The gap between rich and poor is wider than ever. But that doesn't seem to bother Britain's wealthiest earners. In an extract from their new book, Polly Toynbee and David Walker describe the jaw-dropping arrogance they encountered when they asked some of the fat cats to justify their lives of luxury

From the marbled 20th floor of a glass tower in Canary Wharf the view of the river is breathtaking. It snakes down to the Thames barrier, glinting in the sunset. Close to the new city lie the serried ranks of East End estate blocks. The view is typical of London: glossy new wealth nestling close to old and persisting penury. Precious little money has trickled down from this gilded new town in the sky to its neighbours below.

The view is a reminder of the widening gap. History, many like to believe, is a Whiggish tale of wealth, social progress and fairer distribution, an onward march: we all wear the same clothes, meet on equal terms on Facebook. Yet background predicts who will run the banks and who will clean their floors. It's not happenstance; it is largely pre-programmed. General mobility is a myth. The top 10% of income earners get 27.3% of the cake, while the bottom 10% get just 2.6%. Twenty years ago the average chief executive of a FTSE 100 company earned 17 times the average employee's pay; now it is more than 75 times. Since Labour came to power in 1997 the proportion of personal wealth held by the top 10% has swelled from 47% to 54%. Labour did try to tug in the opposite direction, but after Gordon Brown's last budget as chancellor axed the 10p tax rate, many of the lowest paid were left bearing a heavier burden.

Those who make the most money, meanwhile, seem less willing than ever to see it redistributed. Tax consultants Grant Thornton estimated that in 2006 at least 32 of the UK's 54 billionaires paid no income tax at all.

High-earners tend to be elusive, preserving their privacy at home and at work, journeying between them in expensive cars. But in sessions conducted by Ipsos Mori over two evenings we did meet partners in a law firm of international renown and senior staff from equally world-famous merchant banks. Their business is money, and they make it: the law partners earned between £500,000 and £1.5m per year, putting them in the top 0.1% of earners in the UK, while the merchant bankers ranged from £150,000 up to £10m.

We hoped to gain an insight into their notions of fairness - what might persuade them to share more of their wealth with others. What we encountered was a startling demonstration of ignorance. Here were professionals who deal daily with money, yet know next to nothing about other people's incomes. When asked to relate themselves to the rest of the population, these high-earners utterly misjudged the magnitude of their privilege.

How much, we asked our group, would it take to put someone in the top 10% of earners? They put the figure at £162,000. In fact, in 2007 it was around £39,825, the point at which the top tax band began. Our group found it hard to believe that nine-tenths of the UK's 32m taxpayers earned less than that. As for the poverty threshold, our lawyers and bankers fixed it at £22,000. But that sum was just under median earnings, which meant they regarded ordinary wages as poverty pay.

Mistakes such as these should disqualify the wealthy from pontificating about taxation or redistribution. And yet City views carry great weight with ministers and politicians of all parties.

Fortunately, Professor John Hills, director of the Centre for the Analysis of Social Exclusion at the London School of Economics, was on hand at the focus groups to provide correct figures. Once he had done so, one youngish banker said sheepishly: "My appreciation of the numbers was quite hopeless. Given my age and my level of experience in the City I wouldn't have thought that I would be so out of touch with reality." Another realised how much he had lost touch: "It sounds an awful thing to say, but I know people I went to school with, and I've no idea how they survive on the incomes they have." But they got over their initial embarrassment quickly enough. An encounter with the facts didn't seem to impinge in the ensuing discussion: in no time they reverted to an underinformed view of the world.

Justifying their own high incomes, they said: it's not us, it's globalisation, and anyway we are the nation's economic benefactors. "The goose that lays the golden egg is the people who come to London to make wealth," one said, echoed by all. The growing gap between rich and poor is "a reflection of the success of policies here . . . making the City one of the pre-eminent financial centres of the world". Another said defiantly (this was on the eve of the banking sector's implosion), "I don't think we should sit here and say London should be guilty for being successful." They put themselves inside a golden enclave, but one on which the entire UK depended for its wellbeing. Don't mess with its denizens: they deserve thanks for providing invisible exports and powering GDP growth. We high-earners belong to a global elite, able to work anywhere, always mobile.

