Episode 1 The Super-Rich and Us


Episode 1

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Transcript


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'The super-rich are taking over.'

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Somebody like me earns 10,000, 20,000 an hour.

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'85 people own the same wealth as half the world's population.'

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You don't get this stuff at IKEA, do you, John?

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LAUGHTER

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How much are you worth?

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Around £250 million.

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Never before has money been so polarised.

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The 21st century will be the most unequal period in human history.

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'My name's Jacques Peretti, and in this series, I'm going to find out

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'how the super-rich have changed Britain.'

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Explain how important Britain is as a tax haven for the super-rich.

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It's very important.

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It's the most attractive location now on the planet.

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But are they making us richer...

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We want more super-rich people here in England.

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..or creating a more divided society?

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We went to see our local Labour mayor and he said to us,

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"If you can't afford to live in Newham,

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"you can't afford to live in Newham.

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"What do you want me to do about it?"

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Human nature will always be a little envious

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of those who have more than they do.

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Who sold us the idea that the super-rich would make us better off?

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There have always been the haves and the have nots,

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but today, you have the haves, the have nots and the have yachts.

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This is the story of The Super-Rich...And Us.

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'As the rest of Britain struggles,

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'the super-rich have never had it so good.

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'Since the '08 crash, there's been £80 billion of austerity cuts.

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'The same amount bankers will have been given in bonuses.

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'At just over £180,000, this Lamborghini

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'costs the same as an average house in Britain.

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'Simon has flown in from Switzerland to buy a second-hand car,

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'but not like one you or I might buy.'

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You collect cars. How many cars have you got? Do you know?

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I don't know if my wife's listening or not, but let's say less than ten.

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-Less than ten?

-Less than ten.

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'The super-rich are behaving as if the biggest recession since the war

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'didn't affect them, but it did, profoundly.

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'They made lots of money from it.

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'Hard to believe, until you hear it from the horse's mouth.

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'Michael Wainwright is the boss of diamond merchant Boodles.

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'His family's reported £85-million fortune

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'is among the thousand biggest in Britain.'

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When the crash happened, did you think,

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"Oh, this is curtains for us," or...

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-What was your feeling?

-Well, we were.

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It was very bleak for about three or four months.

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In spite of what's gone on in the world since '08,

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I think the wealthy probably have got wealthier.

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There was a bit of reticence to spend it to begin with after '08, but not now.

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They are definitely out to play again, yeah.

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'Michael might have had a bad few months,

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'but we've had seven years of austerity.

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'Our incomes have stagnated,

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'but last year alone, the top thousand saw their wealth rise

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'by £70 billion,

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'making their wealth equal to the combined annual earnings

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'of Britain's entire full-time workforce.

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'The gobsmacking gap between us and the richest 1%

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'is returning us to a world we thought had gone away.'

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You know, when I was growing up in the 1970s,

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the idea that the aristocracy ruled Britain had gone.

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They were finished.

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But now there's a new aristocracy who have taken over.

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And they're not the landed gentry, they're the super-rich.

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'Britain now has 104 billionaires.

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'That's more per head than any other country in the world.

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'But when you ask how their presence benefits the rest of us,

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'it turns out that the rich have a party line on that.

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'It's called trickle-down.

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'This is multimillionaire, Rob Hersov.'

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-Michael.

-Great to see you.

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Are the rich good for Britain?

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Yes, very good for Britain.

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We want more super-rich people here in England.

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Why? Because if they invest here,

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if they hire people, if they use taxis,

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if they go to restaurants, they are creating wealth

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for people in England.

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It's not trickle-down, it's trickle-through.

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They are creating opportunities for other people.

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Trickle-down or trickle-through,

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the idea is that their spending will benefit all of us.

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But does it?

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I've come to a high-end showcase for super-watches to find out.

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That looks amazing!

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So, if I wanted to buy that, how much would that set me back?

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Only £215,000.

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-215? That's a bargain(!)

-Yes. I know.

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-Would you like to try it on?

-Please. That would be great.

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-Please have a seat.

-Thank you.

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So...here we have Metamorphosis II.

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-Metamorphosis II?

-Metamorphosis II.

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What was Metamorphosis I like?

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Metamorphosis I was amazing

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-and this is now...

-Better!

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..on an even higher level.

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-We've separated the hours from the minutes.

-Yeah.

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And then, here, you actually have your dates.

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That's just insane! Now, how on earth can I tell the time?

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So at the moment, it's very simple,

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that we're now at 20...to 8.

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So in a way, right, the only people who understand how this watch works

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-are the people who own them, right?

-Yes.

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-So it's a bit like a private club.

-Exactly. It's a secret.

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-Can I try it on?

-Of course you can.

-Right.

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Wow! That is...

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-How does it look?

-It looks really good.

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Really, really good.

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I think I might just make a move, all right? See you later.

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LAUGHTER

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And if you thought that was ostentatious, look at this.

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It's made of Zambian emeralds,

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White diamonds, white gold.

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'A snip at £2 million.'

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Looks a bit...tacky to me.

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Whatever you think of this watch, these items are trophy assets.

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Manufacturing them is unlikely

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to employ thousands in a factory here in the UK.

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So it's hard to see how this kind of spending benefits the rest of us.

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'This is a problem for Britain.

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'Many of the super-rich we are attracting

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'spend their money on such trophy assets.

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'Private helicopters, Learjets, or yachts.

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'The money stays pretty much in their world.

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'But for the seriously super-rich, only one thing will do.

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'A Premiership football club.'

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Tony, we're walking out onto the hallowed turf.

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-We are. It's expensive turf.

-LAUGHTER

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I never thought a piece of grass would cost £1 million.

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'QPR was bought in 2011 for £35 million by this man -

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'Malaysian businessman Tony Fernandes.'

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Asia's toughest job interview begins.

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Welcome to the most challenging interview of your life.

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He's the star of the Asian Apprentice.

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The Alan Sugar of the Far East.

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His net worth of £650 million

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makes him one of the richest men

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in both Britain and Malaysia.

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It's a monumental screw-up.

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For that reason, you're fired. You're fired.

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'The Apprentice Asia premieres tonight at 9.00...'

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So, Tony, you made your money from an Asian airline.

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Why did you buy a British football club?

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TONY LAUGHS

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When you buy a Learjet or a massive yacht,

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you know, it's generally for yourself, the occasional parties.

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But QPR... The feelings, I can't describe.

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Life is about experiences.

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So I'd rather do that

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than sit on a massive boat in the middle of the sea.

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Buying big things might be exciting for the super-rich

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and employ some people,

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but if trickle-down was working,

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the fact we have more super-rich than ever before in Britain

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should mean we are all getting richer.

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But we're not.

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Instead, the 1% share of wealth is rising.

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For the 99%, living standards remain at pre-crisis levels.

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Across the world, people are marching.

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This is a demonstration in Boston against low pay.

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In London, what began with an occupation outside St Paul's

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continued last year with a protest march against low pay

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and the growing chasm between the 1% and the rest of us.

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You know, me and my husband have worked all our life.

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We are on quite low pay, but, you know, still,

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we can't afford to live.

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Everybody's struggling. Well, apart from the 1%.

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For ten years, the average weekly income of a British family

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stayed the same - £429.

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'In the same period, the richest thousand people in Britain

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'saw their wealth more than double

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'from £200 billion to £500 billion.'

