The rise of stealthy wealth

The new rich hate branding and buy green, and prefer private pleasures to public swagger, finds Luci

I've been brooding about Elton John, bless his Versace suits, and what an extraordinarily old-fashioned figure he cuts. He is a national treasure who adds enormously to the gaiety of the nation, but he does go about buying houses and objects, clothes and gewgaws as if he were Citizen Kane or some weird shopaholic left over from the Eighties.

His loud, conspicuous consumption is a million miles removed from the new luxury that is the trademark of today's multimillionaires. A handful of recent images must have told even the most obtuse observer of the lifestyle scene that notions of luxury ain't what they used to be. There was Bill Gates on television - no longer quite the richest man in the world, but still so rich that few of us, if challenged, could get the noughts quite right - and he was wearing an eye-popping collection of ramshackle clothing. Then there were the photographs of the two would-be US presidents, both doing their best to look purposeful and worthy holders of America's highest office - and what did their style gurus wheel them out in? Identical chinos and blue cotton shirts, that's what. And then there was Rupert Murdoch, no Johnny-come-lately dotcom millionaire, after all, trolled out in a fine black roll-neck sweater instead of a Huntsman suit and a Jermyn Street tie.

In their visual imagery, all four photographs sent out a clear and unambiguous message: not only have the tastes and habits of the rich changed, but they are changing so fast that only the most agile have a hope of keeping up. New money isn't spending its money the way old money did, and even old money is changing its ways in the face of the demographic upheaval that new money is causing.

To the vast luxury goods industry, which earns its fat living catering to the needs, tastes and whims of the rich, it sends out some challenging signals: it is clear notice that all the rules have changed, that it's time to forget making the things you've been accustomed to making since time began. You'd better start anticipating - and fast - what the new rich might want, before somebody else gets there first. Getting it right adds up to unimaginable riches; getting it wrong means a takeover, a putsch, at worst, oblivion.

The problem with trying to define new luxury, though, is that the rules aren't yet all in place. New money doesn't give a toss for many of the old totems of wealth. New money prefers chinos and polo shirts to Savile Row suits, minimalist pads to chandelier-hung mansions, hanging out with pals to white-tie charity do's. New money is fast redefining the parameters of modern luxury: more youthful, more fun and, above all, more subtle. It's not about show and it's not about swank. Stealth wealth, is what it's called. Stealth wealth does not mean a diminution of luxury or quality, merely a recognition of where it truly resides. It isn't about cutting back: it means spending when it really matters, but not bothering when it doesn't. It's about private pleasure as opposed to public swank. It's about wearing the fur on the inside of your coat, and never opting for the brash flash-and-dash of a Versace number. The new rich don't want to show off so much as enjoy their carefully amassed fortunes.

Stealth wealth is not about spending less (the irony is that it can very often cost a great deal more), but the power and the swagger are subtler. A minimalist pad by John Pawson may look as austere as a monk's cell, but believe me, it doesn't come cheap. As Donald Trump pointed out in a recent interview, "In the Eighties, you drove around in a limousine and now you drive around in a vehicle that is supposed to look like a Jeep - you know, non-conspicuous - but which actually costs four times more than the limousine."

So this new luxury is a much more complicated business than the old. Old luxury had very clear agendas. First, it was supposed to provide a cocoon of comfort for those lucky enough to be able to afford it; but its more serious function was to separate the seriously rich not only from the poor, but also the merely well-heeled. It was also perfectly permissible for old luxury to be conspicuous. That was part of the point. The problem today, as the economist James Sproule put it, "is not that you don't have enough; it's that other people have too much". In other words, now that every clubber can wear a T-shirt by Dolce e Gabbana, when the poolside Tuscan idyll, the table at The Ivy, the Prada shoes and long-haul holidays are available to so many, what are the truly rich to do?

If you want to know, watch the Goldman Sachs partners at play, an absorbing study in how times have changed. A Casio watch (£60 for a standard G-Shock), we are reliably informed, is the watch of choice for the firm's chief executive - a man whose annual salary is more than most people earn in a lifetime. Their wives take pride in spending in an anonymous "below the parapet" kind of way; they have large and beautifully furnished houses - but the look is never "showy". They dress impeccably, but never swankily. You will note that snobbery has not been removed from the matter of luxury - more that new, subtler, more complicated snobbisms have arisen.

