An online resource that collates evidence about the impacts of wealth inequality, how to reduce it and mitigate its impacts, and public attitudes to all of the above
By Jack Jeffrey and Will Snell | 15 OCTOBER 2024
Britain is a wealthy country, but its wealth is increasingly concentrated in few hands. While wealth inequality has remained fairly stable in relative terms over recent decades (with the richest 10% owning about half of the UK’s wealth), substantial rises in the value of assets have dramatically increased the absolute wealth gap between the richest and poorest households to a level that is second only to the USA, among OECD countries. As a result, wealth – or its absence – has a bigger impact on people’s lives than ever before, from their housing to their health.
The fact that much wealth is unearned raises serious questions of fairness, but the size of the wealth gap also has demonstrably negative impacts on our economy, society, democracy and environment. Contrary to the orthodox idea that inequality is necessary for a dynamic economy, growing evidence suggests that wealth stratification undermines productivity and growth. It also reduces social cohesion, damages faith in democracy, and makes it harder to reach net zero. What’s more, as the size of the wealth gap is forecast to grow over the coming decades, the risk is that these existing impacts, which also exacerbate each other, will only get worse over time.
There is limited policymaker and public understanding of the causal relationship between the wealth gap and these negative ‘spillover effects’, so our Wealth Gap Risk Register sets out to communicate the evidence base for the impacts of the wealth gap as clearly and concisely as possible through a range of powerful and accessible data visualisations. The report also looks at the evidence base for the policy solutions that will either reduce the wealth gap or mitigate its impacts on other areas, and at the evidence on public attitudes to both the problem and the solutions (including new polling and focus group research on public understanding of the impacts of wealth inequality).
Update, December 2024: We have produced some short, two-page PDF briefings on how wealth inequality impacts on each of the government’s missions, and what we can do to mitigate these impacts. The briefings are primarily designed for parliamentarians, but we hope that they will be more broadly useful.
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Executive summary
Why wealth inequality is a risk
When we think about identifying and mitigating risks, there’s a natural tendency to focus on immediate symptoms rather than underlying causes. At a governmental level, the UK’s national risk register has recently narrowed its focus to ‘acute’ risks (“discrete events requiring an emergency response”, such as terrorism and natural disasters), sensibly placing ‘chronic’ risks (“long-term challenges that gradually erode our economy, community, way of life, and/or national security”, such as the climate crisis or antimicrobial resistance) into a separate chronic risk register, which is currently in development. But it does not automatically follow that the underlying causes, the structural factors that create or exacerbate many risks, will receive the attention that they deserve.
We think that inequality, especially wealth inequality, is a significant driver of strategic risk to the UK as a whole, and that this is seriously underpriced – by politicians and officials, by the private sector, and by all of us. Wealth inequality seriously exacerbates a wide range of arguably existential risks, such as social unrest, failure to act on the climate crisis, economic stagnation and the decline of democracy. And wealth inequality is a major risk to the achievement of all five of the government’s missions.
This report is called the Wealth Gap Risk Register. This arguably understates the problem, because the negative impacts of wealth inequality aren’t just hypothetical future risks, but rather impacts that have already been realised. However, there are plenty of reasons to expect that the wealth gap in the UK will continue to widen over the coming years, so the obvious risk is that each of these existing impacts worsens over time. And since many of these impacts interact and reinforce each other, just as different forms of inequality intersect and exacerbate each other, it is not unrealistic to speculate that we could see the negative impacts of wealth inequality snowballing in the UK over the next couple of decades, and beyond, if action is not taken to reduce the wealth gap or to mitigate its impacts (or ideally both).
The argument in a nutshell
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. The size of the absolute wealth gap in the UK is second only to the US, among OECD countries.
Differences in wealth between generations are also at unprecedented levels. While most of the 20th century saw each generation accumulating more wealth than their predecessors, this trend has stagnated or reversed since the baby boomers and is gathering speed in the wrong direction.