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Do you think it's right,

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the idea that their wealth would trickle down to the rest of us?

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-Absolutely not.

-It doesn't trickle down.

-No. When has it ever? When have you ever seen that?

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You can see it's not worked! You can see it, it's not working, is it?

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Inequality has become the theme of epic Hollywood blockbusters

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like The Hunger Games,

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in which people from outside the super-rich city

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fight to the death for survival.

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Happy Hunger Games...

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and may the odds be ever in your favour.

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But this isn't just science fiction -

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a recent US Government report predicted a Hunger Games future,

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a world of elites and commoners.

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And inequality is a race to the bottom that Britain is winning -

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we're the only leading economy

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to have grown consistently more unequal this century.

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So how did we come to believe that attracting the super-rich

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would benefit everyone?

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Who sold us the idea - and why?

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MUSIC: Sunny Afternoon by The Kinks

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To understand, you need to go back to the 1960s.

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Britain's wealth had been built on empire,

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and the City of London was the hub.

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Now that was gone.

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But Britain had a plan to reinvent itself

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as a tax haven for the super-rich.

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We were no longer an empire - we were a casino.

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And the biggest high rollers were about to roll into town.

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MUSIC: Goldfinger by Shirley Bassey

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This was the era of the jet set,

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and leading the pack were the Greek shipping tycoons.

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# Goldfinger... #

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-PRESENTER:

-These ships, and more, add up to 6,428,602 tonnes.

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Whatever "it" is, the Greek shipping industry obviously has it.

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They also had a problem.

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If they settled here, they would end up paying tax on the profits

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from their huge ships.

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But a compliant British government

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was happy for them to exploit a loophole.

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It meant they could avoid paying tax,

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and it was called the non-dom rule.

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The rule was a hangover from Britain's imperial past.

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It was designed to encourage wealthy British colonial magnates,

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rich from the spoils of empire,

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to come to Britain and spend their money.

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This 19th-century relic now turned into a 20th-century tax giveaway.

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The non-dom rule made Britain uniquely attractive

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to the super-rich - you could come here and avoid paying taxes

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simply through a family connection to a foreign country.

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They couldn't believe their luck.

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Grant Woods is a man who made the system work

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as a senior wealth adviser at Coutts, bankers to the super-rich.

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You place your profits in offshore centres,

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it can be managed there,

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you can live happily in London, enjoy all the facilities in London.

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Among the non-doms who came to Britain

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to reinvent themselves as pillars of the establishment

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were Czech-born Robert Maxwell - originally Jan Hoch -

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and German tycoon Tiny Rowland - Roland Fuhrhop to his friends.

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Grant Woods, whose job was to woo these people,

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saw tax breaks as the key tool.

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People kept testing the limits of what was acceptable

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and not acceptable because there were no rules laid down

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by the Inland Revenue specifically dealing with this situation.

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The rules were very, very loose.

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It was all very cosy.

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The non-dom loophole remained largely unscrutinised

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until the 1990s, when Tory donor multimillionaire Asil Nadir

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was found guilty of fraud.

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There are a large number of people

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who work in Britain,

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who earn their money in Britain,

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who don't pay much tax in Britain.

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And many of these people

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are millionaires who are using

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non-resident status,

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or non-domicile status to avoid their proper share of tax.

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Now, I'm going to close these loopholes.

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But guess what? Nothing happened for 15 years.

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In 2008, Alistair Darling finally imposed an annual charge of £30,000.

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-To someone who is a billionaire...

-Yeah.

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..how prohibitive is a £30,000 flat rate?

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Well, for someone who's super-wealthy,

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it's the sort of money they'd spend on a party for one of their kids.

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Far from being a deterrent, £30,000 is peanuts to non-doms,

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whose numbers are now back on the increase.

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£30,000 is £3,000 more than the average salary in Britain.

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You could blow a year's pay on one visit to this salon -

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Oro Gold in High Street Kensington.

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-Hi, there. I've come for an appointment.

-Hi, is it Jacques?

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-Yes.

-My name's Lena, I'll be your therapist for today.

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-Hi, Lena.

-Would you like to come with me?

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'£30,000 is also around the average deposit for a first-time buyer...'

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Hi, Lena.

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OK. What do you want me to do?

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If you just want to hang your robe up,

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-and you can lay down on the couch for me.

-OK.

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'..and the current timescale to save for such a deposit

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'is 22 years.

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'So what do you get for this kind of money?

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'Something called a facial.'

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I'm a bit nervous, Lena.

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What's going to happen?

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Don't worry, you're in good hands.

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So, I'm just going to cleanse the skin now.

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The thing is, if you are super-rich, you know,

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this isn't that unusual a treatment.

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You're totally right,

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and usually it's not really a one-off treatment,

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as they usually come for a series of treatments

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to get maximum results.

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-OK.

-So, usually between six and twelve treatments

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on a monthly basis.

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It's a bit more expensive than an avocado all over your face...

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-Yes!

-..which is 40p or something.

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Well, it is gold.

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'The full super-rich service

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'adds gold-flecked moisturisers to the gold mask,

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'with a caviar massage thrown in...

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'because you're worth it.

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'Or just because you can.'

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It's just particles of gold in a gel form.

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'Luxury services like Oro Gold

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'thrive thanks to the arrival of so many super-rich people in Britain.'

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In the 1970s,

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we were getting used to their presence for the first time.

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But while they enjoyed tax haven Britain,

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the home-grown super-rich were not amused.

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In 1974, the new Labour government

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promised a massive increase in welfare spending.

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To pay for this, they increased taxes on the wealthiest to 83%.

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The top earners had had enough.

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MUSIC: Taxman by The Beatles

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# There's one for you, 19 for me

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# Cos I'm the taxman

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# Yeah, I'm the taxman... #

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But their saviours were at hand,

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in the unlikely form of two enterprising accountants -

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Roy Tucker and Ron Plummer.

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# Be thankful I don't take it all... #

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Spotting a gap in the market, they'd set up their own bank

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called Rossminster.

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Its main purpose was the development of complex schemes

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for avoiding tax.

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The waiting room of the accountants' office

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resembled an extraordinary cocktail party -

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Led Zeppelin and Roger Moore were clients,

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and, most famously, two of The Beatles.

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-# If you get too cold

-I'll tax the heat

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-# If you take a walk

-I'll tax your feet... #

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Richard Brooks was a tax inspector

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who has investigated Rossminster's activities.

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They were promoting weird and wonderful schemes

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with names like "Exempt Debt Scheme", "Commodity Carry Scheme",

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"Non-Deposit Interest" - all kinds of wacky stuff.

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You, in.

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Attention.

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Things they didn't teach you in school...

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One of Rossminster's most unusual schemes

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was to use the losses from investments in British films

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to reduce customers' tax bills.

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One film dragged into this tangled web

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was the British cult classic Scum -

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a film about borstal.

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And trouble was now looming for Tucker and Plummer.

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On the 13th of July 1979,

0:19:050:19:08

70 tax inspectors and 28 police officers raided Rossminster.

0:19:080:19:14

Their offices here were closed, and their little party was over -

0:19:140:19:18

but an even bigger party was just about to begin.

0:19:180:19:22

Rossminster showed what you could do with the tax law -

0:19:260:19:29

just how creative you could be with it.

