A new report from the Resolution Foundation tells of a widening of the wealth gap in the UK during the COVID-19 pandemic. The short summary that follows is indebted to Larry Elliot’s summary on 12 June in the Guardian.
In terms of wealth, the richest 10% of the population have gained £50,000 on average, dwarfing increases for the poorest third. This is due very largely to the reduction in spending opportunities and a rise in house prices during the various lockdowns, though the benefits were skewed to the richest by a ratio of more than 500 to 1. Jack Leslie from the RF is quoted as saying that it was unusual for wealth to increase during a recession but the impact of events during 2020 and 2021 had ‘turbo-charged’ the gap between rich and poor. The RF report found that the average household had enjoyed a windfall of £7,800 per adult during the crisis, the first time wealth has increased during a recession since the mid-1940s. Leslie: ‘the Covid-19 crisis has seen a highly unusual combination of a sharp reduction in economic activity, and a sharp increase in household wealth. Many families have been forced to save rather than spend during lockdowns, while house prices have continued to soar even while working hours have plummeted.’
Britain experienced its biggest one-year fall in output in 300+ years in 2020, but since the beginnings of the crisis in February 2020 total household savings have risen by £200bn, household debts (excluding credit cards) have decreased by about £10bn, and house prices – which fell by an average of 22% over the previous four recessions – have risen by 8%. Overall, total UK wealth has increased by £900bn to £16.5tn during the pandemic, but the poorest households were more likely to have run down rather than increased their savings. Nor have they shared in the house price boom because they were less likely to own a home.
The richest 20% of households were four times as likely to have increased their savings during the crisis as the poorest 20% of households (47% versus 12%), and 2.5 times as likely to have reduced their debts. The RF said this reflected pandemic-induced spending reductions being concentrated among those on higher incomes. The adults in the richest 10% of households now have wealth of £1.4m each following the £50,000 increase during the crisis, while the poorest 30% gained an average of just £86 per adult in additional wealth.
The wealth gap between the average and the wealthiest 10% of households has increased between by £44,000 during the crisis (this on top of a £350,000 increase between 2006-08 and 2016-18). During the same period, the gap between the average and the poorest 10th of households has also grown, by £7,000 (a bigger increase than seen during the whole 2006-08 and 2016-18 decade).
Martin Haz, chief executive of Standard Life Foundation (who partnered the RF in the study) is reported as saying: ‘the rise in wealth for those at the bottom has been paltry even taking into account the £20 a week increase in universal credit payments to those on the lowest incomes. Wednesday’s announcement of the cut to universal credit risks further widening the wealth divide which ballooned during the pandemic.’ There are no surprises here, but documenting inequality remains an important task. My own analysis of what is happening and why, incorporating an account of underlying structural mechanisms (of class and state) need not be repeated here.