We don't believe the Resolution Foundation in the slightest

The Resolution Foundation tells us that the wealth gap has soared in the course of the pandemic and therefore something must be done about it. One of the things they recommend is exactly why we don’t believe a single word of the analysis:

The distribution of debt and savings changes provides extra justification for keeping the pandemic support of an additional £20 per week to UC

Changing universal credit quite obviously changes the wealth distribution. £20 a week is £1,000 or so a year, capitalise that (using the method Saez and Zucman use in their iconic paper) and that’s a change in wealth of about £20,000 per recipient. More if we use current interest rates to discount future income.

The way the Resolution Foundation - and to be fair to them this is true of the entire field measuring the wealth distribution - measures wealth the wealth distribution isn’t changed in the slightest by this. Which is a basic problem with the measurement of the wealth distribution of course.

We do not include any of the things which government does which reduces wealth inequality in our estimation of wealth inequality. This also means that anything government does to reduce wealth inequality doesn’t change wealth inequality as it is measured.

We move vast sums from richer to poorer each year. Total social spending is some 20% of GDP - a fifth of everything in the economy. Capitalise that again, using the approved method, that’s about £8 trillion in wealth moved around out of total household wealth of about £15 trillion. Absolutely none of this, at all, is included in the usual estimations of the wealth distribution.

We don’t believe the usual stories about the wealth distribution. Simply - and accurately too - on the grounds that it takes no account whatsoever of what is already done to reduce wealth inequality. Once someone comes back with estimates that include the effects of the welfare state then we’re willing to start discussing whether more should be done - or perhaps, less.