The publication on Sunday of the Rich List, Britain’s 1,000 richest people, provided some eye-popping figures. With a combined wealth of £547 billion, their wealth increased by a staggering £28 billion in the last year alone, or £77 million per day. It’s an awful lot of money, but that’s not the real issue.
The richest 1,000 now have as much wealth as 40% of the UK population. People talk of the ‘rich and the rest’ as distant relatives, but really we’re living on different planets. Let’s consider just the increase in the wealth of the richest 1,000 people last year. Imagine how £28 billion might be used differently if it was channelled towards solving social ills.
Perhaps the most basic need of all is shelter. Many people struggle to keep a roof over their heads. Others continue to wrestle with their council tax bills. Even those lucky enough to own their own home find that their children may not be so lucky; with rental costs rendering them unable to save for a deposit. An increase in wealth of £28 billion could pay a year’s rent for over 2.5 million households. Alternatively, that’s a lot of houses being built.
This gulf in material wealth and income isn’t a reflection of people’s natural talents. Put simply there is nothing natural or defensible about such extreme inequality. In fact more than £14bn of that £28bn increase went to people in the property business.
Last year Thomas Piketty highlighted the danger of increasing returns to wealth. Since then a new paper further diving into the detail of the wealth divide has found that most of Piketty’s findings can be attributed to gains in property wealth. As house prices have risen those with the most have seen massive gains whilst others struggle to afford somewhere to live.
It’s also important to remember that the UK’s extreme housing costs are also influenced by the rich. The data shows a clear link between difficulty in getting planning permission in order to build more houses (which would eventually lower costs) and the wealth of an area. Places with higher incomes and higher rates of home ownership are more likely to reject applications for planning permission. This appears to be a clear case of people with power and privilege using that power to prevent others from having the same opportunities.
One of the key solutions to tackling wealth inequality will involve building more housing and tackling the inequalities of power embodied in current planning laws. Another key solution will be reforming our property tax system. Council tax (our main property tax) is regressive hitting the poorest far harder than the richest. Any party serious about addressing inequality will need to change this.
Tim Stacey, Senior Policy and Research Advisor