issue 220 - June 1991
The legacy lottery
Great wealth is more often than not an accident of birth –
not the product of rags-to-riches effort. Melissa Benn
shows how a system of lax inheritance taxes has allowed
the accumulation of Britain’s greatest fortune.
The 1980s, according to the Thatcherite Right, was about the triumph of new money over old, meritocrats over aristocrats. Landed wealth and privilege were swept away in favour of a society open to talent. A grocer’s daughter or the son of a trapeze artist were held to have as much chance of being rich and powerful as a duke’s son.
But, as so often, the figures tell a different story. The widening gap between rich and poor was accompanied by the consolidation of ‘old money’ based on the inheritance of capital. A 1990 study in the Sunday Times of the 200 richest people in the UK showed that the majority (104) were from some establishment background. As many as 54 were aristocrats and 35 Old Etonians. Indeed several of the self-made millionaires of the 1980s fell victim to a volatile stock market, causing the New Right Sunday Times to bemoan the fact that ‘new wealth is vulnerable while old wealth is remarkably stable’.
Most stable of them all, next to royalty, is Gerald Grosvenor, sixth Duke of Westminster. At the last count his total worth was set at a staggering £4.2 billion ($7.6 billion). The Grosvenor wealth, like that of most of the enduringly super rich, is based primarily on land – vast tracts of Chester, Lancashire, Sunderland, Canada, New South Wales and Hawaii. At the heart of this empire are 120 hectares in London’s Mayfair and Belgravia, including the ‘flagship properties’ of the US Embassy and the Connaught Hotel. This strategic Grosvenor ownership of prime-site London is so entrenched that one year for Christmas the Duke was reported to have received from his brother-in-law Lord Lichfield a special Monopoly board on which all of the properties were actually his.
HAROLD BRAITHWAITE. The Sydney Tax Lawyer. Now Braithwaite was the kind of guy I’m used to. A welcome break after all these high rollers. Harold wore shiny suits and had beery breath. A guy who would steal the hole out of a donut. But he’d built up a big rep as someone who knew where to hide money. Whether it was Panama City or the Cayman islands he was the guy who knew a guy. Rumour had it that the money wasn’t all that clean, starting off as it did in places like Marseille, Medellin and Macao. But through the wizardry of electronics Harold understood how to make a dollar look like it had just come out of your kid’s piggy bank. And a dime of it always stuck to his fingers.
To Harold the tax collector was merely an obstacle to go around (or to buy if necessary). He wasn’t too impressed with Rakowski’s moralistic tirades against the parasitic legal profession whose healthy cut of tax-evasion lucre contributed to everything bad – from starving babies to current-account deficits. Harold wore his success badly. His ethics were those of the gutter. And he was just insecure enough to let someone like Rakowski get under his skin.
This Monopoly board proves clearly that in contemporary Britain where you come from is still far more important than what you do. The argument that the power of inherited wealth and landed families has declined is at best a partial truth. Dynasties like the Grosvenors may be less common than they were a hundred years ago but the power of inheritance is intact. Those born with, or bequeathed, wealth have a massive advantage over those who are not. At the lower end of the scale, this allows extra comforts. At the top end it ensures access, generation after generation, to a world filled with the most extraordinary privilege.
The Grosvenor family motto may be ‘virtue not ancestry’ but common sense reverses the judgement. It takes perhaps some residual talent to keep a family fortune intact but the current Duke owes his status to a long family line, traceable to Hugh Lupus Le Gros Veneur, Chief Huntsman to William the Conqueror. The bulk of the fortune, however, dates from 1677 when one of the Grosvenors married 12-year-old Mary Davies. Her dowry was 120 hectares of marshland – now prime London real estate.
In the best British traditions money and land are a magnet for political influence, royal connections, and titles. When the Grosvenor family was ennobled one social commentator of the time noted acidly, ‘to elevate a man to a dukedom because he happens to be the biggest ground landlord in London is an action which I, for one, cannot admire… There is little to be said for or against the Grosvenors, who have always been a race of respectable mediocrities, occasionally exhibiting some amount of public spirit and not altogether devoid of popular sympathies’.
Popular sympathy goes some way to explaining the endurance of inherited wealth in the UK. While opinion polls have shown again and again that people believe excessive wealth unfair and redistribution desirable, anger and envy are tempered with a media-inspired deference to the wealthy. As with the monarchy, we are coaxed into a fascination with those who are somehow different and superior to ourselves. We learn the intimate details of their lives, trials, houses, bereavements. This cartoon-like knowledge has proved an enduring block to public consent for change.
Change through redistribution comes either quickly through revolution, or more slowly via the tax system. Some form of tax on property has existed since the Middle Ages, but effective taxation of big landed estates occurred only in the post-World War Two period when a Labour government was bolstered by the belief that the rich should pay for public provision. By 1950, all estates worth over two million pounds were taxed at 80 per cent.
