The British economy seems at last to be showing signs of recovery. The numbers in employment have increased slowly, although unemployment remains over 7 percent. The governor of the Bank of England has made it clear that there is unlikely to be a rise in the current ultra-low interest rates in the near future.

Inflation, however, remains above the Bank’s target although the rate has fallen over the past year. House prices especially in London and the southeast are rising and there are already hints of another property bubble. It remains difficult for young people to get on the property ladder despite low interest rates. Many people in their 20s must continue to live with their parents unless the latter can help put up the deposit needed to buy a house or an apartment.

There have been significant increases in the cost of food and energy. Clothing prices have been relatively stable. The cost of electrical goods has shown some reduction. Childcare costs have continued to rise

Overall the cost of living has risen above the rate of inflation while salaries and wages have not risen even in line with inflation. Many people are not working full time and are finding it difficult to make ends meet. Those on low incomes have benefited to a limited extent from the increase in the level over which income tax has to be paid at the rate of 20 percent.

The wealthy have seen their taxes fall because the top rate of tax has been reduced from 50 to 45 percent. Those on middle incomes have been squeezed the most as the level over which higher rate income tax at 40 percent is levied has been reduced while child benefit those paying taxes at the higher rate is being cut.

The opposition Labour Party has been particularly critical of the failure of the coalition government to take action to halt the apparently inexorable rise in the cost of living. Britain has a statutory minimum wage, but in the view of many economists and social scientists, the minimum wage is insufficient to provide a decent standard of living. The opposition is accordingly calling on companies to pay a “living wage.”

Because of the extra costs of living in London, the “living wage” in London needs to be higher than in other parts of the country. But companies argue that to remain competitive in international markets, they cannot afford to pay all their employees a living wage’

The opposition has also focused their attacks on energy prices. They assert that these are being manipulated to ensure a high rate of profit to the six large energy companies who dominate the energy market in Britain. They have promised that if they win the next election they will freeze energy prices for a period of twenty months while they sort out the energy market.

Energy companies are outraged at accusations of manipulating the market and gauging consumers. They assert they have had to put up prices because wholesale market costs for gas and electricity have risen while they have also had to pay for the government’s green policies in particular free installation of insulation in homes.

The coalition government has been rattled by the cost-of-living issue and has been looking at various ways to get reductions in energy prices including watering down or postponing some green levies, but this might involve reneging on promises to cut greenhouse gases. They are also anxious to ensure that capital investment in energy keeps pace with rising demand as otherwise there could well be blackouts in the not-too-distant future.

The gap between the very rich and the poor continues to grow. There is widespread feeling that some people at the top are overpaid. Do the chief executive officers who receive millions of pounds in bonuses as well as huge salaries really deserve such mega-sums?

Surely a company’s success depends to a large extent on teamwork? Are their responsibilities so much greater than those of the government ministers and senior civil servants managing large departments and vast budgets?

The Swiss in a referendum recently rejected a proposal that no one in an organization should be paid more than 12 times that of the lowest-paid worker. They realized that such a rule would lead to an exodus of multinationals. But there is now increasing pressure to keep under control the competitive rise in the emoluments of top bankers and industrialists. The powers of shareholders to disapprove rates of pay are being strengthened, but the main shareholders in most companies are institutions such as insurance companies and pension funds, where their top executives get very well paid.

So the advisory boards on salaries and perks seem like pussycats for whom the custom is “if you scratch my back I’ll scratch yours.”

Ultra high salaries are also increasingly being paid to lawyers, accountants and medical specialists. It is hard for most ordinary people to believe that these people are worth such huge hourly rates as some now command.

The gap between the top and the bottom in Britain seems to be widening. We may not yet have as wide a gap as exists in the United States, but we are moving toward this. One difference is that millionaires, or should we say billionaires, in the U.S. seem to be more philanthropic than some of the nouveau riche in Britain.

The size of the gap is not, however, just an Anglo-Saxon problem. Russian oligarchs, Indian billionaires and, increasingly, Chinese together with tax exiles from high tax European and other countries are buying up expensive properties in London, where they build underground swimming pools, private gyms and cinemas and leave empty over half the year.

Some of this wealth, many suspect, is “funny money” or laundered cash. The tax-avoidance industry is multinational and multilingual.

Ordinary educated folk, who comprise the squeezed middle and who would perhaps like to be rich, may wonder how much is due to luck and cunning.

Hugh Cortazzi is an internationally known observer of London television who comments frequently on what he’s seen.

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