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Nearly a quarter of all household wealth in the UK is held by the richest 1% of the population, according to alarming new research revealing a historic underestimation of inequality in the country.
The study found that the top 1% had nearly £ 800bn more wealth than official statistics suggest, meaning that inequality has been much higher than previously thought. The researchers said the additional billions were a conservative estimate and could well be more.
The revelation comes amid calls for ministers to consider a new wealth tax or substantial reforms to existing taxes on the wealthy, to play a bigger role in helping the country deal with the fallout from Covid and the costs of an aging population. Demands for a mansion tax are also being revived.
About 5% of the total wealth held by the richest households has been lost by official measures, researchers from the Resolution Foundation think tank found. He discovered the missing wealth by comparing official statistics compiled by the Office for National Statistics with data from the Sunday Times Rich List.
It found that official data had a hard time capturing the assets of very wealthy households. Taking into account the newly discovered billions has a significant impact on the share of total UK wealth held by the top 1%, increasing it by more than a quarter, from 18% to 23%.
Wealth inequality narrowed for much of the 20th century, and the share of wealth held by the richest 10% fell from more than 90% to around 50% in the 1980s. However, the Resolution Foundation said that had been stable or slightly increased in recent decades.
Wealth has been driven by rising asset prices since the financial crisis, such as skyrocketing values of homes, land, or stocks, rather than active savings. Between 76% and 93% of financial wealth gains since the crisis come from increasing the value of assets such as homes.
Rishi Sunak, the chancellor, has faced recent calls to enact a one-time wealth tax on some households in a move that could raise up to £ 260 billion for post-Covid recovery.
The call came from the Wealth Tax Commission, made up of leading tax experts and economists convened by the London School of Economics and Warwick University. The group said targeting a one-time tax on the wealthiest households would be the fairest and most efficient way to raise taxes in response to the pandemic.
In November, a study commissioned by the chancellor also recommended reforming the capital gains tax by reducing the annual allowance. The measure, backed by the independent Tax Simplification Office, would affect wealthy people with assets such as second homes.
Even before Covid, the Treasury faced large spending demands in areas such as social care. Health and wellness spending is projected to increase by £ 38 billion a year by 2030. The Resolution Foundation said wealth taxes “should play a bigger role in the economy during the 2020s.”
“The foundation is asking the chancellor to embark on the biggest estate tax reforms in a generation, including by restricting capital gains and estate tax breaks (collectively raising several billion), and adding a 1% municipal tax supplement on properties worth more than £ 2 million (raising more than £ 1 billion). “
Jack Leslie, an economist at the foundation, said: “The UK has experienced a wealth boom in recent decades, which has continued even as earnings and income have stagnated. But official data have struggled to capture these gains and lose £ 800bn of assets from Britain’s wealthiest households.
