Belle Mellor on the wealth gap
‘George Osborne should tax under-occupied rich homes to the skies, as Iain Duncan Smith is taxing under-occupied poor ones.' Illustration: Belle Mellor

Should I be shocked that five British families "own more than 12.6 million Britons put together", as suggested by a "deeply worried" Oxfam this week? They include the Duke of Westminster, Lord Cadogan, the Reubens and the Hindujas. Likewise "85 global billionaires" have more money than half the global population. Shame on them all. Noble Oxfam seems to have become an all-purpose leftwing wailing organisation. There is no harm in being reminded that some people are rich and some poor, which is why just 1% of Britons pay a third of all income tax. This is hardly news we can use.

Last year's wealth shock stat was that Germans had barely half the net worth per head of the Greeks. The reaction was that this had to be either untrue or fishy. The reason turned out to be that Germans, unlike Greeks and Britons, do not waste their savings on property but put them to productive use. They are thus richer, but "own" less. So?

Economists have long played about with these variants on the "law of the vital few", otherwise drafted as the Pareto principle and the Gini coefficient. They show that the rich tend to be few and the poor many. Democracies tax the former to help the latter, but it is always a game of cat and mouse, cursed by the fact that most rich people are rich because they were born that way. Even the most socialised democracies give sacred status to family legacy. It is summed up in the lighthearted workers' cry: "What's yours is public property; what's mine's my bloody own."

What I find objectionable is not disparities in wealth but blatant unfairnesses, the blatant crudity of the extremes. Public rage at bonuses for failure this past month has been staged against a backdrop of "Benefits Street" television. Soaring house prices have been contrasted with "bedroom taxes". Polls have divided between stinging the undeserving rich and stinging the undeserving poor. Wealth porn has clashed with poverty porn.

Most people seem not to mind when talented artists, footballers and entrepreneurs walk off to the bank with cash won in the open market. But they are infuriated when the bankers walk off with the bank. The assumption that a licence is awarded by the "market for talent", in effect to steal from a bank's depositors and shareholders (including the state), is simply outrageous.

City traders howling for a Porsche and a Cotswolds cottage on pain of taking their dubious skills to Monaco must be a nadir in modern capitalism. They cheekily say they need such incentives so they can give back to taxpayers money spent since 2009 rescuing them from their own failures. I would have taken them at their word. I would have built a trading floor in Wormwood Scrubs prison and kept them there until the money indeed came back.

It is not the billionaire homes, the non-dom status and the tax scams that are shocking in themselves but the fact that regulators – that is ministers – have allowed them. Labour's failure to curb bank oligopolies and the Tories' failure to call the bonus bluffs at Lloyds and RBS are what exaggerated the gap between wealth and poverty. Bankers are Putins, bullying and bluffing their way across Whitehall.

The other side of the gap is no less obscene. I sympathised with Iain Duncan Smith's bid to bring order to a chaotic benefits system. It was fair to all to seek a single universal credit, a cap on benefits income and a matching of housing capacity to means and needs. Labour's dreary cry of "what about the losers" or "too little too late" – after a decade of doing nothing – was kneejerk opportunism.

For all that, I was shocked by two TV series, Channel 4's Benefits Street and the BBC's Famous, Rich and Hungry. Neither had anything to do with wealth distribution. They showed how a centralised welfare bureaucracy could turn good intentions into personal tragedies. The wreckage that drugs, debt and imprisonment could inflict on the community of a street was devastating. In the "regulated anarchy" of Benefits Street it was anarchy that was kind and regulation that was evil.

Likewise in Famous, Rich and Hungry, what was instructive was not the impact of hunger on the rich and famous. It was the ease with which minor debt could slide into a tangle of hunger and despair. This was largely caused by the court system. I had never imagined that the justice minister, Chris Grayling, would in effect subcontract a fine repayment to a racketeer. This turns a £500 fine almost instantly into £1,000, and so on ad infinitum. The system could hardly be better designed to get the poor into prison and their children into care homes.

There are many causes of Lombard Street being rich and Benefits Street poor. But the widening of the gap must in part be caused by the actions or inactions of the state. It is government contracts and lax regulation that drives London's banking community to immense wealth – to a level unknown in Germany. Likewise it is government policy on drugs and incarceration and lax loan-shark control that drives the poor into desperation.

George Osborne should tax under-occupied rich homes to the skies, as Duncan Smith is taxing under-occupied poor ones. All taxes should be clear and hard to avoid, as benefits should be clear and hard to abuse. There will always be rich and poor, but specific actions of the state should not be what makes the rich obscenely rich or the poor obscenely poor.