If this had continued, the break-up of massive concentrations of wealth would have been guaranteed. Yet the Grosvenors, the Fitzalan Howards and ‘newer’ business families like the Vesteys managed to survive. The key was tax avoidance. In 1953, the Grosvenor family were forced to ‘sell’ Pimlico to pay a £17-million tax bill on the second Duke’s estate. Measures had to be devised to escape such a draconian tax net. One such means was the ‘discretionary trust’ allowing close family members to avoid formal ownership while maintaining control. The tax on inheritance following a death in the family could be by-passed by early handovers of money and property. Sophisticated tax manoeuvres allowed both the third and fourth Dukes of Westminster to hand over their sizeable estates to the next generation largely intact.
Press coverage of the wealthy – of which there is a good deal – rarely discusses the ethics of owning so much. The Duke’s position is treated as a neutral matter of fact. Sycophantic profiles linger lovingly on his assets – two massive country homes, a private helicopter, 40 square kilometres of land in Wagga Wagga, New South Wales (for family holidays), the seat in the House of Lords – as if these were simply his due.
Press reports fall in line with the Duke’s updated image as the very model of industry and entrepreneurial skill. He knows that he must get away from the hunting, shooting, green-welly-boots image of old wealth and suggest he is earning his keep. Much is made of his charitable work – he and his wife are patrons to literally hundreds of well-meaning organizations – and his philanthropy. In a recent much-publicized case, he refused to hand over 532 flats to Westminster Council, who as part of the Thatcherite drive towards home ownership, wanted to sell them. The Duke argued successfully in the courts that a clause in the lease should be respected which urged that the flats be used ‘as dwellings for the working classes and no other purpose’. Such touching feudal hangovers are reflected in his private life: the Duke recently paid the poll-tax bills of all 87 staff working at his two homes.
However, even philanthropy must bend under the might of financial interest. In the mid-1980s, the Department of Health and Social Security (DHSS) was required to sell part of St George’s Hospital, in London’s Hyde Park Corner, back to the Grosvenor estate, its original owners. A clause in the lease stipulated that the hospital must be sold back for its original price of £22,700 – a gross under-valuation of its real value. As the Financial Times wrote at the time, ‘the prospect of an immensely wealthy property owner benefitting at the expense of an impoverished health service has caused a major furore’. But the DHSS had no choice. The site was redeveloped as a centre for promoting Britain as an international business location.
People like the Duke of Westminster, who earn in an hour what others earn in a decade, seem an unchanging feature of Britain’s class landscape. In theory, the advantage offered to people born with massive riches contradicts the ideology of ‘equality of opportunity’, a central tenet of Thatcherism. In practice, the New Right cares not one whit. Their hatred has always been of redistribution, socialism and high taxation. Conservative tax policies in the last decade have done nothing to break down inequalities in income or capital. While the basic rate of tax is 25 per cent, high income earners pay only 40 per cent, leaving their wealth intact. There has been abolition of both a supercharge on unearned income and lifetime capital transfers.
Equality has always been a touchstone of the Left, who have long argued against what RH Tawney called the ‘social poison of inheritance’. Some socialists still argue for a radical programme of high taxation – similar to the post-war period – so as to disperse family wealth within a couple of generations. But with socialism very much on the ideological defensive many of its radical principles are either muted or entirely abandoned.
Caution does not square with change. Redistribution of wealth is, by definition, radical and divisive. You cannot take money away from the rich without expecting loud screams of opposition. To secure public consent it is the rich who should be politically isolated and identified as greedy – not those who seek more equality. It is also crucial to distinguish between modest and immodest hand-downs of capital and property to future generations. Redistribution does not mean it is illegitimate to wish to secure the future for family and loved ones. It just means that one man cannot hand down his private helicopter, his vast landholdings, his 87 servants and his seat in the House of Lords – and still claim he lives in a true democracy.
Melissa Benn writes on UK social issues.
JENNIFER HUNTLEY-JONES. One of the beautiful people. An heiress with estates in Cornwall and Dorset who wintered in the Grenadines and summered in Cap Ferrat. Old money worn with ease and grace. To give meaning to life Huntley Jones was honorary chair of the Heritage Council, which stood for preserving the values that made civilized life worth living – in other words it was against any kind of inheritance tax. She gave the Conference her standard speech on the subject with a lot in it about the special obligations that went along with the stewardship of society by ‘the better sort of people’. Rakowski was heard to laugh quite loudly and inappropriately at several points. He had also been recommending a new legacy tax, saying the way people could pass wealth from generation to generation made a mockery of all the talk about a society of opportunity.
One of Huntley Jones’ retainers let it slip that all was not well in the stately mansion: the fortune was dwindling due to conspicuous consumption, ill-considered investments and a husband who stuck £15,000 worth of cocaine a year up his nose. Had Huntley-Jones’ aristocratic reserve cracked to reveal the mailed fist of class privilege?