Top 1 Per Cent Has Almost £800 Billion More Wealth Than Official Statistics Show - From Resolution Foundation In 2021

17th November 2024

t has been glaringly obvious for many years that the unequal distribution of wealth in the UK has gotten out of control. The Resolution Foundation release on 3 January 2021 set out the case for tackling the problem. That was when a Conservative government did nothing to change things Finally a Labour government is doing something about it. Reaction from the right wing think tanks has been swift to try and make all of us think it is an attack on society. It's not and is about making society fairer for everyone especially the 99 percent who do not have huge assets.

The ONS' main data on wealth misses almost £800 billion of assets held by the wealthiest 1 per cent of households and correcting for this oversight means UK wealth inequality is higher than previously thought, according to new Resolution Foundation research published today (Sunday 1 January 2021).

The Missing Billions examines the scale and distribution of wealth across the UK, and finds that official measures miss around 5 per cent of the total wealth in the UK, held by the very wealthiest households, which conservatively amounts to around £800 billion and could easily exceed this.

The Foundation uncovers this missing wealth by merging the official ONS Wealth and Assets Survey (WAS), which traditionally struggles to capture the assets of very wealthy households, with data published in the Sunday Times Rich list.

It finds that taking this missing wealth into account significantly increases measures of wealth inequality, raising the Top 1 per cent of household's share of total wealth by over a quarter - from 18 per cent to 23 per cent.

The Foundation notes that even without this £800 billion, wealth across the UK is very unequally distributed - with total wealth inequality around twice as high as income inequality (the Gini coefficients are 0.63 and 0.34 respectively).

And while wealth inequality has fallen throughout much of the 20th century - the proportion of wealth held by the Top 10 per cent has fallen from over 90 per cent at the turn of the 20st century to around 50 per cent by the 1980s - it has been flat or increased slightly in recent decades.

Focusing on how wealth has grown since the financial crisis - a period marked by an unprecedented lack of pay and income growth - the report notes that wealth gains have largely come about through changes in asset prices. The vast majority (between 76 and 93 per cent) of financial wealth gains over this period have come through such passive accumulation, rather than saving.

The Foundation says that with rising asset prices driven in part by falling interest rates, which are likely to remain low for the foreseeable future, these huge wealth gains are likely to be long lasting.

With the UK entering a decade of mounting fiscal pressures - both due to the cost of the pandemic and an ageing population causing health and welfare spending to rise by £38bn a year by 2030 decade - the Foundation says that wealth taxation will need to play a bigger role in the UK economy over the course of the 2020s.

The Foundation is calling on the Chancellor to embark on the biggest reforms to wealth taxation in a generation - including via the restriction of capital gains and inheritance tax reliefs (together raising several billion), and adding a Council Tax Supplement of 1 per cent on properties worth over £2 million (raising over £1 billion).

Jack Leslie, Economist at the Resolution Foundation, said, "The UK has undergone a wealth boom in recent decades, which has continued even while earnings and incomes have stagnated. But official data has struggled to capture these gains, and misses £800 billion of assets held by the very wealthiest households in Britain.

"With the country facing a decade of mounting fiscal pressures, now is the time for Britain to do a better job of taxing its record levels of wealth by reforming our capital gains, inheritance and property taxes."

Note
The new Labour government budget made changes to Capital Gains tax and Inheritance tax and making changes for people who own multiple houses.

There is much more that can be done. Earlier in 2024 Richard Murphy published a Wealth Report setting out how things could be change. Not a fan of current Labour policies and how they are doing things nevertheless his Wealth Report offer many suggestions for changes.

Some of the suggestions made, and the amounts that they might raise in additional tax, are as follows:

1) Charging capital gains to tax at the same rate as income tax would raise £12 billion of extra tax per annum.

2) Restricting the rate of tax relief on pensions to the basic rate of income tax, whatever tax rate a person pays, would raise £14.5 billion of extra tax per annum.

3) Charging VAT on the supply of financial services, which are inevitably consumed by the best off, could raise £8.7 bn of extra tax per annum.

4) Charging an investment income surcharge of 15% on income earned from interest, dividends, rents, and other sources might raise £18 bn of extra tax per annum. Lower rates could, of course, be charged. This estimate assumes no such charge on the first £5,000 of such income a year, with a higher allowance for pensioners.

5) Charging national insurance at the same rate on all earned income, whatever its amount above the existing minimum, might raise up to £12.5 bn of extra tax per annum.

6) Investing £1 billion in HMRC so that it might collect all tax owing by the UK's 5 million or so companies when 30% of that sum goes unpaid at present might raise £12 billion per annum.

In addition, the report suggests that if the tax incentives for saving in ISAs and pensions were changed so that all new ISA funds and 25% of all new pension contributions were required to be saved in ways that might help fund new infrastructure projects in the UK, including those linked to climate change, then up to £100 billion of funds might be made available for that purpose a year.

The great fear amongst many people in the UK at present is that Labour might form a new government this year but will not change anything because of their commitment to harsh fiscal rules that appear to promise more austerity. The Taxing Wealth Report 2024 shows that this austerity is not necessary. The existing tax system only needs to be made a bit fairer and the funding required to transform our society would be available.

The report is available in three lengths (click to download the version you want):
The summary report
The shorter length report
The full report

To download any of them go HERE
Full of well thought out suggestions that will make you think.