But the City's importance is exaggerated. Finance, including the City, insurance and high street banks, forms 7.9% of the UK's GDP, compared with manufacturing at 14.7% and property services at 16.5%. Added together, hotels, catering and telecoms account for nearly the same share of GDP as finance. As for their threats of flight, both our bankers and lawyers turned out to be remarkably immobile, most having worked for their firms for a long number of years. The warmth with which they described their London lives with partners and children suggested they would be loth to leave.

"We work harder and aspire the most," one said. The longer we talked, the more they turned to moral reasons for success and failure, moving away from the structural globalisation reasons given above. One banker said: "It's a fact of modern life that there is disparity and 'Is it fair or unfair?' is not a valid question. It's just the way it is, and you have to get on with it. People say it's unfair when they don't do anything to change their circumstances." In other words, they see themselves as makers of their own fortune. Or, as another banker said, "Quite a lot of people have done well who want to achieve, and quite a lot of people haven't done well because they don't want to achieve."

One woman banker described escaping from a provincial town where the main employer was the public sector: "If you aspire to anything beyond that you're not going to live [there] any more, and that's the choice you make."

They had chosen a life that would make them rich while others, making different and morally equivalent choices, had abdicated their right to complain. "Some of these are vocational, things like nurses . . . It's accepted - they go into it knowing that that's part of the deal." Another said: "Many people, like teachers, don't do things for the pay. But you won't find a teacher that works as hard as we do." This was categorical, evidence unnecessary. They spoke of heroic all-nighters drawing up contracts for clients in time zones on the other side of the globe, a Herculean effort that justified fat pay. But did they work 10 times as hard as a teacher on £30,000 a year or, in the case of some lawyers and bankers, 100 times as hard? Such disproportionality did not enter their scheme of things.

None of us like to feel guilty about our comfortable lives, and it would have been absurd to expect mea culpas from these people just because they earned so much. What we had hoped for was more awareness, some recognition that their position needed explaining and even justification. Instead, with the exception of a couple of progressive lawyers, they simply denied they were rich.

They could scarcely deny they had money; indeed they spoke of the pleasures that high incomes bought. "I do enjoy the fact I can have nice holidays and don't think twice about buying particular items," said one lawyer. But most blocked out the suggestion they were extremely well off. Living in London cost a lot, they said: the city that made them rich was a reason you had to be rich. You had to afford London property. "I'm sick of this, because with £100,000 in Manchester you are well off; £100,000 is a not a wealthy person down here."

A lawyer admitted that he couldn't imagine surviving on an income as low as £100,000, and in discussions about higher tax bands his colleagues objected to any such low sum being used as a benchmark. One of the more imaginative lawyers described their social isolation: "We now live in a separate economy, we live on a separate level to the vast majority of people in the country. We don't send our kids to the same schools, we have more choice over schools, we have more choice over health, we have more choice over where we live, we have more choice over where we go on holiday and what we do for our jobs. And we live in a completely different world to the people we live next door to."

"Providing for children" was flourished as a trump card, as if spending on offspring were automatically moral and good, regardless of how other people's children fare.

"I work hard, I've got two boys and I want to provide for them." Providing for children meant buying them access to high-earning jobs, taking trusted routes through school and university. One result of such social selection is already being seen on the City's doorstep. Applicants at this law firm are "becoming posher", a senior partner noted. Older partners were often grammar school, but now recruits almost exclusively have been to private schools. They are also greedier: the same older partner said he was shocked that the first question high-flying graduates ask now is about the salary.

Once our conversation turned to tax, the high-earners' arguments against rebalancing the system ranged from threat to bluster to attack. Response one: we will leave, and you will be poorer. Or: we don't deserve to be forced to pay more. Or: even if we were taxed more, the money would all be wasted. John Hills's charts showed how the modern UK tax system can barely be called progressive, with the top 10th of income earners paying a smaller proportion of their total income in tax than the bottom 10th. The poor are hit hard by VAT and other indirect taxes: they spend relatively more on taxable goods and services. Even when confronted with that evidence, the bankers especially gave the crudest response, saying flatly that they contributed more in cash - denying the point of a progressive tax system, which is that higher earners pay a larger proportionate share.

