Public policy towards wealth gap is incoherent

Household wealth in Great Britain amounts to £5.5 trillion, even excluding pension rights – four times national income. It is far more unequally distributed than incomes or earnings. Official figures show that the top tenth of households owned 850 times the total wealth of the bottom tenth in 2008-10, if pension rights are added in.

Yet a three year study by academics at the London School of Economics has found that tax, benefit, care, housing, and education policies are inconsistent and fail to narrow the wealth gap.

The researchers looked at key issues connected with the distribution of personal wealth in the UK, including inheritances, and found that inheritances are worth about 4% of national income. Each year around one adult in forty is left an inheritance in a will, but these are very unequally distributed. Over the ten years from 1996 to 2005 half of the total went to the top tenth of inheritors, just 2% of all individuals.

The researchers found a positive association between early asset-holding and subsequent general health and psychological well-being ten or even 20 years later.

“The value of the differences in wealth between the comfortably off – not just the super-rich – and others increased substantially over the last 20 years. It would now take many more years of saving for someone with a middle income to move up the wealth range than in the past, so these wealth differences are becoming cemented in place,” commented Professor John Hills, director of the Centre for Analysis of Social Exclusion (CASE) at LSE.

“Wealth – and access to it through family or inheritance – is of huge importance to people’s life chances. Yet we talk far less about policies towards wealth and what can be done for those with low assets or in debt than we do about income differences,” he concluded.

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