0:19:290:19:31

By the late '80s, you found the big accountancy firms

0:19:310:19:36

devising tax-avoidance schemes and selling them very aggressively.

0:19:360:19:40

Although Tucker and Plummer did not face criminal charges,

0:19:400:19:43

things would never be the same.

0:19:430:19:45

The men behind Rossminster marked the fundamental change in attitudes.

0:19:460:19:51

From now on, they were saying, rules are there to be broken -

0:19:510:19:55

but only if you're wealthy.

0:19:550:19:58

MUSIC: Angel by Massive Attack

0:19:580:20:00

Britain was now the tax-dodge capital of the world.

0:20:000:20:05

And it's still happening.

0:20:050:20:07

Last year, it cost the rest of us £20 billion.

0:20:070:20:10

One man who's experienced how tax avoidance works for the super-rich

0:20:130:20:16

is billionaire John Caudwell.

0:20:160:20:19

-John.

-Hi, Jacques. How are you doing?

-Nice to see you.

0:20:210:20:24

-Thanks for your time.

-Pleasure.

0:20:240:20:25

It's a nice little place you've got here(!)

0:20:250:20:27

It is, it's a phenomenal place.

0:20:270:20:30

You don't get this stuff at IKEA, do you, John?!

0:20:300:20:33

It's probably a good job, really.

0:20:330:20:36

He built up Phones 4u from nothing, to a billionaire lifestyle

0:20:380:20:41

of helicopters and a Jacobean pile in Staffordshire.

0:20:410:20:45

But this is his latest acquisition -

0:20:470:20:50

a pair of Mayfair mansions.

0:20:500:20:52

Reported value - £250 million.

0:20:520:20:56

It's a good place to entertain...

0:20:580:21:01

Brilliant place to network with the rich and famous of London.

0:21:010:21:06

John, how does this compare with where you grew up?

0:21:070:21:10

THEY LAUGH

0:21:100:21:12

-Oh, my gosh.

-A little more spacious(!)

0:21:120:21:16

Well...

0:21:160:21:17

Well, my first home - first marital home,

0:21:170:21:21

when I was....I was about 20, at the time,

0:21:210:21:24

was a 14-foot Sprite Musketeer caravan on my mother's lawn.

0:21:240:21:29

Caudwell's not like many of the super-rich -

0:21:290:21:32

he actually pays his way, and as Britain's biggest taxpayer,

0:21:320:21:36

he's handed over £200 million in the last five years.

0:21:360:21:40

But has he ever been tempted to break the rules?

0:21:400:21:44

John, have you ever been approached with mad schemes...?

0:21:440:21:47

Well, I was approached all the time with mad schemes,

0:21:470:21:50

and we DID take some of them up, you know, and I'm not proud of that.

0:21:500:21:53

How does it work?

0:21:530:21:55

You know, what's the conversation that's had?

0:21:550:21:57

Oh, do you know, some of the schemes are so convoluted

0:21:570:22:00

that I couldn't even...

0:22:000:22:01

I wouldn't even begin to necessarily understand them.

0:22:010:22:04

There's hundreds or even thousands of tax accountants,

0:22:040:22:07

often recruited from the Inland Revenue,

0:22:070:22:10

who were tax inspectors, to advise people

0:22:100:22:13

on how to have the latest, barmiest, cutting-edge scheme.

0:22:130:22:17

If I thought they were reasonably ethical, I'd do them,

0:22:170:22:19

-but...they were wrong.

-Mmm.

0:22:190:22:23

At the end of the day, I believe they were wrong.

0:22:230:22:25

But this wasn't just about individuals.

0:22:250:22:28

There was a culture in which cosy relationships developed

0:22:280:22:31

between corporations and the tax authorities,

0:22:310:22:34

with devastating consequences for the public purse.

0:22:340:22:38

There was very much a system in which senior tax officials

0:22:380:22:43

were rewarded in terms of promotions and bonuses -

0:22:430:22:48

not for success in tackling tax avoidance,

0:22:480:22:52

but success in fostering a partnership between the companies

0:22:520:22:57

and the department.

0:22:570:22:59

So it was about how well can you create a relationship with a company,

0:22:590:23:02

rather than how much money can you actually get for the public out of that company?

0:23:020:23:07

That's right. And if you ended up in a big dispute with that company,

0:23:070:23:12

that would probably count against you in terms of your prospects.

0:23:120:23:16

So, you're actually being promoted for not doing your job, essentially?

0:23:160:23:20

-Many people...

-Your job as a public employee is to raise revenue

0:23:200:23:24

on behalf of the public, but actually, they were working

0:23:240:23:27

pretty much on behalf of the companies.

0:23:270:23:30

Yeah, I think many senior tax officials, er, ten years ago

0:23:300:23:34

would have said that's how they felt, yes.

0:23:340:23:36

'This toxic combination of tax breaks for foreigners

0:23:400:23:44

'and massive avoidance amongst the home-grown wealthy

0:23:440:23:47

'has changed Britain's role in the world.

0:23:470:23:50

'We were once an imperial superpower.

0:23:500:23:52

'Now we're a tax haven.

0:23:520:23:54

'Pippa Malmgren is a former economic adviser to President George W Bush.'

0:23:550:24:00

Can you explain how important Britain is

0:24:000:24:03

as a tax haven for the super-rich?

0:24:030:24:05

It's very important.

0:24:050:24:06

It's the most attractive location now, I think, on the planet -

0:24:060:24:10

and that's partly because the old

0:24:100:24:11

tax havens in places like Switzerland

0:24:110:24:13

are no longer open for business for NEW money.

0:24:130:24:16

Do you think the super-rich and the super-wealthy were surprised

0:24:160:24:20

by how open Britain was as this new tax haven - this new Switzerland?

0:24:200:24:25

Yeah. I think that they had assumed

0:24:250:24:30

that they would be placing their money in, you know, Geneva

0:24:300:24:33

and the Cayman Islands and places like that.

0:24:330:24:36

MUSIC: Time by Pink Floyd

0:24:360:24:38

These changes only happened because successive governments

0:24:380:24:41

became convinced that trickle-down was the answer.

0:24:410:24:44

It started in 1979.

0:24:440:24:47

A Conservative government is elected

0:24:480:24:50

on the assumption that Britain is broken,

0:24:500:24:53

and the money of the wealthiest will help save us.

0:24:530:24:56

Within weeks, they slashed the top rate of tax from 83% to 60% -

0:24:560:25:02

the biggest giveaway to the wealthy in decades.

0:25:020:25:05

Tax avoidance was now government policy.

0:25:070:25:10

The old world of heavy industry, unions and high taxes

0:25:130:25:17

was no longer to be trusted.

0:25:170:25:19

It had failed, and should be chucked on the bonfire of history.

0:25:190:25:23

# Ticking away the moments that make up a dull day... #

0:25:230:25:30

But there was serious concern about how this brave new world

0:25:300:25:33

of lower taxes for the 1% would create inequality.

0:25:330:25:38

It dominated Mrs Thatcher's first ever TV interview as Prime Minister.

0:25:380:25:43

Is the price for our economic recovery and prosperity

0:25:520:25:56

greater inequality in this country?

0:25:560:25:59

You will get a more thriving society

0:25:590:26:02

when people can rise to the limit of their talents,

0:26:020:26:05

and out of the wealth they create, we shall all be better off.

