Will Hutton gives us wibble
Britain’s wealth gap is growing. Its malign effects seep into all aspects of life. It’s a national disaster
Will Hutton
This is from a new report from the “Fairness Foundation” where:
The great merit of the Wealth Gap Risk Register report (full declaration: I chair its editorial advisory board)
Hmm, well. From the report itself:
Rising wealth has created large gaps between those with wealth and those without it. While wealth inequality (understood in relative terms, as measured by the Gini coefficient) has remained relatively stable over recent decades (albeit at a much higher level than income inequality), the wealth gap (the absolute difference in wealth between rich and poor households) has increased significantly, because of rising asset values, and is likely to get worse.
That is, wealth inequality hasn’t increased at all. Their measure of the number of £s that makes up the gap is elsewhere referred to as since 2006. And we’ve had 68% inflation since then. So, yes, measured by pounds the gap is larger and that’s because each pound is smaller. We might well complain about that much inflation but the effect upon the gap perhaps not so much.
There’s also this:
Private wealth in the UK has experienced a remarkable surge in recent decades, with total household wealth more than doubling in recent years, from around three times national income in the 1980s to almost eight times national income today (£14.6 trillion).
True. Some 85% of that household wealth is house prices and pensions. House prices we know how to solve - build more houses. Pensions, well, why would we want to solve that? We really have changed lifespans since the 1960s (the relevant time for thinking about when people will save for their pensions) and we’ve gone from an average of three or four years of retirement that need to be financed to 20 or 30 years of it. So, obviously, people are rationally saving more of their current income to finance those golden years. This isn’t a problem that requires a solution.
We’d also make our now ritual complaint that any analysis of wealth that doesn’t include lifetime effects upon pensions wealth - those 55 to 65 are going to have the most of it, those 20 none - isn’t worth the electrons being spaffed upon it.
We’d also call this astonishing:
While households face a cost-of-living crisis with falling real incomes, many large companies are transferring record profits to shareholders. Dividends and share buybacks (two ways by which public companies return excess profits to investors) reached record levels in 2022, totalling £137 billion. These mechanisms enrich shareholders at the expense of the entire economy, as profits are ploughed into cash transfers rather than productive investments. A 1% tax on share buybacks (like the one implemented by the Biden administration) for FTSE-listed companies could raise £225 million annually. An additional £6 billion per year could be raised if taxes on dividends were levied at the same rate as taxes on income.
That money should move out of mature businesses so it can be redeployed seems obvious to us but perhaps not to some. But the ignorance of thinking that dividends are currently undertaxed relative to income. They are first taxed at the corporate level then taxed again at the individual. The combination - at the top end - ends up being higher than income tax rates.
So, you know, no. Back to Hutton:
Again, there is a spillover on cultural values and priorities; vocational training has a permanent Cinderella status.
Good grief. Britain used to have an organisation devoted to that, called the Industrial Society. Which was taken over by one Hutton, W, renamed the Work Foundation and we’re still awaiting the publication of the report into how it managed to need rescuing.
As damagingly, it sends a signal that the route to wealth is not the gruelling business of starting and growing a value-creating company, it is to buy and sell property,; the quintessential example, buy-to-let empires.
The Telegraph seems to think that Hutton’s late wife ran a buy to let empire. Ho Hum again.
But back to the base idea of this report and complaint. Wealth inequality hasn’t changed therefore we must do lots of things about wealth inequality. Fortunately, Hutton’s column is a weekly one so we’ll soon gain a top up to the nation’s vital supplies of Willy Wibble. Aren’t we the lucky ones?
Tim Worstall