I could feel the sweat starting to trickle down the forehead. Oh boy, I thought, this is going to be a tough one. I'd begun my speech with a joke, a trusty, well-oiled joke that had never failed before, and yet this time, as I uncorked the ancient vintage, the response was verging on the muted. I peered through the glare of the podium lights, and another drop poised for the southward journey. Help, I thought, and as I scanned the audience, I began to guess at the problem. As jokes go, this one is emphatically British. It requires a knowledge of British politics in the 1960s, and perhaps even a British sense of irony. And I later discovered that there were about 40 nationalities in the 450-strong audience, and some of them were listening in more or less complete bafflement. A Swedish woman came up and told me to abandon my libertarian rants against children's booster seats, since these were much-loved in her country. A Dutch fellow said crossly that he wanted much more detail about my tax policy, and a woman from Sri Lanka said she couldn't follow it all, but she could tell that it was intended to be amusing; and as I looked around that audience, I understood for the first time what people mean when they talk about Planet London. It was the banking universe's equivalent of the bar scene in Star Wars. It was cosmopolitan to a degree that would have been unimaginable 10 or even five years ago. There were far more women than before; and considering the colossal value of the loans they were arranging, everybody seemed so young. Half a century after the end of the British Empire, London is once again an imperial city. It is the new Rome, the originator of the international language of business, a magnet for talent from the ends of the earth, a gigantic financial entrepôt; and in the view of some, of course, it is the Whore of Babylon, sucking in so much money as to cause a Dickensian gap between the haves and the have-nots. And since we are really talking about the growing gulf between the middle classes and the new super-rich, we should really refer to the haves and the have-yachts. The City of London now produces a staggering 8.8 per cent of the United Kingdom's GDP, and all the luscious tax revenue that goes with it. Thanks to the efforts of these 335,000 in the financial services sector, London is now a global powerhouse, a city-state, and it is about to knock New York off its perch. According to my old friend Hugo Dixon, top financial guru and editor of BreakingViews.com, there are some senses in which London is already in the lead. "London has the momentum," says Hugo, and traces it all back to those historic Thatcherian reforms, the ending of exchange controls and the Big Bang. Since then, London has consolidated its position as the number one place in Europe to go to raise money - even if you are a French or German company. Other places have hedge funds, but London has Leylandii-sized hedge funds. London effortlessly dealt with the creation of the eurozone. Do you remember those dunderheads, those idiots, who told us that the City would suffer for us failing to join the euro? I think Chris Huhne of the Liberal Democrats was one of the more egregious examples. Well, look at London now, trading more euros than the rest of the eurozone put together. America responded to Enron with the Sarbanes-Oxley amendment, a masterpiece of over-regulation, and since the inception of the war on terror it is said that New York has been somehow more xenophobic, a less welcoming venue for international capital, particularly from the Arab world. And then, of course, London has time on its side. If you are trying to use the phone to set up a big deal in China or Russia or India, you are much better off having your staff in London than slaving away until after midnight in New York. Those are among the reasons why the money is flooding into the British capital, and that is why the financial centre of the world is attracting thousands of extremely brilliant people - like all those Goldman Sachs staffers who this year received bonuses of more than £1 million. Think of that incredible tsunami of dosh, and think of the knock-on effects it has. Think how difficult it is for the British middle classes to get their kids into top schools, competing as we now must with the offspring of financially gifted eggheads from around the planet. Think of the effect that £8.8 billion bow-wave of bonuses is having on house prices. No wonder some in the Labour Party are starting to get ugly, and call for a proportion of the loot to be handed over - or else, says Peter Hain, we shall have to resort to traditional methods: that's right - taxation. It might be popular, but it would be a huge mistake. Sir Richard Lambert of the CBI yesterday made an excellent speech in which he pointed out that these financial whizzkids are as mobile as premiership football stars. Tax them too much and they will just evaporate. All it would take, he said, would be a few Jumbo jet loads and much of the talent would be gone. Of course, it is odd that these metics - resident aliens - are often paying taxes of only 30 per cent or less on their squillions; but then without their efforts, there would be no squillions, and a windfall tax might simply kill the goose. So I have a better solution. One of the joys of living in London is that rich and poor are crowded together, and wherever the new Masters of the Universe live, there will be a school that could be doing better. Isn't it time to change the law, so that they didn't have to spend their bonuses on Aston Martins or property in Greece? Let us release the pent-up wave of philanthropy. Let us change the 1944 Education Act, so that private money can at last be used to help state schools. Let's give these Masters of the Universe the chance to endow new schools, and to earn themselves immortality, and by improving the education of our feral children to reduce the risk of being despoiled of their squillions by a hoodie.