The transformation of the UK economy towards asset control and rent-seeking behaviour – away from wealth creation towards wealth extraction – has consolidated resources into fewer hands and shifted economic activity away from productive enterprise. This has concentrated UK markets, restricted innovation and technological progress, reduced economic dynamism, and severely limited economic growth and the prospects for future growth. Whereas wealth creation increases the size of the cake, wealth extraction simply gives more of the existing cake to those who already have the biggest slice (upwards rather than downwards redistribution), and sometimes it makes the cake smaller at the same time.
Much wealth in UK is unearned, flying in the face of the dominant meritocratic political and media narrative that justifies the accumulation of wealth as a consequence of effort and talent. The large increase in asset prices over the past decades has largely been the result of passive factors. According to the most recent statistics, inheritance and gifts have doubled over the past two decades to £100 billion, and are expected to double again by 2040. Wealth transfers between generations will likely exacerbate existing social and economic inequalities. People’s life prospects weren’t very fairly distributed when they were mostly defined by what they earned; today, when what people own (or inherit) is much more important in influencing their life chances than what they earn, the situation is even less fair.
While there is limited public awareness of the ways in which wealth inequality undermines economic growth, and the meritocratic mindset retains a strong grip on worldviews, most people have an intuitive understanding that the increasing wealth gap is unfair in terms of both its causes and its consequences. Indeed, the growing level of popular disengagement and distrust with politics is in part driven by this awareness, and is already damaging our democracy and social cohesion, with a real risk of much worse to come in the future.
The problem is solvable. Shifting the UK's tax burden towards wealth could curb today’s excessive levels of wealth concentration. Reforming existing taxes on wealth would be more politically feasible than introducing a new wealth tax, but less effective at tackling wealth inequality. But taxing wealth is not the only means to curb the wealth gap. Governments can share wealth more broadly at source, through mechanisms like sovereign wealth funds or regulatory approaches such as mandating worker representation on company boards. And there are many opportunities to mitigate the impacts of the wealth gap, such as cleaning up lobbying and political donations, or strengthening the social safety net. Case studies from other countries provide a host of practical, popular and evidence-based approaches to curbing wealth extraction and promoting inclusive and sustainable economic growth.
What’s going on with the wealth gap?
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). This explosion in wealth has been largely driven by passive factors, such as substantial increases in asset prices (which account for over 50% of wealth accumulated since 2006-08).
Francis Bacon, who coined the aphorism that “wealth is like muck – only good when it is spread”, would not be impressed by the extent to which this wealth is shared across the population. The distribution of wealth in the UK is much more unequal than income. This stark contrast is vividly illustrated by the Gini coefficient. Income inequality in the UK hovers around 35 on the scale (where zero represents perfect equality and 100 perfect inequality), but wealth inequality often surpasses 70 on the same scale, largely because wealth can be built up incrementally and over long periods.
Britain is not a complete outlier in this regard. Like other European nations, it experienced a dramatic decline in wealth inequality during the 20th century. Between 1900 and the mid-1980s, the share of total wealth held by the top 1% fell from roughly 70% to 20%. Since then, wealth inequality has remained relatively stable, with the richest 10% of families consistently owning just over half of total wealth, in line with the OECD average. However, a dramatic rise in asset prices, coupled with huge disparities in asset ownership, has led to a substantial increase in the absolute gap in wealth between households.
The gap in total wealth between the top 10% and bottom 10% in the UK increased by 48% between 2011 and 2019 (from £7.5 trillion to £11 trillion), while the equivalent gap between the top 10% and the middle 10% increased by 49% (from £7.3 billion to £10.8 billion). As well as growing over time, the UK’s wealth gap is high by international standards; the size of the absolute gap between the wealthiest 10% in the UK and the bottom 40% is second only to the US, among OECD countries.
Wealth inequality also drives and magnifies inequalities across multiple other axes. Many minority ethnic households own substantially less wealth than their white British counterparts; a typical person from a Bangladeshi, black Caribbean or black African background has no significant wealth, in contrast to the typical white Briton, who has a household net worth of £140,000. This stark divide highlights deep-rooted historical and ongoing inequalities and discrimination, including (but by no means limited to) opportunities to accumulate wealth through home ownership. There is also an average wealth gap of over £100,000 between men and women, with an even larger divide among older age groups. Furthermore, wealth entrenches longstanding regional divides in England; the North is home to 30% of the population but only 20% of its wealth. These imbalances not only reflect historical inequalities but also perpetuate and deepen them over time.
