New statistics from the ONS, show that there has been an increase in wealth, but also an increase in wealth inequality, with the richest seeing large gains in the value of their pension wealth.
- Total household wealth in Great Britain was £10.3 trillion in 2008/10, This is a rise of 12.9 per cent since 2006/08 when it was £9.1 trillion
- Total net financial wealth for all private households in Great Britain increased by £54 billion (5.3 per cent) to £1,085 billion between 2006/08 and 2008/10.
- The wealthiest 10 per cent of households were 4.3 times wealthier than the bottom 50 per cent of households combined
- In 2008/10 nearly a quarter (24.3 per cent) of households had negative net financial wealth.
- UK wealth. Source: UK Communities – housing wealth pdf
Reasons for Wealth Inequality in UK
- Pension inequality. In recent years, richer households have been able to increase their private sector pension contributions. (Private pension wealth makes the largest contribution to total wealth for the wealthiest 30 per cent of households.) The increased importance of pensions has occurred despite poor stock market returns reducing value of some pensions and asset trusts.
- Property Prices.
Since the 1960s, UK house prices have increased much faster than the rate of inflation. Property owners have seen a marked increase in household wealth through rising property prices. This has increased gap between property owners and non-property owners.
- Ability to Save. People on low income rarely have the ability to save. They have a very high marginal propensity to consume. People on higher incomes have a lower marginal propensity to consume, after buying necessities, they have an ability to save (e.g. for private pensions and personal savings account.
- Increased income inequality. Since the 1970s, there has been a widening of income inequality. This has contributed towards greater wealth inequality. See also: rising income inequality
Wealth Inequality in London
Wealth inequality varies throughout different regions. Because London property prices are higher than national average then wealth inequality is much greater in the capital. According to In Injustice: Why Social Inequality Persists published by Policy Press, Danny Dorling.
In the capital the top 10% of society had on average a wealth of £933,563 compared to the meagre £3,420 of the poorest 10% – a wealth multiple of 273. (London’s richest)
Impact of Wealth Inequality
In 2008, a female born in London’s exclusive Kensington and Chelsea could expect to live until 88 and nine months – a year earlier she would have reached 87.9. In Glasgow, by contrast, where women were expected to live until 77.1 In 2007, the rise was only a month to 77.2 in 2008.
Definition of Household Wealth
- Sum of property wealth (net), financial wealth (net), physical wealth and private pension wealth.
Definition of Financial Wealth
- Net financial wealth = gross financial wealth – financial liabilities.
- Gross financial wealth is the sum of formal financial assets (not including current accounts in overdraft) + informal financial assets held by adults + children’s assets + endowments for the purpose of mortgage repayment.
- Financial liabilities are the sum of arrears on consumer credit and household bills + personal loans and other non-mortgage borrowing + informal borrowing + overdrafts on current accounts.