"Politics of envy!" one lawyer exploded furiously. "I really object because what it does is take the whole emphasis and focus away into something that's totally irrelevant and won't help a poor person at all." The idea of redistributing more was, he said, "all kinds of bullshit crap which doesn't help the people". They felt a passionate hatred of capital gains tax and inheritance tax.

One banker, bearing a distinct resemblance to Mr Scrooge, said: "People don't starve in this country - it's OK. Compared with other countries, here you don't go hungry because you can just go and get money for free." Some thought benefits already too high. One banker said he thought a family of four receives "say, £3,000 a month in their hands, and they're somewhere miles up north. They're not going to earn that sort of money, so where's the incentive for them to go out to work?" In fact, a family of four would in 2008 receive a net total of £1,328 a month.

Whatever, the poor didn't deserve it. Masters of the universe our groups might be, but their outlook was pure Daily Mail: "Single people . . . get pregnant and get a flat and more money. You just see everybody pushing prams, then they'll get more income and a little flat that they can stay in for life." There was much talk of the perverse incentives for single parenthood, with one banker complaining that the 18-year-old mother on benefits "doesn't get that much less money than another 18-year-old working in a shop". It didn't seem to occur to this speaker that the shop worker's pay might also be too low. They were contemptuous of anything that gave extra money directly to poorer people: "This thing of giving pregnant women £200 for dietary supplements. Like, as if they'll really spend it on fruit." Most were adamant, along with this banker: "We don't think just chucking money at the welfare state is the answer."

A last defence against paying more tax was their absolute conviction that government is inefficient and could not to be trusted with a penny more. When it comes to government, "lack of ability is the main basis on which you get a job", said one lawyer. "Nobody in the public sector is actually trained to do the job that they're required to do." Another argued: "Labour did a bit of that, with extra taxes and windfall taxes and the famous raid on pensions. The big debate is about how effectively all that money-raising has been applied. Most people would say not all of it was well applied."

We heard this get-out time and again. Public money is always misspent. Our bankers airily said the administrative cost of paying tax credits was astronomical; Hills said it was actually 3%. And what was the ratio of office costs to turnover in a big City bank? A good deal more - nearer 8%, it turned out. But their error was delivered with all the aplomb of power.

The entire public realm was dismissed in one sweep. As if he hailed from the planet Zog, one of the bankers said: "I have absolutely no idea how my taxes are spent and therefore I do not trust the system at all." But he knew his taxes would be misspent. "The classic is how much you pay in your taxation versus what's invested in the roads and the transport system. It goes into a black hole." Another banker asserted that there is "little accountability and measurability in the way that tax is actually used". Several lawyers, meanwhile, swivelled in their chairs to point downriver from Canary Wharf, to where the Millennium Dome floats like a jellyfish on its spit of land. "Doesn't that," they cried in triumph, "say all we need to say about the waste and futility of public spending?"

Here were people who might be technically adept, or good at deal-making, but as a group - with one or two exceptions - they were less intelligent, less intellectually inquisitive, less knowledgeable and, despite their good schools, less broadly educated than high-flyers in other professions. Their high salaries were not a sign of any obvious superiority. Most dismaying was their lack of empathy and their unwillingness to contemplate other, less luxurious lives. They could not see that the pleasure they derived from possessions, prospects and doing well by their children is universal and that others deserve a share of that, too.

'What can charity do for us?'

How the rich - or at least those who bother to give - are using philanthropy to boost their status

Charity used to be something you did quietly, unostentatiously. We attended a breakfast for high-net-worth individuals organised by the Charities Aid Foundation and hosted by the Lord Mayor of London. The main speaker was Stanley Fink, chief executive of Man Group plc, the hedge-fund managers. Charity, he made plain, is now a way to fame.

