The unequal distribution of wealth in modern Britain
Last week, the Institute for Public Policy Research (IPPR) published the latest in a series of discussion papers for the IPPR Commission on Economic Justice. “Wealth in the twenty-first century: inequalities and drivers“, by Carys Roberts and Mat Lawrence, sets out the facts and trends on the distribution of wealth in the UK. Stark inequalities exist between individuals and families, between areas of the country, generations and genders, and between people from different ethnicities and class backgrounds.
The report’s key findings are as follows:
- Wealth inequality is twice as great as income inequality. The wealthiest 10 per cent of households own 45 per cent of the nation’s wealth, while the
least wealthy half of all households own just 9 per cent. The wealthiest 1,000 individuals and families in Britain have a combined wealth of £658 billion. By contrast, the net wealth of the lowest 30 per cent of households is £200 billion. - The next generation is set to have less wealth, largely due to housing inequalities. Fewer than half of ‘millennials’ (those born between 1981 and 2000) are expected to own their own home by the age of 45, based on current trends. Every generation since the post-war ‘baby boomers’ has accumulated less wealth than the generation before them had at the same age.
- Among the least wealthy half of Britain, the average household has on average just £3,200 of net financial, property and pension wealth. This compares to the £1.32m held on average by the top 10 per cent. The total wealth of the top 10 per cent of households is 875 times the total wealth of the poorest 10 per cent.
- Debt is likely to rise faster than disposable income over the next decade. In 2017 prices, household disposable income is forecast to rise by 10.3 per cent by 2027 (from £48,000 to £53,000). This implies an average debt per household in 2027 of £85,700, a 21.8 per cent increase from £70,400 in 2017. This includes a projected £28,400 of unsecured debt, a 39.8 per cent increase from £20,300 in 2017.
- London and the South East are pulling away from the rest of the country. The total value of housing stock in London is now greater than the housing stock of all of Wales, Scotland, Northern Ireland and the North combined. Median household wealth in London increased by 14 per cent between 2010 and 2014, but in Yorkshire and the Humber it fell by 8 per cent. By 2030, it is estimated that a quarter of homes in London will be worth £1 million or more, compared to fewer than 1 per cent of homes in the North East, Yorkshire and The Humber, North West, Wales, Scotland and East Midlands. If house prices per square metre continue to grow at the rates they have in different regions since 2009, by 2027 a square metre of property in London will be 10.9 times the price of a square metre in the North East.
- A majority of people want the Government to take greater action to reduce wealth inequality and think 18–24 year olds will have more debt and less wealth than previous generations. New polling for this report shows that 57 per cent of people think the Government should do more to reduce wealth inequality. 74 per cent of people think 18–24 year olds will have less savings and investments than previous generations and 72 per cent think they will have less housing wealth. 80 per cent think they will have more debt.
- Trends in the labour market, capital returns and technology threaten to increase wealth inequality. The longest pay squeeze in 150 years, combined with growing labour market insecurity, is making it harder for many people to save. Real returns to capital have risen at an average rate of 6–7 per cent per year since the 1980s, much faster than earnings, further driving disparities of wealth between lower and higher income households. The concentration of wealth is likely to be exacerbated by automation and digitalisation in the economy, as the returns to capital increase and the returns to labour decline.