The gap between the wealthy ‘haves’ and the less fortunate ‘have nots is continuing to imcrease with estimated wealth more than six times GDP (630 per cent), more than 50 per cent higher than when the last time Labour came into power in 1997
The report by the Resolution Foundationfound that families in the top tenth of the wealth distribution have £1.3 million more in wealth per adult on average than those around the middle . Yet, despite huge increases in wealth, revenues raised from wealth-related taxes have barely moved, at around 3 per cent of GDP.
Tapping unearned gains on wealth could be an appealing option for the Government, if it wants to avoid sharp cuts to some public services and maintain commitments not to raise the headline rates of taxes on income. To that end, reforms to Capital Gains Tax and Inheritance Tax could collectively raise almost £10 billion.
Their report found that not everyone has been able to join in on Britain’s wealth boom and that historically low levels of active saving have left many families with small financial buffers.
In June, three-in-ten Britons said their household would be unable to cope with an unexpected bill of £850. Many workers are also failing to save enough in their pensions, despite the success of auto-enrolment during the 2010s.
The new Government faces no shortage of economic challenges. Public services are under severe pressure, while households are still recovering from a cost of living crisis that saw prices rise by 22 per cent in just two years, all against a backdrop of low wage growth and chronic under-saving.
The Government says the report will need to think carefully about policy to support household finances.
And, on the back of the biggest tax-raising Parliament since the Second World War, it’s time to reconsider the role of wealth taxes in today’s system. On both fronts, it’s critical to understand the nature of household wealth in Britain today and its main drivers over the recent past.
“When it comes to household wealth, we are facing some big challenges. The cost of living crisis shone a spotlight on the importance of financial resilience and, with the tax burden approaching a historic high, the issue of raising tax fairly is more important than ever. But the new Government has the opportunity to take these challenges head on. Unfortunately, there are no silver bullets, and the solutions will create winners and losers. Progress will need to be made carefully and in full consideration of the nature of household wealth in the UK today.” says report author Simon Pittaway