People accumulate wealth throughout their lives. Naturally, older people will have more wealth than younger people. However, the significant disparities in wealth between generations exceed what might be anticipated from age differences alone. For most of the 20th century, each successive generation accumulated more wealth than the last, but starting with the post-war ‘baby boomers,’ each subsequent generation has amassed less wealth than the previous one did at the same age. According to the most recent statistics, people born in the 1980s had 20% less wealth in their early thirties than those born in the 1970s.
To provide some context for the Wealth Gap Risk Register, we wanted to answer one key question: how big is the wealth gap in the UK, and what has happened to it in the last few years? To find out, we asked Ben Tippet, an economist at King’s College London, to look at the data. The Flourish ‘story’ below sets out what he found. There’s a full methodology here.
What are the impacts of the wealth gap?
Many people lack a crucial financial safety net, with nearly a quarter of Britons either devoid of assets or grappling with debt. The poorest half of the population controls a mere 9% of the nation’s total wealth, and the poorest 10% of households have a total net worth (including work pensions, vehicles, and household items, as well as financial and housing wealth) of £15,400 or less. For many, physical possessions are their only form of wealth, leaving them vulnerable to unexpected events. Around one in twenty households have negative net financial worth.
Living without the stability of some form of financial cushion has significant health consequences, particularly for people’s mental wellbeing. People in debt are three and a half times more likely to experience mental health issues, such as depression, anxiety and stress, than those without financial difficulties. This can create a feedback loop whereby financial difficulties exacerbate someone’s mental health problems, and poor mental health worsens their financial situation. While the data on inequalities of healthy life expectancy and overall life expectancy is based on measures of deprivation that do not explicitly include wealth, there are a range of indirect links between wealth inequality and physical health that suggest that the relationship is more likely to be causal than simply correlational.
Wealth also provides opportunities. The UK has a highly stratified education system. There are many ways in which the wealthy can buy advantage for their children, obstructing social mobility, from sending them to private schools to buying private tutors and sharing access to ‘social capital’. And the absence of wealth is a direct barrier to opportunity, with deprived children on average 19 months behind their peers by the time they take their GCSEs; wealth inequality is a structural driver of this educational inequality, as explored in our earlier report, Deepening the Opportunity Mission.
Contrary to the orthodox idea that inequality is necessary for a dynamic economy, growing evidence suggests that wealth concentration significantly undermines productivity and growth. A lack of wealth creates barriers that prevents people from fully participating in the economy. This limits the potential pool of talent and innovation that contributes to economic growth. It can especially limit entrepreneurship, since wealth allows people to take the risks that are an inevitable part of building a new business. More broadly, an economy that is more focused on wealth extraction than wealth creation leads to much higher levels of financial engineering and speculation at the expense of investment in productive enterprise, which has a chilling impact on innovation, dynamism, productivity and growth.
These practices also perpetuate a cycle of precarity and disadvantage. Private equity acquisitions often prioritise short-term gains over long-term company viability and employee wellbeing, and rising corporate profits are used to boost executive rewards rather than wage increases or productivity enhancements. Combined with policies to suppress the power of trades unions, these mechanisms entrench hardship and poverty.
The recent surge in housing wealth has had complicated impacts. Before the 1980s, housing wealth worked to compress wealth differences, strengthening household capital formation and spreading it more equally. Since then, housing wealth has been a mechanism by which wealth disparities are exacerbated. While many homeowners have seen their wealth increase in recent decades, this trend has also created two big problems. Firstly, there has been a notable shift in investment patterns, with a disproportionate amount of capital flowing into housing rather than more productive sectors of the economy. The UK has one of the lowest levels of business investment in the developed world, contributing to its persistent productivity problem. Secondly, the rising cost of housing has put significant pressure on household budgets, reducing consumer demand in the wider economy. Millennials spend around 28% of their post-tax income on housing costs, whereas people of a similar age in the 1960s and 1970s typically spent 5-10% of their income on housing. The poorest fifth of households now spend over 39% of their income on housing costs, up from 30% two decades ago.