The difference is that whilst any old vulgar fool can spend millions on expensive objects, spending money the new way takes more than dosh: it takes insider knowledge, know-how, sophistication. The new spender likes to feel he's right in there on the inside track, discovering things long before hoi polloi. One type of olive oil may seem much like another, but stealth wealth means knowing whether cold-pressed extra virgin from the groves of Liguria is better than virgin oil from southern Greece. To be one of the new luxury purists, you not only have to buy the very best, but know what the very best is.

Insider information is where the new snobbery really comes into its own. It's being the first to get to the new hide-away luxury lodge; it's knowing a small profumeria in Florence where you can get scents made to order; it's discovering a craftsman who makes handbags in finest calf that are infinitely more desirable than a seen-everywhere, high-profile label. It's knowing why an Alessi kettle, an iBook or a table by Christian Liaigre are better than their rivals. It's finding the small shop that imports the finest teas, knowing why Blue Mountain coffee from Jamaica is judged the best in the world. New luxury, as you can see, isn't for the lazy.

It is, however, for the pure of mind - for those who are anti-branding and pro-green; who do not want the products around them to carry an instantly recognisable label that speaks of some big corporation in the background (whether that be Levi's, Versace or Coca-Cola); and who do not want to feel guilt pangs every time they drive a car that guzzles gas or taste a chicken that's been battery-farmed. If you spend your money on the right things, you're telling the world that you're not just rich, you're also enlightened.

These are all matters I've been considering ever since, a few months ago, I joined a group of men who have formed a company called Quintessentially. Its sole aim is to deliver luxury, wherever it is to be found, to its members. So far as we knew, nobody had put together a company solely committed to this sort of new-millennium luxury. But how, we had to ask each other, did we define luxury today? What did we want to deliver? What would appeal to the kind of sophisticated, educated, cultured members of Quintessentially who we had in mind? Interestingly, although we are of very varied ages and come from very different backgrounds, we shared an extraordinarily cohesive point of view.

Mostly, our ideas of what modern luxury is about centred on simple things done quite beautifully - olive oil, but it had to be the best estate-bottled, cold-pressed virgin olive oil; the finest soap, triple-milled and perfumed only with essential oils or herbs; first-class mature cheddar; and the best-quality simple white linen sheets, finely hem-stitched. Things that even the poorest might once have taken for granted - space, quiet, tranquillity, pure water - are luxuries these days. Which explains why, as a symbol of what we stood for, we chose a bottle of the purest water we could find (it comes, you may be surprised to learn, from Cape Grim in Tasmania, where the rain falls from air that has blown in from Antarctica, making it the least polluted air space in the world).

We found that we minded about quality writing-paper and tissue-lined envelopes, which is why we have some very fine stationers on board. And proper candles and divine scents and cashmere sweaters and fresh flowers and good wine. For us, though, the ultimate new luxury had to be time and service. Shortage of time is the modern disease, and if only we could crack our members' problems, sort out the things that eat into their leisure time, then, we felt, we really would have a company on our hands. What the pressed executive really needs is not yet another object or branded polo shirt - he is much more likely to need someone to arrange his dry-cleaning, buy a present for his granny, wrap up all his Christmas presents, and make sure the family flights to Nice are booked. Forget chandeliers and furs: what we wanted was a good manicure or massage at home, tickets for the concert we'd forgotten to book for. New-millennium luxury, as you can see, is a complicated package to deliver.

I'm not sure Elton John will become a client. But who knows, he may learn to mend his ways and start wearing a Casio watch and chinos. Then again, he might not.

This article first appeared in the 27 November 2000 issue of the New Statesman, The rise of stealthy wealth

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Q&A: What are tax credits and how do they work?

All you need to know about the government's plan to cut tax credits.

What are tax credits?

Tax credits are payments made regularly by the state into bank accounts to support families with children, or those who are in low-paid jobs. There are two types of tax credit: the working tax credit and the child tax credit.

What are they for?

To redistribute income to those less able to get by, or to provide for their children, on what they earn.

Are they similar to tax relief?

No. They don’t have much to do with tax. They’re more of a welfare thing. You don’t need to be a taxpayer to receive tax credits. It’s just that, unlike other benefits, they are based on the tax year and paid via the tax office.

Who is eligible?

Anyone aged over 16 (for child tax credits) and over 25 (for working tax credits) who normally lives in the UK can apply for them, depending on their income, the hours they work, whether they have a disability, and whether they pay for childcare.

What are their circumstances?

