The wealthiest in society are much richer than Prime Minister Boris Johnson’s government would have everyone believe.
New research highlighted by the Resolution Foundation estimates that official government figures massively underestimate the growing wealth of the richest in the UK. A huge £800 billion, or five percent of aggregate wealth in the UK held by the wealthiest families, was missed by the latest Office for National Statistics (ONS) figures.
The findings reveal that the level of inequality between rich and poor, which rose sharply after the 2008 banking crisis, is much wider than previously thought. The wealthiest one percent owns 23 percent or almost one quarter of the country’s aggregate wealth, rather than 18 percent (less than one fifth) reported by the ONS. During the last year of the pandemic, when so many were plunged into a health and economic catastrophe—with at least 95,000 lives lost already—the richest continued to pile up their wealth hoard.
Resolution Foundation economist Jack Leslie said, “The UK has undergone a wealth boom in recent decades, which has continued even while earnings and incomes have stagnated. But official data has struggled to capture these gains, and misses £800bn of assets held by the very wealthiest households in Britain.”
Danny Dorling, an expert on inequality, and Halford Mackinder Professor of Geography at the University of Oxford, commented, “The more closely researchers look into the wealth of the best-off 1%, the greater the slice of the cake we find they have taken.”
The Resolution Foundation is a London-based thinktank that declares as its’ aim the improvement of the living standards of those on low to middle incomes. The research it analysed was conducted by the UK Wealth Tax Commission, which compiles data to “assess the practical and conceptual arguments for net wealth taxes.” The Wealth Commission was formed in the Spring of 2020 by a team of academics from the London School of Economics and Warwick University, with close links to the Resolution Foundation.
There is a huge discrepancy between official government figures and statistics produced by the Sunday Times Rich List, which provides an estimate of the value of the wealth of the richest 1,000 families in the UK. Last year it listed 147 billionaires. The newspaper only records known assets of its listed 1,000, and last year their wealth was recorded at £742.6 billion.
The problem with the ONS figure, explains Resolution Foundation, is that “capturing the very wealthiest families in a survey… is hugely challenging: families are under no legal obligation to respond and there is little incentive for them to do so.” The ONS therefore fails to include the wealth of the rich resulting from the burgeoning value of assets in property, shares and land.
The Resolution Foundation rectifies this discrepancy. Its data analysis reveals the changing composition of the increasing wealth of the rich. It notes that “aggregate wealth in the UK has risen fast over the past few decades—from around three times national income in the 1970s to over seven times national income [total economic output] today.” The rising wealth has occurred as a “result of passive accumulation [not associated economic activity].”
The wealth of the richest one percent globally is of stratospheric proportions. On January 7, Tesla boss Elon Musk overtook Jeff Bezos as the richest person in the world. Musk has a net worth of $185 billion—up seven-fold from $27 billion in 2020.
At the other end of the scale, in Britain there were 14.3 million people living in poverty in 2019. This year it is predicted that almost 40 percent of children in the UK will be in poverty.
When Thatcher became Prime Minister in 1979 corporation tax stood at 52 percent and when she left office in 1990 it was 34 percent. In the decades since it has been reduced to 19 percent. In 1949, the top rate income tax was 75 percent. Today those earning over £150,000 pay a tax rate of 45 percent.