The highly unequal distribution of personal wealth is put under the spotlight in a new report from an independent Commission. It points out that the overall wealth share of the top tenth of the population in 2008-2010 was more than 850 times the share of the bottom tenth, and that the distribution of wealth is much more unequal than the distribution of income.
The Policy Commission on the Distribution of Wealth was launched in October 2012 by the University of Birmingham, with the aims of reviewing existing knowledge on wealth inequality; questioning the extent to which wealth inequality is a problem; and considering appropriate policy responses.
- Wealth inequalities occur in different ways. Some people have higher incomes than others; some choose to accumulate wealth rather than spend; some receive higher levels of inheritance/lifetime gifts from parents; and some invest in housing or other assets just before they increase substantially in value. Each of these different forms of accumulation has different implications for policy.
- Wealth affects physical and mental well-being, as well as education and employment opportunities. It has also been argued that wealthy people become insulated from the lives of others, leading to social fractures. The ability of wealthy people to gain greater political influence is a potential threat to democratic processes.
- Low levels of income reduce the ability to avoid debt and/or accumulate saving. Levels of problem debt have been increasing in recent years and look set to increase still further. Debt advice needs to be improved; credit unions should be given more government support; and the financial services sector needs to do more to help saving by those on low incomes.
- Those in the middle of the wealth distribution tend to have some housing and pension wealth or the ability to accumulate some. But there are a number of difficulties facing this group, not least getting a foot on the housing ladder and the ability of owner-occupiers to access some of their housing wealth to maintain or increase their living standards, particularly in retirement. The decline of defined-benefit pension schemes in favour of defined-contribution schemes is also a particular concern.
- Those at the very top of the income distribution have seen huge increases in their incomes in recent decades, which have subsequently fed through into wealth inequalities. Those on high incomes are also much more likely to receive an inheritance and/or lifetime gift, and much more likely to receive one of high value. Action is needed to ensure fairer rewards for work, both for those at the top and for those on lower wages. The government should consider a range of reforms to wealth taxation, including an overhaul of council tax and capital gains tax. Consideration should be given to a mansion tax and a land tax.
Source: Sharing Our Good Fortune: Understanding and Responding to Wealth Inequality, Birmingham Policy Commission on the Distribution of Wealth
Links: Report | Summary | Commission press release