When Liz Truss says she wants to give tax cuts to the wealthiest, she thinks she is making a moral argument. The rich deserve to keep their money because they are the best and brightest among us. They have succeeded on their own merit and not because of their class, sex or ethnicity.

This, she believes, is a Thatcherite view of society. But the crisis that her government has imposed on Britain is as much due to her misreading of modern history as of her economic illiteracy. Her support for the City rests on a misunderstanding of how Thatcherism transformed the top of British society, as a new and devastating study shows.

‘Highly Discriminating: Why the City Isn’t Fair and Diversity Doesn’t Work’ by Louise Ashley leads a herd of sacred cows to the slaughter. The standard story of the last half-century says that the UK used to be run by upper-class amateurs, tied together by family, school and university connections. Then Margaret Thatcher came to power and the ‘Big Bang’ deregulated and Americanised the City. The days of gentlemanly capitalism were over. From the mid-1980s, the best paid jobs in the UK went to the most talented people. Meritocracy and sandwiches at your desk replaced the old boys’ network and the three-bottle lunch.

True: sexual, racial and other prejudices blighted the City, as they blighted the rest of the country. But its institutions were fighting back by ensuring that talented women and members of minorities could not be excluded. Partners in the ‘magic circle’ of law firms now announce their ‘commitments to diversity and inclusion and targets for gender, race and ethnicity, and LGBTQ+ representation’. Goldman Sachs says it is focused on ‘cultivating and sustaining a diverse work environment’. The big four accountancy firms, the high street banks and the hedge funds say that they are equally determined to crush regressive attitudes.

An FT columnist expressed some orthodox boosterism about the new City in 2018 when he said that financial services has finished off the class system:

None are as colour-blind, passport-blind or accent-deaf in the pursuit of excellence (that euphemism for profit) as bankers. The City made dreams come true for ‘graduates born of school-leavers, first-generation anglophones from Punjabi-speaking households, escapees from small towns [and] scholarship-winners on the make.

I accept that the top of British society has changed in the past 50 years. It could not retain its legitimacy and justify its eye-boggling rewards if it could not claim blindness to colour, class and sex. The people at the top of financial services may well be better qualified and harder working than their predecessors. Ashley’s report does not bash the bankers. Ashley herself worked in the City before becoming an academic at Queen Mary, London, and interviewed hundreds of workers in financial services for her study.

But when you investigate the City with her vigour and scepticism, not a great deal appears to have changed.

Between 1890 and 1914, some 74 per cent of the bankers and bank directors in the City attended a leading private school. Ashley quotes a 2014 study that found 60 per cent of leaders in investment banks went to fee-paying schools. Meanwhile, a study by the Bridge Group from 2020 found that 68 per cent of private equity and 61 per cent of asset management leaders went to independent schools.

All that money spent on diversity initiatives. All that talk of meritocracy. All the efforts made by City people to ‘make a difference’ that hasn’t materialised.

Looked at from a class perspective, the present may be worse than the past. Before the 21st century, working class ‘barrow boys’ made good careers as traders. One commodities merchant told Ashley how a public school boy on his team was relieved when uncouth colleagues left. ‘Oh thank God for that,’ he cried. ‘At least we’re now more Harrow than Barrow’.

Credentialism explains a part of the change (or lack thereof). The modern city recruits graduates from Oxbridge and the rest of the Russell group: students who are more likely to have privileged backgrounds. An investment banker told Ashley that ‘we only recruit from about five universities, really, but that’s definitely not what we say and I’ll get in trouble with HR if I tell you anything else.’

Oxbridge graduates in particular are more likely to know about the ‘insight days’ for school pupils, or about ‘Spring Week’, a formal internship offered to students in their first and/or second year at university. Success in Spring Weeks can lead to a longer internship over the summer and, for a few, the offer of a permanent job. It pays to get in early.

Some readers might say that the best universities produce the best candidates. But Ashley finds that young people coached purely for exams cannot follow new instructions or cope with understanding clients who do not share their backgrounds.

Other readers will say that by ‘privileging’ recruits from the upper and upper middle classes, City recruiters are revealing their unconscious biases. So they may. But there could be nothing unconscious about the bias. A national risk aversion may explain it instead. One investment manager told Ashley that if they hired an Oxbridge white male and ‘that person doesn’t work out – which often happens – then ‘nobody will blame the hiring manager’. But if they were to hire a working class black woman, they risked ‘looking a fool’ if she messed up.

There seems to be a business case for embracing stereotypes. One City manager said his firm looked for men who were confident and robust, but could also make clients feel that ‘we’re deferential in some way’. But the confidence the private schools coat their pupils in, like farmers dipping sheep, does not work for everyone. Confidence can seem like cockiness when displayed by a black man, and aggression when displayed by a woman.

There are equally rational arguments for boasting that you hire from the best universities. Professionals justify high fees by saying that only a minority of well-trained and exceptionally talented people can do their jobs. An elite hiring policy sustains the belief that extraordinary remuneration is justified.

In any case, it is not as if the nepotism of the past has vanished. The new world just has different old boy networks.

In 2016, the US authorities fined JP Morgan $264 million after it generated business in Asia by hiring 100 interns and full-time employees at the request of Chinese government officials. A City recruitment consultant told Ashley that globalisation meant that ‘if your father is a minister in a trade delegation’ you were in. Equally the old English class networks meant that ‘if your daddy knows someone on the buy side’ then a job could always be found.

Ashley’s conclusion is uncontroversial to those who study social mobility: corporate diversity programmes may help individuals but they do not transform societies or even organisations – nor in many cases are they meant to. Diversity is just sold as a business strategy that will increase profits, not justice.

Yet it is far from clear that the business case stands up in every instance or even in most instances. Magic circle law firms would undoubtedly find more women willing and able to move into senior positions if they ended the punishing long-hours culture which makes raising children so hard. They don’t because they believe that their culture guarantees their profits.

You cannot, in other words, have a fair corporate culture in an unfair society. In all the interviews Ashley conducted, the saddest were with decent people in the City, who had dedicated much of their lives trying to promote diversity and inclusion, and were baffled that all they had achieved were cosmetic changes. They still did not realise that cosmetic change was the point of the process.