The more you earn, the less you are likely to receive. Single claimants must work at least 16 hours a week. Let’s take a full-time worker: if you work at least 30 hours a week, you are generally eligible for working tax credits if you earn less than £13,253 a year (if you’re single and don’t have children), or less than £18,023 (jointly as part of a couple without children but working at least 30 hours a week).

And for families?

A family with children and an income below about £32,200 can claim child tax credit. It used to be that the more children you have, the more you are eligible to receive – but George Osborne in his most recent Budget has limited child tax credit to two children.

How much money do you receive?

Again, this depends on your circumstances. The basic payment for a single claimant, or a joint claim by a couple, of working tax credits is £1,940 for the tax year. You can then receive extra, depending on your circumstances. For example, single parents can receive up to an additional £2,010, on top of the basic £1,940 payment; people who work more than 30 hours a week can receive up to an extra £810; and disabled workers up to £2,970. The average award of tax credit is £6,340 per year. Child tax credit claimants get £545 per year as a flat payment, plus £2,780 per child.

How many people claim tax credits?

About 4.5m people – the vast majority of these people (around 4m) have children.

How much does it cost the taxpayer?

The estimation is that they will cost the government £30bn in April 2015/16. That’s around 14 per cent of the £220bn welfare budget, which the Tories have pledged to cut by £12bn.

Who introduced this system?

New Labour. Gordon Brown, when he was Chancellor, developed tax credits in his first term. The system as we know it was established in April 2003.

Why did they do this?

To lift working people out of poverty, and to remove the disincentives to work believed to have been inculcated by welfare. The tax credit system made it more attractive for people depending on benefits to work, and gave those in low-paid jobs a helping hand.

Did it work?

Yes. Tax credits’ biggest achievement was lifting a record number of children out of poverty since the war. The proportion of children living below the poverty line fell from 35 per cent in 1998/9 to 19 per cent in 2012/13.

So what’s the problem?

Well, it’s a bit of a weird system in that it lets companies pay wages that are too low to live on without the state supplementing them. Many also criticise tax credits for allowing the minimum wage – also brought in by New Labour – to stagnate (ie. not keep up with the rate of inflation). David Cameron has called the system of taxing low earners and then handing them some money back via tax credits a “ridiculous merry-go-round”.

Then it’s a good thing to scrap them?

It would be fine if all those low earners and families struggling to get by would be given support in place of tax credits – a living wage, for example.

And that’s why the Tories are introducing a living wage...

That’s what they call it. But it’s not. The Chancellor announced in his most recent Budget a new minimum wage of £7.20 an hour for over-25s, rising to £9 by 2020. He called this the “national living wage” – it’s not, because the current living wage (which is calculated by the Living Wage Foundation, and currently non-compulsory) is already £9.15 in London and £7.85 in the rest of the country.

Will people be better off?

No. Quite the reverse. The IFS has said this slightly higher national minimum wage will not compensate working families who will be subjected to tax credit cuts; it is arithmetically impossible. The IFS director, Paul Johnson, commented: “Unequivocally, tax credit recipients in work will be made worse off by the measures in the Budget on average.” It has been calculated that 3.2m low-paid workers will have their pay packets cut by an average of £1,350 a year.

Could the government change its policy to avoid this?

The Prime Minister and his frontbenchers have been pretty stubborn about pushing on with the plan. In spite of criticism from all angles – the IFS, campaigners, Labour, The Sun – Cameron has ruled out a review of the policy in the Autumn Statement, which is on 25 November. But there is an alternative. The chair of parliament’s Work & Pensions Select Committee and Labour MP Frank Field has proposed what he calls a “cost neutral” tweak to the tax credit cuts.

How would this alternative work?

Currently, if your income is less than £6,420, you will receive the maximum amount of tax credits. That threshold is called the gross income threshold. Field wants to introduce a second gross income threshold of £13,100 (what you earn if you work 35 hours a week on minimum wage). Those earning a salary between those two thresholds would have their tax credits reduced at a slower rate on whatever they earn above £6,420 up to £13,100. The percentage of what you earn above the basic threshold that is deducted from your tax credits is called the taper rate, and it is currently at 41 per cent. In contrast to this plan, the Tories want to halve the income threshold to £3,850 a year and increase the taper rate to 48 per cent once you hit that threshold, which basically means you lose more tax credits, faster, the more you earn.

When will the tax credit cuts come in?

They will be imposed from April next year, barring a u-turn.

Anoosh Chakelian is deputy web editor at the New Statesman.