0:26:050:26:08

So a more unequal society, you think,

0:26:080:26:10

is actually better for prosperity?

0:26:100:26:12

A more opportunity society, which enables the able to earn more.

0:26:120:26:17

But it does mean more inequality, does it not?

0:26:170:26:19

It does mean more... Yes, indeed.

0:26:190:26:21

If opportunity and talent is unequally distributed,

0:26:210:26:25

then allowing people to exercise that talent and opportunity

0:26:250:26:30

means more inequality, but it means you drag up the poor people,

0:26:300:26:34

because there are the resources to do so.

0:26:340:26:36

No-one would remember the Good Samaritan

0:26:360:26:39

if he'd only had good intentions.

0:26:390:26:41

He had money as well.

0:26:410:26:42

Thank you very much, Prime Minister.

0:26:420:26:44

This belief that lower taxes would stimulate growth

0:26:470:26:51

came from the US

0:26:510:26:52

with radical economists like this man, Arthur Laffer,

0:26:520:26:57

an adviser to Republican presidential candidate

0:26:570:27:00

Ronald Reagan.

0:27:000:27:02

Laffer believed that business, not government,

0:27:020:27:05

should be trusted to create prosperity,

0:27:050:27:07

and to do this, the rich should be freed from the burden of tax.

0:27:070:27:13

Rich people are different than most people.

0:27:130:27:15

The rich is the one group of people where you lower tax rates,

0:27:150:27:18

you will get more revenues -

0:27:180:27:19

and every time we've raised those tax rates on the rich

0:27:190:27:23

they've paid less.

0:27:230:27:24

Laffer went further.

0:27:240:27:26

He said taxing the rich would make society as a whole poorer.

0:27:260:27:30

If you tax rich people and give the money to poor people,

0:27:320:27:35

you're going to get lots and lots of poor people and no rich people.

0:27:350:27:38

The dream is always to make the poor rich, not to make the rich poor.

0:27:380:27:42

In Britain, Chancellor after Chancellor courted the super-rich

0:27:440:27:49

in the belief that they would create wealth

0:27:490:27:51

and trickle-down would be our reward.

0:27:510:27:54

22 pence...

0:27:540:27:56

But after three decades of devotion to lower taxes,

0:27:590:28:03

a new breed of economists who have looked at the evidence

0:28:030:28:07

are convinced we've got it wrong.

0:28:070:28:10

Among them, one of the world's leading economists,

0:28:110:28:14

Cambridge academic Ha Joon-Chang.

0:28:140:28:17

Trickle-down economics, you know, in theory, is not a stupid idea.

0:28:170:28:21

But the trouble is that, in reality, this prediction

0:28:210:28:25

has not been borne out, because in countries like the UK, the US,

0:28:250:28:29

that have used these policies,

0:28:290:28:31

investment as a share of national income has fallen,

0:28:310:28:34

economic growth has fallen,

0:28:340:28:37

so where is that pudding, you know, that that we were promised?

0:28:370:28:42

That, "Well, if you give these people more money,

0:28:420:28:46

"they create more jobs, more income."

0:28:460:28:48

They haven't done anything, you know?

0:28:480:28:51

The pursuit of trickle-down in the UK

0:28:530:28:55

means the rich have doubled their share of income since the 1980s.

0:28:550:28:59

The last decade has seen incomes for most of us stagnate,

0:29:000:29:04

further widening the gap,

0:29:040:29:07

so it's hard to see how trickle-down could not be linked to inequality.

0:29:070:29:11

Unless you're Arthur Laffer, of course.

0:29:110:29:13

What critics would say about your innovation -

0:29:160:29:20

the moment at which economics is turned on its head -

0:29:200:29:22

is that, essentially, it's a fig leaf for politicians

0:29:220:29:26

to cynically create tax cuts,

0:29:260:29:28

but with absolutely no economic rationale behind it whatsoever.

0:29:280:29:32

-Oh, that's not true. Come on!

-Taxation at its most basic

0:29:320:29:35

is raising revenue so a society can function.

0:29:350:29:38

-Exactly.

-To say taxation is bad

0:29:380:29:40

-is to essentially say, "Everyone for themselves..."

-No.

0:29:400:29:43

"There is no such thing as society, and this is what the deal is."

0:29:430:29:47

Of course the reason you tax is so that you can get those revenues

0:29:470:29:51

and do good. The government can do what governments should do -

0:29:510:29:54

-I mean, highways, schools, defence - all these wonderful things.

-Mm.

0:29:540:29:58

And when they've run out of things the government should do, you stop.

0:29:580:30:02

But look what's happened in Britain -

0:30:020:30:04

we have one of the lowest levels of taxation for the super-wealthy,

0:30:040:30:07

and our economy has, at a real level, stagnated.

0:30:070:30:11

Do you think inequality has increased as a result?

0:30:110:30:14

If by inequality declining, you make everyone poorer,

0:30:140:30:17

but you make the poor a little bit less poorer,

0:30:170:30:19

then you make the rich a lot poorer, I don't like it.

0:30:190:30:21

I like equality when everyone is benefitting

0:30:210:30:25

and I don't want to see everyone reaching equality

0:30:250:30:28

by everyone going to the basement.

0:30:280:30:30

That's my view.

0:30:300:30:32

So I think looking at equality as an issue by itself is nonsense.

0:30:320:30:35

This conviction that taxes should be low

0:30:410:30:44

is the super-rich mantra.

0:30:440:30:46

But here in Seattle, one of them is breaking rank.

0:30:460:30:50

Nick Hanauer is an internet billionaire

0:30:520:30:55

who believes we've been duped.

0:30:550:30:57

Trickle-down economics

0:30:570:30:59

is as old as human civilisation -

0:30:590:31:01

we used to call it "divine right".

0:31:010:31:04

Now we call it "trickle-down economics" -

0:31:040:31:06

it's simply the idea that I matter and you don't.

0:31:060:31:11

HE LAUGHS

0:31:110:31:12

That what I do is indispensable, and what you do is extra.

0:31:120:31:18

It's how we keep you in line.

0:31:190:31:21

He agrees with the critics

0:31:230:31:24

that the gross inequality we are now witnessing

0:31:240:31:27

is the result of the wrong turn we took three decades ago.

0:31:270:31:30

The great problem we face in Britain and the United States

0:31:320:31:36

is that we have formed our economic policies

0:31:360:31:40

on essentially believing the trickle-down idea

0:31:400:31:43

of Reagan-Thatcherism. Right?

0:31:430:31:45

The idea that if you make rich people richer,

0:31:450:31:47

everybody's going to be better off.

0:31:470:31:49

And, you know, that's just not true - it's not how the economy works.

0:31:490:31:54

To use me as an example...

0:31:540:31:55

I mean, I earn literally a thousand times as much per year

0:31:550:32:01

as the median wage, essentially, in the United States, plus or minus.

0:32:010:32:07

But I don't buy a thousand times as much stuff -

0:32:070:32:11

I own three or four pairs of jeans, a couple of pairs of shoes...

0:32:110:32:16

You know, we have a big, beautiful house,

0:32:160:32:19

but I don't have a thousand houses here in Seattle,

0:32:190:32:22

and so, no matter how much money I have,

0:32:220:32:26

I cannot sustain a great national economy -

0:32:260:32:30

only a robust middle class can do that.

0:32:300:32:32

This is not simply about the failure of trickle-down.