"I want to talk about what charity can do for us," he told his audience, describing giving as the ultimate door-opening lifestyle accessory. "What do you do now you've got all the toys?" he asked. "You've already got all the houses, yachts, cars and jets you can use, so what comes next is charity." It's not just the joy of giving, but opportunities to meet celebrities: "I get invited to places I'd never have seen otherwise." Charity is the passport to the in-crowd: he listed the eye-popping names and places his philanthropy had taken him, from No 10 upwards. Give and ye shall meet celebs.

At the behest of Labour ministers, the mega-wealthy have taken to secondary education. In academy schools, for a very reasonable £2m a pop, they get their name above the door plus the option to chair the trustees and, subject to governance rules, select like-minded members of the board. Sponsors thus play a major role in selecting and firing headteachers and designating specialisms, free of local-authority control. "If we can apply the entrepreneurial principles we have brought to business to charity, we have a shot at having a really strong impact, to be able to transform the lives of children," says Arpad Busson, a Swiss-born financier and the founder of Absolute Return for Kids (ARK), which runs seven academy schools. This is a charity mentioned as often in the gossip columns as in Society Guardian because Busson helped turn giving into high fashion. ARK's 2007 fundraising dinner is said to have raised more than £26m, exceeding the £18m claimed in 2006, mainly on the back of pledges from Bloomberg, Merrill Lynch and UBS. Guests were entertained by Prince, and items auctioned by the deputy chair of Sotheby's included a day on the set of the latest Bond movie and dinner with Mikhail Gorbachev. The previous year, guests heard Elton John, and up for sale were a Damien Hirst and a guitar lesson from Chris Martin of Coldplay. Press releases namecheck the producers, the food suppliers and the floral decoration: this is business as charity and vice versa.

Are the rich merely bidding to reclaim the position once occupied by aristocratic patrons, suzerains of the public sphere? They control the business sector, so why not social policy as well? City entrepreneurs are used to running the show and think they know best, whether running schools, hospitals, universities, galleries or Jobcentres. The voluntary sector should be efficient and effective, of course, and corporate and finance-sector managers have a contribution to make. Financial skills are often in short supply, and balance sheets and audit committees should truck no nonsense. But voluntary organisations are complex and attract diverse people. The business approach can be reductionist.

Nor are the rich quite as generous as they would like to appear. Many don't feel any responsibility outside their family, or need every last penny of that £5m-a-year income. An Institute for Public Policy Research survey found wealthy people refusing to give because they don't trust charitable organisations: apparently, charities have become too professional in their fundraising and yet not businesslike enough in how they spend the money. It concluded that tax incentives and high-profile giving campaigns might encourage those already giving large amounts to up the ante, but the majority of wealthy individuals who give little or nothing are pretty impervious.

When the Scottish sports-goods magnate Sir Tom Hunter announced that he was giving away £1bn over his lifetime, the story led the BBC Ten O'Clock News, perhaps underscoring how rare big giving is. Andrew Carnegie said that a man who dies rich dies shamed, but it seems embarrassment is easily weathered. We explored attitudes in our focus groups with lawyers and bankers. They felt charities were not so different from government and would "waste" money. One lawyer asserted: "The general feeling is a lot of cynicism about whether or not, if you do give the cash, it's going to get where you want it to go." Another admitted: "People like us don't put our hands in our pockets so much."

It is true that the larger a household's annual income, the more likely the household will give money to charity. Half the households in the top 10% of the income distribution make charitable donations, but only one in six of the bottom 10%. But there is a twist in the figures. The worse off give proportionately more of their income. The top fifth of households give less than 1% of their total income, while the poorest 10th give three times as much, or 3% of their income.

The Charities Aid Foundation notes that the same few names get recycled in the media, giving an erroneous impression that philanthropy is on the rise. Its own annual report for 2007, however, records "a fall in the proportion of high-level donors" - and this in a year of soaring boardroom bonuses. To put it bluntly, the rich are a greedy bunch.

· Extracted from Unjust Rewards by Polly Toynbee and David Walker, published by Granta at £12.99. To order a copy for £11.99 with free UK p&p, go to theguardian.com/bookshop or call 0870 836 0875