Pandemic has ‘turbo-charged’ gap between rich and poor
Research by the Resolution Foundation found the richest 10 per cent of families have made more than £50,000 over the past year, while the poorest 30 per cent of households have seen an average wealth increase of just £86 per adult over the course of the pandemic.
The report, published in partnership with the Standard Life Foundation, found the average “middle wealth” family saw their wealth increase by £7,800 per adult over the past year.
Despite the UK experiencing the biggest economic contraction in over three centuries last year, levels of household wealth increased rapidly, in stark contrast to the falls seen in past recessions, the study said.
Total household savings are £200bn higher than they were pre-crisis, household debts (excluding credit cards) have fallen by around £10bn, and house prices – which have fallen by an average of 22 per cent over the previous four recessions – have risen by 8 per cent since February 2020.
However, lower income households were more likely to see savings decrease, and were less likely to pay off debt, than families higher up the income distribution.
The gap between the average and the wealthiest 10 per cent of households has increased by £44,000 during the crisis, while the gap between the average and the poorest tenth of households has also grown by £7,000.
The Resolution Foundation said plans to cut Universal Credit by £20 a week in October will fall largely on households who haven’t seen their wealth increase.
Jack Leslie, senior economist at the Resolution Foundation, said: “The Covid-19 crisis has seen a highly unusual combination of a sharp reduction in economic activity, and a sharp increase in household wealth. Many families have been forced to save rather than spend during lockdowns, while house prices have continued to soar even while working hours have plummeted.
“But not all households have benefitted from this unlikely wealth boom. The poorest households are more likely to have run down rather than increased their savings, and haven’t shared in Britain’s house price bonanza as they’re less likely to own a home in the first place.
“As a result, the rising wealth and widening wealth gaps that marked pre-pandemic Britain have been turbo-charged by the crisis.”
She added: “With policy makers facing many tough decisions in the Autumn – from protecting households as unemployment rises to paying for a decent system of social care – they can no longer afford to ignore the dominant role wealth is playing in 21st Century Britain.”