THEY MAY not pay taxes here, but the non-doms seem to think they run the country. Last week, the chancellor, Alistair Darling, was forced to make a humiliating capitulation to the non-domiciled plutocrats who have been using London as a global tax haven. Attempts to get them to open their books and pay a risible £30,000 for the privilege of sheltering millions in overseas earnings were shredded by their lobbyists.

The chancellor has also had to do an embarrassing U-turn on capital gains tax. He was trying to close a loophole which allows private equity barons to pay only 10% tax instead of 40% when they wind up their businesses. They had other ideas. He's no longer the Darling of the City, and the pressure is on to have him sacked from the Cabinet.

Now, I know people's eyes glaze over when you talk about capital gains tax, private equity and non-domiciled status. But the essence of the story is very simple: we've created in Britain a society in which the rich have more or less been relieved of paying tax altogether.

If you're an honest British basic-rate taxpayer you pay 22% tax (not including National Insurance) or 40% at the higher rate. They pay 10% by paying themselves in capital gains rather than taxable income. You have to declare your earnings; they send them offshore and pay nothing. You pay NI for hospitals; they avoid it. You pay your mortgage out of your net income; they use buy-to-let and deduct mortgage interest from their tax. No wonder you can't afford a house.

According to the BBC business editor, Robert Peston, the top 50 UK-based billionaires paid just £15 million in tax last year on a combined fortune of £126 billion. In fact, most accountants say that for the modern rich - the 4000 Britons earning over £1m a year - taxation has become largely voluntary, as there are so many ways of avoiding it. The man likely to take over Northern Rock this week, Richard Branson, is a champion in offshore tax farming. What a marriage made in heaven that is.

We live in a parody of a social democracy: a welfare state for the rich, with the poor and middle classes taxed to the hilt. There are around 112,00 non-doms in London, many living in extravagant isolation like the Russian oligarch, Badri Patarkatsishvili, who died last week in a fortress in Leatherhead surrounded by 120 armed guards. These people are attracted by a society which appears to value wealth above all, and doesn't ask where it is or where it came from.

Non-doms come here to buy their multi-million-pound tax-free houses, to launder their money through casinos and football clubs and our corrupt property system (see the reports last week on the FSA and police probes into "endemic" fraud in British real estate). They then wind up their companies, paying virtually no tax, repatriate their earnings and live tax-free. I don't care if it's the politics of envy. It's grotesque.

The government justifies its tolerance of tax avoidance by saying it benefits Britain to have all these "wealth creators" living here. Look at all the money they spend, the people they hire, the taxes their employees pay. But I'm not sure Labour are getting it right here. The most immediate impact of this wealth has been to make housing all-but-unaffordable to most people in Britain.

The people who are paying the taxes the non-doms and private equity people avoid are being priced out of their own country. Real middle-class earnings have stagnated over the last decade as a new class of super-salaried hedge fund managers and CEOs have captured our government. This impoverishment of the middle classes has been disguised by the boom in house prices which gave people an illusion of wealth, as they were "eating" their houses by equity withdrawal - another name for debt.

Not any more. As the governor of the Bank of England, Mervyn King, made clear last week, in an astonishingly blunt assessment of the British economy, house prices are going nowhere but down for the next four years at least, while we experience "a genuine reduction in our standard of living". This is largely because the economy has been distorted by its subordination to the narrow interests of the super-rich.

Our productive industry collapsed as we embraced an "asset economy" based on inflated house prices and huge debt - public and private. One reason the chancellor was trying to get the super-rich to pay is because he realises the party is over, and that - as the Institute for Fiscal Studies warned last week - the government is going to have to raise taxes and cut its spending. We'll all be paying more tax, while the very rich will pay less.

So why is there so little public outrage? Of course, our media is dominated by the super-rich, thanks to the malign influence of the likes the imprisoned Conrad Black and Rupert Murdoch. Yet Murdoch is actually a citizen of America, where non-doms' foreign earnings are assessed and taxed by the government. In Brown's Britain, it's no questions asked.

We all naively thought Gordon Brown would address the shocking imbalances of wealth and power that developed under Tony Blair. How stupid of us. Brown has turned out to be the greatest defender of the super-rich. Have you heard a word from the prime minister as his chancellor has been hung out to dry? Not a squeak. As always when there is trouble, Gordon has gone missing.

Yet, he could have stood behind Darling, raised awareness, taken on the plutocrats and won public support. As the credit crisis spreads, we are approaching a turning point. There is growing disquiet at the shameless wealth on display in London: the hedge-fund Henrys, the private equity pirates and the rest of the hyper-rich, cruising their gated communities in "Chelsea hearses" - huge, black 4x4s with smoked windows. These people are in danger of becoming public hate figures, rather like the union barons of the 1970s. A narrow interest group, beyond accountability, who care nothing about society, refuse to pay their dues and seem only interested in getting their snouts in the trough.

As people find out more about the way banks have been manipulating the system to pay themselves stupendous bonuses, attitudes are hardening. British society is no longer in thrall to wealth. Only this time it's the middle classes, not just the working class, who will be taking to the barricades as their living standards decline. Are you listening Gordon? It's time to tax the rich.