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Work and prosperity
4 June 2013

Britain: a nation of millionaires!

We are rich!

Well, some of us are. The Guardian reports that millionaires are rather more common than one might think:

  • “One British household in every 10 now has total assets exceeding £1m, according to a new book based on work at the London School of Economics published on Wednesday.
  • “Wealth in the UK crunched the findings from a comprehensive official survey that took place between 2008 and 2010, and found that 10% of households had total wealth of £967,200 or more.
  • “The lead author, Prof John Hills – who previously headed Whitehall's National Equality Panel – says a subsequent surge in stock markets, London house prices and the valuation of occupational pensions will ‘have pushed the entry point into that wealthiest tenth over the million-pound mark today’.

But as Tom Clark’s report makes clear, it’s not all good news:

  • “Just as striking as the rocketing level of wealth at the top end, however, is the continuing gulf between the haves and have-nots. Inequality in British pay is familiar, but it is dwarfed by inequality in wealth: whereas the top tenth of households brings home roughly 10 times as much as the poorest tenth in annual income, the top 10% own 850 times as much as the bottom tenth.”

That is some gap, but what are we supposed to do about it? For those on the left, the answer is redistribution. But what of, exactly? This isn’t money in the bank we’re talking about, but mostly people’s houses and pension pots. Are these to be confiscated?

Of course, “through downsizing, inheritance or equity release, this notional wealth gets cashed in at some stage”. And, as Clark goes on to argue, spending the proceeds on “master's degrees or deposits to help buy property in the right place” will have “major implications for the life chances of some – but not others – in the next generation, and the one after that.”

Furthermore, this isn’t even necessarily money that people have earned or paid tax on:

  • “Hills believes that the most important force that has subsequently pushed up the wealth of the well-to-do has been lax monetary policy.
  • “‘With rock-bottom interest rates and quantitative easing … any given fixed pension that has been promised for the future is now worth more, in terms of the money you would have to set aside to fund it today.’”

Trying to tax this windfall might seem fair, but how is it to be distinguished from money that has been hard-earned and taxed once already? Mansion taxes, death duties and the like provide far too blunt an instrument.

Also would government do any better a job promoting social mobility if it had the money? Recent experience would suggest otherwise.

The only thing that truly promotes social mobility is the opportunity to earn – and right now this seems to be in short supply:

  • “...surging house prices and – more recently – rocketing valuations of pensions have boosted Britain's wealth far beyond its overall earning power. Back in the 1960s, Britons' non-pension wealth was only about twice national income; by the mid-noughties Britons were instead worth four times what they earned.”

This is not a good sign. It suggests that those with money see existing assets as a better bet than the creation of new wealth.

So, while we should be concerned by the growing gap between the financial worth of the rich and the poor, an even bigger concern – if you actually care about workable solutions – is the growing gap between our notional wealth and our national income.  


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