KEY POINTS:
Saudi billionaires scooping up Mayfair mansions, Goldman Sachs partners rejoicing in seven-figure bonuses, record prices for vintage claret - evidence is everywhere that London has become a favourite haunt for the super-rich, from Russian oligarchs to American deal-makers.
But do the members of this privileged class form a
valuable part of British society, bringing jobs and wealth to the capital and lavishing philanthropic contributions on their favourite charities - or should the Treasury be doing more to rein in their excesses?
As part of their bid for power in 1997, New Labour made a conscious decision to abandon old-fashioned class warfare, and the "politics of envy" which saw Denis Healey impose a top tax rate of 83 per cent in 1978, shortly before Labour was booted out of office.
Tony Blair and Gordon Brown deliberately courted moneyed movers and shakers, and set out to make the UK an attractive place to do business.
Safeguarding the competitiveness of the Square Mile, as the old City of London, London's financial district is known, which rivals Wall Street as the world's financial centre, has become a key aim of Government policy.
There was a logic behind this pact with the devil, as some in the Labour Party saw it. The rich set up businesses, which create jobs; splash out their wealth in luxury shops and classy restaurants - helping to create more jobs - and they contribute to society through the tax system, and through philanthropy.
Moreover, the argument goes, if the UK is to have a thriving financial services sector - which employs more than a million people - the talent of its biggest brains has to be generously rewarded.
As Richard Bernstein, chief executive of high-tech investment fund Eurovestech puts it: "If I can find somebody who is going to make me £10 million, I have no problem in paying them £2 million. The City is very much feast and famine: this is life; this is how it works."
Bernstein, an analyst at investment bank Schroders before setting up his own company, regularly hands out shares in Eurovestech to charities. "It's a connection with the real world," he says. "It's cutting and giving a small slice of the cake to good causes."
He says his colleagues in the City are far more generous with their cash than the champagne-swigging stereotype suggests.
If a recent survey on charitable giving is anything to go by, however, London is hardly a hotbed of philanthropy: apparently, the most generous parts of the country, judging by how many people give to charity, were down-at-heel Motherwell and Sunderland - not posh places like Kensington or Chelsea in London.
Ironically, the current focus on remuneration in financial services - in particular the less tightly regulated areas of hedge funds and private equity - is partly a result of the Government's efforts to clean up pay for corporate fat-cats.
Since shareholders were given the right to vote on the pay of directors at public companies, some of the worst boardroom excesses have been wiped out, switching attention towards executives in private companies.
David Pitt-Watson, co-author of The New Capitalists and long-time corporate governance activist, says there are legitimate doubts about whether the market for talent in the City works properly - because the end-customers of the investment firms, many of whom are ordinary pension fund-holders - have no idea how the people managing their money are paid.
Pitt-Watson is worried that the culture in the Square Mile is too money-orientated. "If you're managing an institution or a system, and you say that money and reward isn't important, you're stupid; but if you say that it's the only thing that motivates people, you're about to make a very, very costly mistake. The point at which everybody working for an institution says, 'I'm going to take as much out of this as possible, regardless of the cost to the institution as a whole', you're lost."
Even if the super-rich deserve every penny of their bonuses, and spread their wealth around by helping charities, Richard Murphy of the Tax Justice Network says the "rich people create jobs" argument doesn't stack up.
Attracting wealthy individuals to pounce on swanky flats is not the same thing as encouraging corporations to set themselves up in the UK.
Instead, he says the super-rich are drawn to live in the UK - regardless of where their business is located - by its unusual "non-domicile" tax rules, which allow foreign-born wealthy individuals to live here, but avoid paying income tax. "They're here in no small part because they're not paying tax".
Vince Cable, the Liberal Democrats' Treasury spokesman, agrees.
"These people are wealthy beyond imagining; they have vast property holdings, and make very little contribution to society."
Barclays chief executive John Varley defended the bank's record profits last week by pointing out that it had paid almost £2 billion ($5.6 billion) in tax; but overseas private equity firms and wealthy non-domiciled individuals pay little tax. And whatever the benefits of letting the wealth-creators off the leash, there is growing concern the resulting inequality has damaging consequences for society.
"The negative side, which I think people are becoming more conscious of, is that you create an enclave economy,' says Cable.
These worries about the social impact of inequality have been underlined by growing evidence, seized on by the Conservatives, that social mobility has declined. Research by economists at the London School of Economics showed that children born in the 1970s were less likely to escape their parents' class than those born in the 1950s. Rich rewards for success are harder to justify if opportunities are restricted to those who come from the right social background.
Even if the ostentatious consumption of the mega-rich is causing growing disquiet, however, it doesn't mean the electorate would support squeezing the big spenders until the pips squeak. Evidence from the British Social Attitudes Survey shows almost three-quarters of people think the gap between rich and poor is too wide; but when asked whether the Government should redistribute from the rich to the poor, fewer than a third say yes.
Perhaps the other two-thirds are hoping, against all the odds, that one day they will hit the jackpot, and join the ranks of the unfettered super-rich themselves.
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