In the palatial surroundings of a Pall Mall club were gathered people of a certain age and a certain wealth. St James’s Place Wealth Management targets by postcode, seeking those not quite rich enough to have flotillas of financial advisers, not too rich to be unflattered by free lunch amid opulence, nor sceptical enough to count how all this marketing cost comes from charges they would pay if they sign up.

The targets are retired folk of the lucky generation, sitting on unexpected fortunes from an untaxed bonanza in their south-east England homes, with very decent pension pots too. They were here to learn how St James could protect their wealth from chancellors present and future to pass their good fortunes down to their families. A slide showing a giant lorry with “taxman” on its bumper showed the threat to the unknowing – as did a sinister picture of Jeremy Corbyn and John McDonnell: “You won’t like what they’re going to do.”

Every £1 in a tin for donkeys or indeed the Odinist Fellowship gets 25% added by the treasury, willy-nilly

It was a good day last week to slip in incognito, the day the Office for National Statistics (ONS) produced figures on household wealth, and the day the chancellor murmured he was asking the Office of Tax Simplification (OTS) to examine the “complexities” of inheritance tax. Did he mean good or bad intentions towards the likes of them? Expect the worst, warned Sean of St James: “Chancellors regard you as cash cows.” But have no fear, St James the saviour is here, all above-board, legal and onshore. And so their tax plans are.

For a few hours, he explained tax avoiding via trusts, gift plans, loan schemes, equity release, the enterprise investment scheme and much more. Your children? Don’t trust whom they marry! A trust can protect gifts to your daughter to stop him running off with her capital. Best tax avoidance is by redefining high-taxed income as low-taxed capital gains. Some gasped as he warned that the Treasury’s take from inheritance tax has been rising by 20% a year.

That’s how “tax planning” is done: keeping one step ahead of shifting rules. But look round the room, and these are the people who will most need NHS care soon, so who is supposed to pay for that? That “taxman” pays for their GP, hospital, district nurse and all the services dwindling in this anti-taxation, austerity decade. St James turns that into a warning: “The NHS and the armed forces need more money whoever is in power. You are the ones they’ll come after, as you have the money.”

There is plenty of national wealth to pay for everything: last week the ONS reported more household wealth than ever, up 15% in the two years to the Brexit vote. But the poorest fifth saw their wealth decline in real terms. The top 10% have 290 times more than the bottom 10%. And it will worsen, as those born into money increase their riches with greatest ease. The divide in wealth is nearly twice as high as income difference. The Resolution Foundation finds that while wealth doubled in the past 50 years, the tax take from wealth has stayed flat.

The trouble with inheritance tax is that it yields relatively little (only a tiny proportion of estates pay it), yet is by far the most hated tax: average house values are £210,000, while couples can bequeath £850,000 tax free (before adding all other avoidances). Nor does it go to “children”: heirs are, on average, aged 61.

Governments profess concern about social mobility, but the inequality effect of wealth is accelerating, sums inherited set to double by 2035. Goodness knows what the OTS has in mind. But the Resolution Foundation suggests the state look hard at all tax reliefs. Inheritance tax relief costs the exchequer a minor £2bn, but multitudinous other exemptions see the best-off benefit while the pay-as-you-earn (PAYE) classes pay the price. Swelling tax reliefs now cost £155bn, more than all spending on health, transport, justice, home and foreign offices – reliefs that are under-scrutinised, under-policed and badly targeted.

Look at the figures and imagine if, instead of reliefs, that money was spent in better targeted spending. Some reliefs are enormous. About £28bn a year exempts main residences from capital gains tax: that’s where wealth resides, untaxed forever, an ineffective housing subsidy that could build a lot of homes. £24bn goes in pension tax relief – but not to help the lowest paid. Most of this vast savings subsidy to Isas and pensions goes to the top 10%. Why the £17bn national insurance subsidy to employers? Why is national insurance capped for higher rate taxpayers and not paid even by well-off pensioners? Private health and private education get tax relief of £3.5bn.

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Many reliefs are wasteful: £3bn goes in research and development relief, with little sign of genuine extra investment. Better to add that to carefully assigned grants from expert research councils. You might wonder why charities get almost £2bn in relief, so every £1 in a tin for donkeys or indeed the Odinist Fellowship gets 25% added by the treasury, willy-nilly. Instead of scatter-gun reliefs, a charity council might better allocate taxpayers’ money.

These reliefs hide the gigantic welfare state for the well-off: under-supervised, under-debated, yet worth infinitely more than the miserable sums scrimped by harassing disabled people out of their personal independence payment allowances.

Topsy-turvy tax reliefs could be radically simplified, no longer offering tax-escape valves but releasing funds for things they were originally designed for. Runaway wealth should be taxed, and inheritance rules reviewed. The OTS could suggest great things. But radical reform would take great political bravery, and this government, like previous ones, talks of inequality without the nerve to pluck the wealth from the tax-relief magic money tree.

• Polly Toynbee is a Guardian columnist