The wealth gap in Britain expanded during the pandemic, according to a think tank report, with the richest 10% earning an average of 50,000, while the poorest third of the population grew dwarf.
The Resolution Foundation said wealth increased during the closure as a result of lack of spending opportunities and rising housing prices, but the benefits were skewed to the wealthiest people at a ratio of 500:1 or more.
The think tank’s chief economist, Jack Leslie, said wealth growth is rare during a recession, but the impact of the events between 2020 and 2021 will be to widen the gap between the rich and the poor.
The Resolution Foundation, which focuses on improving living standards for low- and middle-income families, said the report’s findings would force the government to reconsider its decision in September to scrap 20 people per week into universal credit.
According to a report created in partnership with the Standard Life Foundation, the average household per adult experienced a windfall of 7,800 during the first wealth growth crisis since the mid-1940s.
The Covid-19 crisis saw a very unusual combination of a sharp decline in economic activity and a sharp rise in household wealth. Many families are being forced to save instead of spending during lockdown, and house prices continue to soar while working hours plummet, Leslie said.
The UK suffered its biggest one-year decline in production in over 300 years in 2020, but since the start of the crisis in February 2020, total household savings have increased by 200 billion, household debt (excluding credit cards) has decreased by around 10 billion, and house prices have fallen by around 10 billion. Compared to the last four recessions, the figure is up 8%, down an average of 22%.
The think tank reports that total wealth in the UK increased from 900 billion to 16.5 trillion during the pandemic, but the poorest households were more likely to decline rather than increase their savings, and they did not share in the boom in house prices. You are less likely to own a home in the first place.
The result, Leslie said, has risen sharply due to the crisis, as the wealth gap, which is symbolic of Britain’s epidemic, has grown. Policymakers can no longer afford to ignore the dominant role wealth plays in 21st-century Britain as unemployment rises in the fall and faces many difficult decisions from protecting households from paying for an adequate social welfare system.
A fifth of the wealthiest households were four times more likely to increase their savings and 2.5 times more likely to cut debt during a crisis than one fifth of the poorest households (47% versus 12%). The think tank said this reflects the decline in spending caused by the pandemic is concentrated in the high-income bracket.
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According to the report, adults in the richest 10% of households each owned 1.4 million copies of wealth after an increase of 50,000 during the crisis period, while the poorest 30% earned an average of 86 per adult from that additional wealth.
The Resolution Foundation found that the wealth gap between the average and the wealthiest 10% of households increased by 44,000 during the crisis period (after an increase of 350,000 between 2006-08 and 2016-18). Over the same period, the gap between the average and the poorest one in ten also increased by 7,000 (a larger increase than seen for the entire period 2006-08 and 2016-18).
Standard Life Foundation’s chief executive, Mubin Haq, said: The increase in wealth for the bottom is modest, even considering a 20-per-week increase in universal credit payments to the lowest-income bracket. The announcement of cuts to UC on Wednesday risks further escalating the property division that has swelled during the pandemic.
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