A major new report on income and wealth inequality in Britain is published today by UK 2040 Options and The Resolution Foundation.

The report combines data, analysis and policy expertise from subject experts working on wealth and income inequality.

The report shows that:

• Total wealth for the richest 10% of Britons grew 25 times faster than for the poorest 30% between 2006 and 2020;
• Britain’s absolute wealth gap between the richest and the poorest is among the widest in the OECD, second only to the USA;
• The richest 1% earn 13% of the UK’s total income, just below the record levels seen before the 2008 global financial crisis;
• Household income in the richest part of England (South East) is 25% greater than in the poorest part (West Midlands);
• Around 36% of people born in the 80s own their own home by age 30 compared with 56% of the 1970s cohort;
• Real wages have grown at just 0.06% per year since 2009.

The report, which follows UK 2040 Options publications on productivity and tax, reveals stark differences in household wealth among different ethnic groups. Median wealth (including assets) for a white British household is £313,900 but it is just £85,900 for Black Caribbean households.

Subject experts from across a range of sectors contributed to the report. There was broad agreement that tax is “key and ripe for reform”.

National wealth – a mix of financial, property and state assets – is seven times the size of the economy, a gap that has doubled since 1991. This is not a result of households actively saving. Instead, much of this wealth is ‘unearned’. A reformed capital gains tax was described by one expert as a “no-brainer”. The report includes other options such as equalising the tax treatment of earned and unearned income (or income whatever the source).

In a survey of experts working in the field (included in the report), insecure work and pay was ranked as the number one policy issue that needs to be resolved to mitigate the impact of income and wealth inequality on people’s outcomes. Stagnant wages, exploitative practices and insecure contracts are deeply embedded features of the labour market. Options to tackle this aspect of income inequality include sectoral agreements covering fair pay and conditions, improving relations with unions and beefing up employment regulations.

The report highlights that positive change is possible and that it’s happened before. It cites an example from the early 2000s, when there was a clear policy focus on reducing poverty among pensioners. This focus built cross-party support for pensions to be linked to earnings, and helped to shift the dial on poverty among older people. On income, the national minimum wage is now considered to be one of the UK’s modern policy successes and has made a big difference to wage inequality and low pay.

Alex Burns, Director of UK 2040 Options said: “Inequality is holding Britain back but this report shows that governments have options. We know that income and wealth inequality affects people’s ability to save, own a home, access basic goods, and pass on opportunities to their children. All parties have a strong focus on growth and of course that’s essential. But who gains from that growth is just as important to consider - to make sure that a rising tide can lift all boats.”

Mike Brewer, Deputy Chief Executive at the Resolution Foundation, said: “A concern about high income or wealth inequality is not just the politics of envy. Unequal societies tend to be less healthy, less trusting, and have more crime and violence. A vibrant economy doesn’t have to mean high inequality – it can just as well be due to market failings and inefficiencies that are a drag on economic growth. There is also developing evidence that high levels of inequality reduce social mobility. So taking steps to reduce the extent of income and wealth inequality, and to limit its damaging impacts, will be an essential challenge of the next two decades.”

Note to editors

• Embargoed reports ‘The Fundamentals’ and ‘The Choices’ are accessible here. The charts slidedeck is here (if you need code or files just let us know)
• The URL to the report is here (it will go live when the embargo lifts) https://options2040.co.uk/wealth-and-income-inequality/
• For more information on the analysis or to speak to one of the experts involved, please contact Mark Byrne, Head of Media, on 07745234909 or [email protected]
• UK Options 2040 is brought together by Nesta and the Behavioural Insights Team, working closely with a range of expert partners. Lord Gus O’Donnell is project sponsor.
• For more information on the analysis or to speak to one of the experts involved, please contact Mark Byrne, Head of Media, on 07745234909 or [email protected]

As part of the research for the report the UK 2040 Options team and the Resolution Foundation examined the fundamentals of wealth and income inequality. They then conducted a Delphi exercise where they surveyed people deeply engaged in thinking about wealth and income inequality. Finally, the team convened a group of experts to talk through the big choices. The experts at the roundtable were:

• Alex Beer – Nuffield Foundation
• Alfie Stirling – JRF
• Ashwin Kumar - Manchester Metropolitan University
• Baroness Louise Casey
• Carys Roberts – IPPR
• David Halpern – the Behavioural Insights Team
• Karen Rowlingson – University of York
• Michael Vaughan – the London School of Economics and Political Science
• Mike Brewer – Resolution Foundation [Chair]
• Mubin Haq – Abrdn Financial Fairness
• Professor Kate Pickett – University of York
• Will Snell – Fairness Foundation

The Fundamentals were produced by Nesta research teams, with input from Resolution’s Chief Economist and Deputy Chief Executive. It completed the Fundamentals through a comprehensive literature review of analysis undertaken in this domain, including drawing on analysis from Resolution Foundation, IFS, JRF, Demos and the OECD to understand the current state of wealth and income inequality in the UK, and what it may be in 2040. For the Wealth Fundamentals, it drew heavily on ONS’ Wealth and Data Survey, which is current through to 2020, using predictions from IFS, including analysis undertaken by the IFS as part of the Deaton Review of Inequality and Resolution Foundation to cast forward where possible. For the income Fundamentals, it drew from DWP’s Households Below Average Income dataset, as well as IFS’ Poverty, Living Standards and Inequality datasheet (which uses a mix of official and its own data). Where international comparisons were made, it drew on OECD data.