0:32:330:32:36

Inequality is threatening capitalism itself.

0:32:360:32:40

Capitalism, which is the greatest social technology

0:32:400:32:43

ever created for creating prosperity in human societies,

0:32:430:32:46

does need some inequality,

0:32:460:32:48

just like plants do need some water...

0:32:480:32:52

but in precisely the same way that too much water kills plants

0:32:520:32:57

by drowning them, too much inequality kills capitalism

0:32:570:33:01

by drowning the middle class.

0:33:010:33:03

The gains of the super-rich have come at the expense of all of us.

0:33:030:33:08

Stagnation is touching parts of society

0:33:080:33:12

that had previously avoided pain.

0:33:120:33:14

Welcome to Twickenham - home of the middle classes for decades -

0:33:150:33:20

who complained when shops like Lidl arrived.

0:33:200:33:23

Not any longer.

0:33:230:33:25

I wanted to see if they still felt secure as a class,

0:33:250:33:28

or were suffering like everyone else.

0:33:280:33:31

Since 2008, I haven't enjoyed an increase in pay,

0:33:310:33:36

and yet inflation has run higher than my pay packet,

0:33:360:33:39

so effectively, I am earning less now than I was in 2008.

0:33:390:33:43

I think, generally, personal wealth is going to go down

0:33:430:33:45

and down and down. I mean, my parents both had good pensions,

0:33:450:33:50

you know, they get their winter fuel payments,

0:33:500:33:55

they get a lot of freebies, but I'm not expecting to have a pension -

0:33:550:34:00

I'm expecting to be much poorer when I'm older.

0:34:000:34:02

-Mmm.

-Because the money isn't there.

0:34:020:34:05

If I ever need continuing health care, forget it.

0:34:050:34:08

I'll be off to Dignitas!

0:34:080:34:10

But inequality isn't just about the middle class,

0:34:120:34:15

it's about something more fundamental.

0:34:150:34:17

Here in Paris, ground-breaking research is being carried out

0:34:170:34:22

which reveals that a seismic change is taking place

0:34:220:34:24

in the structure of society.

0:34:240:34:26

It was here at the Place De La Concorde in Paris,

0:34:300:34:34

at the height of the French Revolution,

0:34:340:34:36

that the original 1% had their heads chopped off.

0:34:360:34:39

GUILLOTINE DROPS

0:34:410:34:42

So it's fitting that, here in Paris, 200 years on,

0:34:420:34:46

one man, an economist, is changing our very understanding

0:34:460:34:50

of what's going on

0:34:500:34:52

by analysing how the super-rich are transforming our world.

0:34:520:34:56

The man in question is the world's most influential economist -

0:34:590:35:02

Thomas Piketty.

0:35:020:35:04

The middle class,

0:35:050:35:07

it's very important for the economy,

0:35:070:35:09

because this is what also allows us to develop mass consumption,

0:35:090:35:14

to develop mass investment in construction,

0:35:140:35:17

and it has started to shrink, to some extent,

0:35:170:35:20

in the past 20 or 30 years, and I think it will be a major threat

0:35:200:35:25

to our democracies if it was to continue shrinking

0:35:250:35:30

in the coming decades.

0:35:300:35:32

And Piketty puts the blame for the shrinking middle class

0:35:340:35:37

on the growing concentration of wealth in the hands of the rich.

0:35:370:35:41

Are we going to continue in this direction

0:35:430:35:45

of a shrinking middle class?

0:35:450:35:47

It's difficult to know how far this can go.

0:35:470:35:49

What is sure is that, in recent years, what we observe in Britain

0:35:490:35:54

and across countries is that very top wealth holders, billionaires,

0:35:540:36:00

have been rising much faster than average wealth

0:36:000:36:05

and much faster than the size of the economy.

0:36:050:36:07

You can see that if this continues for several decades,

0:36:070:36:10

the share going to the middle class could decline.

0:36:100:36:13

If we believe that a more equal society represents progress,

0:36:140:36:18

this is under threat.

0:36:180:36:21

Piketty points to one form of wealth in particular

0:36:210:36:25

as a key to understanding his argument - property.

0:36:250:36:29

# Grab your coat and get your hat

0:36:300:36:33

# Leave your worry on the doorstep... #

0:36:330:36:36

For much of the 20th century, Britain's property market worked.

0:36:360:36:40

Home ownership grew,

0:36:400:36:42

and wealth was spread across society in the process.

0:36:420:36:45

# Leave your worry on the doorstep... #

0:36:450:36:49

In fact, it was the biggest wealth transfer

0:36:490:36:53

from the rich to the rest of us in British history.

0:36:530:36:56

-JOHN BETJEMAN:

-Along the serried avenues of Harrow's garden villages,

0:36:560:37:01

households rise and shine and settle down to the Sunday morning rhythm.

0:37:010:37:08

In the 1970s, when John Betjeman made his film about Metro-land,

0:37:080:37:12

he was reflecting on a story of quiet triumph -

0:37:120:37:16

wealth spreading as the suburbs grew.

0:37:160:37:19

HE INHALES

0:37:240:37:26

The healthy air of Harrow in the 1920s and '30s,

0:37:270:37:31

when these villas were built.

0:37:310:37:33

You paid a deposit and eventually, we hope,

0:37:340:37:38

you had your own house with its garage and front garden

0:37:380:37:43

and back garden.

0:37:430:37:44

Variety created in each facade of the houses,

0:37:440:37:49

and in the colouring of the trees.

0:37:490:37:52

# On the sunny side of the street... #

0:37:520:37:54

But there was no fairy-tale ending.

0:37:540:37:57

I grew up in Harrow,

0:37:570:37:58

and my parents were part of that revolution in home ownership.

0:37:580:38:01

Many of my generation followed them onto the property ladder,

0:38:010:38:05

but since 2003, home ownership has stalled.

0:38:050:38:09

This is Oxford.

0:38:150:38:16

But we're far away from the dreaming spires here.

0:38:180:38:21

In this city, homes used to cost

0:38:220:38:24

three times the average local salary.

0:38:240:38:27

But now an average home costs 11 times the local salary,

0:38:270:38:31

making Oxford one of the least affordable places in Britain.

0:38:310:38:36

Oxford professor Danny Dorling

0:38:400:38:42

agrees that the decline in home ownership

0:38:420:38:44

is at the heart of the growth in inequality.

0:38:440:38:47

How important was the idea of owning property

0:38:490:38:52

to actual relative economic equality?

0:38:520:38:55

I mean, this was incredibly important.

0:38:550:38:57

We went from a position of 90% of us renting,

0:38:570:39:00

and only those who were moneyed owning,

0:39:000:39:03

to a position where it was absolutely normal

0:39:030:39:05

for the middle class to buy property -

0:39:050:39:07

my mum and dad bought a house here for £4,000 in the '70s -

0:39:070:39:10

to a position where it was normal in the working class to do this.

0:39:100:39:14

You know, we had building societies set up

0:39:140:39:16

to help you borrow money to get a friend to build you a house.

0:39:160:39:21

"My house."

0:39:210:39:23

You know, I can't get used to saying that?

0:39:230:39:26

"Have you seen my house?"

0:39:260:39:27

"Why don't you all come round to my house?"

0:39:270:39:30

Oh, Bob, I can't wait to move in.

