Cliff Notes
- A report by The Resolution Foundation reveals that average earners would take 52 years to save enough to rise from middle to top wealth distribution, estimating a need of around £1.3m.
- Despite a dramatic increase in overall wealth, relative wealth inequality remains stable, with the richest 10% owning about half of all wealth, worsening intergenerational inequality.
- The discussion around a potential wealth tax is sparked by calls from figures like former Labour leader Lord Kinnock, though current economic policies aim to avoid deterring wealthy individuals from the UK.
It’s now almost impossible to work your way to riches, says report into growing wealth gap | Money News
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Britain’s wealth gap is growing and it’s now practically impossible for a typical worker to save enough to become rich, according to a report.
Analysis by The Resolution Foundation, a left-leaning think tank, found it would take average earners 52 years to accrue savings that would take them from the middle to the top of wealth distribution.
The total needed would be around £1.3m, and assumes they save almost all of their income.
Wealth gaps are “entrenched”, it said, meaning who your parents are – and what assets they may have – is becoming more important to your living standards than how hard you work.
While the UK’s wealth has “expanded dramatically over recent decades”, it’s been mainly fuelled by periods of low interest rates and increases in asset worth – not wage growth or buying new property.
Citing figures from the Office for National Statistics (ONS) Wealth And Assets Survey, the think tank found household wealth reached £17trn in 2020-22, with £5.5trn (32%) held in property and £8.2trn (48%) in pensions.
The report said: “As a result, Britain’s wealth reached a new peak of nearly 7.5 times GDP by 2020-22, up from around three times GDP in the mid-1980s.
“Yet, despite this remarkable increase in the overall stock of wealth, relative wealth inequality – measured by the share of wealth held by the richest households – has remained broadly stable since the 1980s, with the richest tenth of households consistently owning around half of all wealth.”
According to the think tank, this trend has worsened intergenerational inequality.
It said the wealth gap between people in their early 30s and people in their early 60s has more than doubled between 2006-08 and 2020-22 – from £135,000 to £310,000, in real cash terms.
Regional inequality remains an issue, with median average wealth per adult higher in London and the South East.
Could wealth tax be the answer?
The report comes seven weeks before Rachel Reeves delivers her budget on 26 November, having batted away calls earlier this year for a wealth tax.
Former Labour leader Lord Kinnock is among those to have called for one, in an interview with Sky News.
But speaking to Bloomberg last month, Ms Reeves said: “We already have taxes on wealthy people – I don’t think we need a standalone wealth tax.”
Previous government policies targeting Britain’s richest, notably a move to grab billions from non-doms, has led to concerns about an exodus of wealth. The prime minister has denied too many are leaving the capital.
Molly Broome, senior economist at the Resolution Foundation, said any wealth taxes would not just be paid by the country’s richest citizens.
She said: “With property and pensions now representing 80% of the growing bulk of household wealth, we need to be honest that higher wealth taxes are likely to fall on pensioners, southern homeowners or their families, rather than just being paid by the super-rich.”