City bonuses and the extent to which private equity could make any profits on which it might be taxed.

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