0:39:300:39:34

In the '70s, popular sitcoms such as The Likely Lads

0:39:340:39:38

reflected the reality of an upwardly mobile society.

0:39:380:39:42

MUSIC: In Every Dream Home A Heartache by Roxy Music

0:39:420:39:45

But today's likely lads are more likely to live in a rented flat,

0:39:450:39:49

spending twice as much renting as they would on a mortgage.

0:39:490:39:53

# In every dream home a heartache

0:39:550:39:58

# And every step I take

0:40:000:40:03

# Takes me further... #

0:40:030:40:06

And there's nowhere that this crisis is more evident

0:40:060:40:08

than here in London.

0:40:080:40:10

They're building - but it's the super-rich who are buying.

0:40:100:40:14

And developers are chasing their cash

0:40:160:40:19

with extraordinary developments like this...

0:40:190:40:22

..showcased in this highly polished promo...

0:40:240:40:26

'One Hyde Park represents a valuable investment.'

0:40:260:40:29

..in which developers sell potential buyers the dream

0:40:290:40:32

of living a celebrity lifestyle in the centre of London.

0:40:320:40:36

'To the south, Knightsbridge, one of the finest...'

0:40:360:40:39

The cheapest flat is £6.5 million.

0:40:390:40:42

On average income, it would take 250 years to buy it...

0:40:430:40:48

if you just went to work and slept

0:40:480:40:52

and never had children or holidays...or food.

0:40:520:40:56

Thanks in part to super-rich investments,

0:40:560:40:59

London prices have increased by 25% in a year.

0:40:590:41:04

'One Hyde Park offers legendary service.

0:41:040:41:07

'A new global benchmark for luxury residential living.

0:41:070:41:11

'Representing a secure investment in the current economic climate,

0:41:110:41:15

'some existing owners have already seen

0:41:150:41:17

'a substantial increase in capital value, in excess of 80%.

0:41:170:41:22

'Own the legacy - experience the exceptional.'

0:41:220:41:25

Few people have changed London's skyline like Peter Rees.

0:41:260:41:31

The former head of planning at the City of London,

0:41:310:41:34

he now blames foreign speculation

0:41:340:41:36

for driving prices out of the reach of ordinary Londoners.

0:41:360:41:39

We have a housing bubble in London

0:41:410:41:43

that is fuelled by an almost limitless wave

0:41:430:41:46

of international capital.

0:41:460:41:48

There's no end to that supply -

0:41:480:41:50

it's constantly being generated in Russia and China

0:41:500:41:53

and in the Middle East.

0:41:530:41:54

How do foreign investors view the properties they're buying in London?

0:41:540:41:58

Do they see them as homes?

0:41:580:41:59

Investment in the residential real estate market in London

0:41:590:42:02

is perceived as even better than gold bricks,

0:42:020:42:05

which you have to hide in a vault, and you can't see.

0:42:050:42:08

These things are out there, piled up,

0:42:080:42:10

and you can actually keep an eye on them.

0:42:100:42:13

But of course, inside, they are just containers for the same capital

0:42:130:42:17

that you would otherwise put in a bank vault,

0:42:170:42:20

which is why I refer to these as piles of safe deposit boxes.

0:42:200:42:24

# Us...

0:42:240:42:26

# And them... #

0:42:290:42:32

Battersea Power Station, once a symbol of industrial power,

0:42:320:42:36

seen in this glossy ad, is being redeveloped for flats.

0:42:360:42:40

In the first release, 50% were sold to foreign buyers,

0:42:400:42:44

speculating on Britain's property market.

0:42:440:42:48

70% of all new-build residential property in central London

0:42:480:42:52

is now being bought by foreign investors.

0:42:520:42:56

So, what does this mean for ordinary people? For us?

0:42:560:43:00

The enclaves of the very rich are spreading

0:43:000:43:04

over larger and larger areas -

0:43:040:43:05

and not even areas where the uber-rich are living,

0:43:050:43:09

but areas where they're simply investing.

0:43:090:43:12

How far can this go?

0:43:120:43:13

How much do we give over to this desert of wealth

0:43:130:43:16

before London ceases to work?

0:43:160:43:19

This is creating a new class of economic refugees.

0:43:230:43:28

In Newham, this group of single mums are being removed from their homes

0:43:280:43:32

to make way for a new development.

0:43:320:43:36

But they've refused to go.

0:43:360:43:37

What's happening here is being called social cleansing.

0:43:370:43:41

It's obvious what's happening -

0:43:410:43:43

all these council homes and places

0:43:430:43:47

are being demolished and built into glass buildings

0:43:470:43:49

that are luxury apartments that nobody in the local area can afford.

0:43:490:43:53

There's one being built just there -

0:43:530:43:54

it's a stone's throw from where we are standing right now.

0:43:540:43:57

-Yeah.

-Yeah, that's Stratford Plaza -

0:43:570:43:58

-and before that was even halfway up, it was already bought off.

-Yeah.

0:43:580:44:02

We went to see our local Labour mayor,

0:44:020:44:04

and he said to us, "If you can't afford to live in Newham,

0:44:040:44:07

"you can't afford to live in Newham. What do you want me to do about it?"

0:44:070:44:10

And that's the response that we've had from our MPs,

0:44:100:44:13

-councillors, and our mayor.

-How does that make you feel,

0:44:130:44:17

that you're being made to move out of where you live?

0:44:170:44:19

It's really upsetting, because, obviously,

0:44:190:44:22

all of our family and support networks are here.

0:44:220:44:25

-Has anyone shown you any support?

-No! Why would they?

-No.

0:44:250:44:29

We're a thorn in their side for all they care.

0:44:290:44:31

We're an embarrassment to them,

0:44:310:44:33

because we're proving something that they're saying is not happening.

0:44:330:44:35

After a public outcry,

0:44:350:44:38

Newham Council did eventually reprieve 40 out of 434 homes,

0:44:380:44:43

and apologised for the treatment of the women.

0:44:430:44:46

But the fact that they are just fighting for a place to live

0:44:460:44:49

shows how far expectations have dropped.

0:44:490:44:52

For this generation, buying a property is a ridiculous dream.

0:44:520:44:56

By 2032, Britain will be a country in which the majority are renters.

0:44:590:45:04

Getting hold of that key piece of wealth - property -

0:45:070:45:11

will become ever more difficult.

0:45:110:45:14

..and no key worker accommodation.

0:45:140:45:17

That is a SHAME!

0:45:170:45:19

We should not be collaborating with developers

0:45:190:45:23

and excluding ordinary people from housing.

0:45:230:45:27

This demonstration is taking place outside a property fair

0:45:270:45:30

in London's Olympia.

0:45:300:45:32

But this fair isn't just about London.

0:45:350:45:37

Cash-strapped councils from all over Britain are selling off land.

0:45:370:45:42

Hi, there.

0:45:420:45:45

If I was an investor coming here

0:45:450:45:46

and I said I've got 15 billion to spend, OK?

0:45:460:45:50

-We've certainly got plenty of space for 15 billion.

-Have you? OK.

0:45:500:45:53

Foreign investors are now circling property markets across the country.

0:45:540:45:58

It's unbelievable.

0:46:000:46:02

They're all just here flogging off, basically, what they own

0:46:020:46:06

to private investors from abroad.

0:46:060:46:09

I'm from Tokyo, on a business trip, for about a week.

