Evanomics

Looking after the super-rich

• Evan Davis | Notes on Real Life |
• 9 Aug 07, 09:45 AM

There are lots of ways a country can help earn a living - it can build cars like the Germans, make movies like the Americans or sell oil like the Saudis.

And what does Britain do?

Well, we might have once been the workshop of the world; but now we're butler to the global super-rich.

And we don't just provide butlers for them; we have company headquarters here running their businesses, shops serving their every whim, and lawyers settling their divorces. It's not enough to employ us all, but every little helps!

Why did we develop such pre-eminence in this sector? The industries that countries flourish in reflect the resources they have and the markets they're suited for:

- The Saudis export oil because they have oil.

- Thailand does tourism and its "related services", because it has sun and tourists.

And Britain sells services to the super-rich, partly because we are traditionally strong at services, but mainly now because we have the super-rich.

They come to the UK for many reasons. The English language for example. But it's not just that - they can speak English if they want to wherever they go.

No, perhaps the main reason they come to us is because we don't charge them nearly as much as other countries.

In most parts of the world, if you reside in a country, you pay tax in that country. And you pay it on your whole income, wherever you make your money.

In the UK, we only charge you UK tax on your UK income, but not the income you make elsewhere in the world, unless you bring it into the UK. It can make quite a difference.

And all you have to do is prove that although you are resident here, you are not "domiciled" here. You live in Britain, but your roots are in Russia for example.

This enormous tax concession plausibly costs us nothing - because if we didn't offer it, none of them would come and we wouldn't get anything from them anyway.

But equally plausibly, we might get some of them anyway even if we did charge them more tax: after all, most of our competing tax havens are less interesting places to settle.

So it really comes down to whether we like our role as butler to the world's elite.

It is certainly cleaner and more glamorous than some other jobs.

But it has its potential drawbacks.

- Do the global super-rich make our home-grown rich feel relatively poor, to the point they start thinking of five million pounds a year as an inadequate salary?

- Is it secure as an economic base for the country - or will they up-sticks and move to Dubai if that offers a better deal?

All one can say is that you want to build your economy around servicing the business activities of the super-rich, you'd better have some super-rich around.

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