0:46:110:46:13

And I'm in the property business.

0:46:130:46:16

-We have a portfolio of 180 million.

-180 million?

-Currently.

-OK.

0:46:160:46:20

180 million.

0:46:200:46:22

So, it's kind of a little bit of money to spend(!)

0:46:220:46:25

We have many investors interested in UK properties,

0:46:250:46:28

and that's why I'm here today - just to meet people in the same industry

0:46:280:46:32

and to find out what are the opportunities here.

0:46:320:46:34

But what is now becoming clear is the type of properties

0:46:370:46:40

these new investors are after.

0:46:400:46:42

They want more and more of us to rent.

0:46:430:46:46

And that's increasingly what the market will supply.

0:46:490:46:52

MUSIC: For The Love Of Money by The O'Jays

0:46:530:46:56

But it's not just super-rich foreign investors exploiting this trend.

0:46:560:47:01

Properties are being swept up by a growing class

0:47:010:47:03

of British super-rich property investor -

0:47:030:47:06

the buy-to-let baron.

0:47:060:47:08

# Money, money, money, money... #

0:47:090:47:11

And this man is the biggest buy-to-let baron of them all -

0:47:110:47:15

Kevin Green.

0:47:150:47:16

After the count of three, we're going to say, "Yes, yes, yes,"

0:47:180:47:23

in really quick succession.

0:47:230:47:24

One, two, three...

0:47:240:47:26

-ALL:

-Yes, yes, yes!

0:47:260:47:29

Brilliant! Give a high-five to the person next to you.

0:47:290:47:32

He owns 700 properties,

0:47:320:47:34

but he also gives wealth seminars on how to be a buy-to-let millionaire.

0:47:340:47:38

If you worry what everybody's going to say about you,

0:47:380:47:41

you ain't going to become a very successful entrepreneur.

0:47:410:47:45

Does that make sense?

0:47:450:47:47

Kevin's business is doing very well,

0:47:470:47:49

but he's gaining at the expense of one group in particular -

0:47:490:47:52

first-time buyers.

0:47:520:47:54

By value, buy-to-let lending is growing faster

0:47:540:47:57

than first-time mortgages.

0:47:570:47:59

It seems as though, in Britain, there are two worlds being created,

0:47:590:48:02

and one is the buy-to-let market, which is booming,

0:48:020:48:05

and then, on the other half, is everyone else

0:48:050:48:07

who's trying to get on the property ladder

0:48:070:48:09

and just simply can't afford to get on the property ladder -

0:48:090:48:12

and they're related, because your world is forcing everyone else

0:48:120:48:17

from not being able to buy anything.

0:48:170:48:19

So how do you feel about that?

0:48:190:48:21

Yeah, I mean, it's a fair comment, there.

0:48:210:48:23

Property, if you're into it, does - if you do it right -

0:48:230:48:26

get you in a very wealthy position.

0:48:260:48:27

Generally, there is a split,

0:48:270:48:29

and it's getting harder for first-time buyer to come in.

0:48:290:48:32

Whether that's because of investors is arguable.

0:48:320:48:35

We then had a payment of £31,000 tax free.

0:48:350:48:39

Hands up who'd like that?

0:48:390:48:41

These people aren't mega landlords,

0:48:410:48:44

but every one that succeeds, could push out one more first-time buyer.

0:48:440:48:47

If everyone becomes a buy-to-let landlord,

0:48:470:48:51

there won't be any property left for anyone else -

0:48:510:48:54

it's going to just exacerbate the problem, make things even worse.

0:48:540:48:57

Probably that problem has already been realised,

0:48:570:49:01

and we've reached that point.

0:49:010:49:02

Our housing crisis is Kevin's business opportunity,

0:49:020:49:07

as we become a nation of renters.

0:49:070:49:10

When I get up every morning,

0:49:110:49:13

I do something which is a little bit different -

0:49:130:49:16

cos sometimes, as an entrepreneur,

0:49:160:49:18

it's good to be a little bit crazy or a little bit different, isn't it?

0:49:180:49:22

What I do is, I instil self belief.

0:49:220:49:24

I go, "If I wasn't me, I would SO want to be me!"

0:49:240:49:29

You know? And then... I feel better already, do you know what I mean?

0:49:300:49:34

Once you've got that sweet taste of success that starts coming,

0:49:340:49:38

then you just want more.

0:49:380:49:40

After three - one, two, three...

0:49:400:49:44

-ALL:

-If I wasn't me, I would SO want to be me!

0:49:440:49:47

Brilliant! Give yourself a round of applause.

0:49:470:49:49

Property equals wealth in Britain.

0:49:510:49:53

It's at the heart of ballooning inequality,

0:49:530:49:56

increasing wealth for the super-rich and taking it away from us.

0:49:560:50:00

And as we struggle,

0:50:040:50:05

the party only gets better for the wealthiest in Britain.

0:50:050:50:08

I'm on my way to a private event at Prince Harry's favourite club,

0:50:080:50:13

Mahiki, thrown by diamond seller to the super-rich - Vashi.

0:50:130:50:17

-How's it going, Vashi?

-Mate, it's just unbelievable.

0:50:170:50:20

As you can see, we've got about 150 people already here.

0:50:200:50:23

-So it's just going better than expected.

-Yeah.

0:50:230:50:26

For Vashi, business is booming.

0:50:350:50:37

This is Stephanie, the wife of a Russian multimillionaire in London

0:50:370:50:42

who wants to spend a lot of money on diamonds.

0:50:420:50:45

So, in terms of the jewellery, what were you looking for?

0:50:450:50:49

-I would like to surprise people with something.

-Yeah? Great.

0:50:490:50:52

Let's take it out.

0:50:520:50:53

What's the most ridiculous thing

0:50:550:50:56

that you've been asked to cover in diamonds?

0:50:560:50:58

Well, we had the other day someone buying a bra crusted with diamonds.

0:50:580:51:02

That's the only way that you can buy a bra that's worth £10 million.

0:51:020:51:06

Buying diamonds isn't simply an extravagance for the super-rich -

0:51:060:51:10

like gold or watches, they're an investment,

0:51:100:51:13

insulating their wealth in case the economy goes belly up again.

0:51:130:51:17

-Can I take one more?

-Yes, please.

0:51:170:51:19

After a bit of polite horse trading, they agree on a price.

0:51:190:51:22

Altogether 54, 55, so we can do it for 50.

0:51:220:51:25

-Thank you very much!

-It's a pleasure!

0:51:250:51:27

-Thank you, Stephanie.

-Thank you.

-Great doing business with you.

0:51:270:51:30

Mwah! Mwah! Mwah!

0:51:300:51:32

For decades, as we've seen, government after government

0:51:360:51:39

pursued an economic policy to attract the super-rich to Britain.

0:51:390:51:43

It was all based on a flawed idea -

0:51:430:51:45

that their wealth would trickle down to the rest of us.

0:51:450:51:48

It didn't.

0:51:480:51:50

Economists believe it actually trickled up,

0:51:500:51:52

from us to the super-rich,

0:51:520:51:55

into their giant reservoir of private wealth.

0:51:550:51:58

So you think, in a way, trickle-down was almost a way of duping us

0:51:580:52:01

into redistributing wealth from all of us

0:52:010:52:05

to the richest members of society?

0:52:050:52:08

Yes, I can only describe it like that,

0:52:080:52:10

because, especially in the US and the UK,

0:52:100:52:12

back in the late 1970s,

0:52:120:52:15

the top 1% used to take about 10% of total income -

0:52:150:52:18

on the eve of the 2008 financial crisis, this rose to 23%.

0:52:180:52:25

There is now a growing consensus that this trickle-up effect

0:52:250:52:29

needs to be reversed.

0:52:290:52:32

We have indeed made rich people richer -

0:52:320:52:35

I am testament to that - but clearly,

0:52:350:52:38

everyone else isn't better off.

0:52:380:52:40

And it's both immoral but also economically idiotic.

0:52:400:52:46

The super-rich have the money and we need it -

0:52:460:52:50

so how do we get it off them?

0:52:500:52:52

Thomas Piketty has a radical solution -

0:52:520:52:54

instead of increasing income tax,

0:52:540:52:56

directly target the wealth of the super-rich.

0:52:560:52:58

It would be better, actually, to have an annual tax on wealth.

0:52:580:53:02

This is just a matter of common sense -

0:53:020:53:05

you know, this is not a matter of just left or right.

0:53:050:53:08

When you have booming property values at the top

0:53:080:53:11

and booming top wealth portfolio at the top,

0:53:110:53:15

you know, it would be crazy not to ask a little bit more

0:53:150:53:18

to these people.

0:53:180:53:20

But guess who disagrees...

0:53:200:53:23

the super-rich themselves.

0:53:230:53:26

I'm very, very much in favour of very low taxation

0:53:270:53:31

right the way across the board.

0:53:310:53:33

I think we don't need to be taxed any more -

0:53:340:53:37

we are paying a lot of tax.

0:53:370:53:38

if I gave you, Jacques, my tax bill you'd probably have a heart attack.

0:53:380:53:41

So this approach of robbing the rich to pay the poor,

0:53:410:53:44

I don't agree with it.

0:53:440:53:46

If somebody's done well for themselves through hard work

0:53:460:53:48

and effort, why should they be taxed through the eyeballs?

0:53:480:53:51

The super-rich don't want higher taxes -

0:53:530:53:55

but low taxation does not necessarily equal higher growth.

0:53:550:53:59

Since 1980, countries which have reduced tax rates for the wealthy,

0:53:590:54:04

such as Britain and the US, have not grown any quicker

0:54:040:54:08

than Denmark or Sweden, which kept them higher.

0:54:080:54:12

We need to change the discourse here,

0:54:130:54:16

because if low tax was good in itself,

0:54:160:54:20

why doesn't everyone move to Jamaica?

0:54:200:54:22

The highest income tax rate in Jamaica is 5%.

0:54:220:54:26

If you look at the Scandinavian countries,

0:54:260:54:29

the system there is that you tax everyone heavily,

0:54:290:54:32

but then you spend that for everyone quite heavily.

0:54:320:54:35

88% of Danish people say they are happy to pay

0:54:350:54:40

what tax they are paying. This is quite amazing.

0:54:400:54:43

We, in Britain, have a low-tax culture, instilled in us

0:54:450:54:48

through 30 years of driving taxes down for the super-rich.

0:54:480:54:53

But it hasn't worked.

0:54:530:54:55

The economy would be 20% bigger

0:54:550:54:57

had the gap between the rich and poor not widened since the 1980s.

0:54:570:55:02

Now even the rich believe things must change.

0:55:020:55:07

Nobody wants to live in a society where your society is gated,

0:55:070:55:10

where you have to live behind barbed wire,

0:55:100:55:13

where you can't walk down the street.

0:55:130:55:15

You know, people who are very wealthy,

0:55:150:55:17

billionaires and zillionaires of every stripe, do need to wake up.

0:55:170:55:20

The price that you have to pay in higher taxes

0:55:200:55:25

for a safe, civil society

0:55:250:55:28

where everybody is happy and doing better

0:55:280:55:31

is very, very low - it's just not that big a deal.

0:55:310:55:35

But it would be a massive struggle to convince any government

0:55:350:55:39

to seriously hammer the super-rich.

0:55:390:55:42

The drive is to attract more of them here than ever before -

0:55:420:55:46

and there's a surprising reason why.

0:55:460:55:48

Economist Matt Whittaker has been crunching the numbers

0:55:490:55:52

on the super-rich and come to a startling conclusion.

0:55:520:55:55

It turns out the super-rich do have a vital role

0:55:550:55:59

to play in our economy,

0:55:590:56:00

just not the one we were told they were playing.

0:56:000:56:02

Take the activities of the super-rich away,

0:56:020:56:05

particularly in finance and in business services

0:56:050:56:07

and our GDP figures simply would not have looked as good.

0:56:070:56:10

So the super-rich have played a role in our economy

0:56:100:56:13

in terms of window dressing the economic figures.

0:56:130:56:17

You can certainly see the attraction to Chancellors of the Exchequer

0:56:170:56:20

of attracting the super-rich to the UK.

0:56:200:56:23

But clearly, for the majority of people in the UK,

0:56:230:56:25

actually what the super-rich have done is simply mask over the fact

0:56:250:56:30

that economic growth has not been as strong

0:56:300:56:32

as it would otherwise have been in recent years,

0:56:320:56:34

and living standards haven't improved for a significant number of people,

0:56:340:56:38

even in the pre-crisis years,

0:56:380:56:40

and I think that a model which is based on a top 1%

0:56:400:56:43

generating and consuming all of the growth simply isn't sustainable.

0:56:430:56:48

So if I gave you an option of,

0:56:480:56:50

"Were the super-rich good for Britain - yes or no?"

0:56:500:56:54

which one of those two words would you go for?

0:56:540:56:56

I'd say no.

0:56:560:56:58

When we first began to woo the super-rich to Britain,

0:56:590:57:02

there was no pretence that we'd benefit.

0:57:020:57:04

But then, with the collapse of manufacturing in the '80s,

0:57:060:57:09

we were told that these people would be the saviour

0:57:090:57:12

of the British economy.

0:57:120:57:13

But it was a lie. We've ended up poorer.

0:57:130:57:17

It was not even us, nor even really the super-rich

0:57:170:57:19

who ultimately benefited most, but government,

0:57:190:57:23

allowing successive Chancellors to hail economic growth

0:57:230:57:26

when the reality for us was a decade of stagnation.

0:57:260:57:30

The super-rich were a massive PR exercise - and we bought it.

0:57:300:57:35

But not any more.

0:57:350:57:37

Next, we travel into the world of the global super-rich.

0:57:390:57:43

How the billions that fuelled their fortunes were made from our debt...

0:57:430:57:48

Finance just means other people's debts.

0:57:480:57:50

So, you yourself didn't bring about the crash,

0:57:500:57:52

but you created the mechanics for it to happen.

0:57:520:57:54

That's true.

0:57:540:57:56

..and as luxury booms, we reveal how job insecurity has been

0:57:560:58:00

turned into a super-rich business opportunity...

0:58:000:58:03

Employment, as we know it traditionally,

0:58:030:58:05

has made people quite lazy, in many ways.

0:58:050:58:08

..but increasing inequality is going to change our world.

0:58:080:58:12

And the super-rich are worried.

0:58:120:58:15

So, are the pitchforks coming?

0:58:150:58:17

If things keep going the way they are, for sure they're going to come.

0:58:170:58:20

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