All of this not only make us less prosperous, less dynamic, and less innovative; it also leaves the UK more exposed to social and democratic decline. The social contract has been shattered by a combination of widespread poverty, a pervasive sense of insecurity among people most of the way up the income and wealth spectrum, and a concentration of wealth at the top of society. There is growing awareness not only of the scale of wealth inequality, but also of its unfair causes and its objectionable and damaging consequences, not least the way in which it undermines our democracy because of the numerous ways in which wealth can be used to wield political influence and power (as well as the other very obviously anti-social ways in which the wealthy often spend their money). Those with less wealth in the UK are more likely to believe they have no political influence and are much less likely to vote and participate in politics. Wealth inequality enables populists to harness popular resentment towards the wealthy so as to undermine faith in democracy, leading to a loss of state legitimacy. Sometimes this leads to political violence; it certainly seems likely that wealth inequality was an aggravating factor in the summer riots of 2024. Wealth inequality can thereby drive people towards more extreme political positions, damaging social cohesion and trust in politics, and increasing the risk of social unrest and, eventually, societal breakdown. There is also a strong positive correlation between wealth inequality and crime rates.
Wealth inequality presents a barrier to the achievement of net zero. People in the wealthiest 1% of UK society emit 25 times more carbon dioxide equivalent emissions per head than people in the poorest 10%, and consume vastly more resources. A 1% rise in the wealth share of the top 10% corresponds to a 0.67-0.84% increase in CO2e emissions. Meanwhile, the wealthy, whose financial interests (notably investments) are often closely aligned to those of fossil fuel industries, can use their influence on politics to block or water down action to reduce emissions. The impacts of wealth inequality on poorer households also make it harder to secure public support for an ambitious programme of decarbonisation.
Finally, the UK’s institutional context makes wealth inequality much more harmful than in other countries with similar levels of wealth inequality but much better guardrails around it. For example, many Scandinavian countries have a significant wealth gap but have robust measures in place to reduce the ways in which wealth can be used to influence politics or otherwise hoard privilege, and to increase the services, protections and opportunities provided to everyone in society. The UK does not.
The matrix below plots these impacts on two axes. Along the top, they are ordered according to the strength of the evidence for the impact of the wealth gap on the issue in question. Down the side, they are ordered by the strength of the relationship between the wealth gap and the issue in question (how strong an impact the wealth gap has on the issue). The impacts can be filtered using the buttons at the top by area, and also by the government’s missions (’growth’ and ‘building’ have been separated out, although they are both contained in the ‘growth’ mission). For background, see our methodology. Click on an impact to read about it, and click again for more detail, including links to source material(s).
What do people think about the wealth gap?
Wealth is now arguably the most important economic dividing line in the UK. Despite its crucial role in shaping life chances and society generally, public awareness of wealth inequality and understanding of its impacts remain limited and fragmented.
Multiple studies have found that the public consistently underestimates the extent of economic inequality, especially wealth inequality. Generally, people overestimate the wealth of the poorest decile and underestimate the wealth of the top decile. Why? Our perception of the world is heavily influenced by our immediate surroundings and social circles, which are generally more homogenous (and therefore more equal) than national distributions. As a result, our understanding of economic disparities is primarily shaped by our local experiences and observations, limiting understanding of wider societal differences.
It follows that understanding of how the economy works is low. Research by NEON found that there is an intuitive understanding among the general population that the UK economic system is inherently ‘rigged’. While people have a general sense of economic unfairness, they lack detailed understanding of the specific mechanisms and actions employed by wealthy elites to maintain and perpetuate this imbalanced system. This is not to say that people aren’t aware of, and worried about, some of the negative impacts associated with wealth inequality. Polling that we carried out for this report finds that crime, the cost of living, and poor mental health are strongly linked in people’s minds with the negative impacts of wealth inequality. There is much less awareness of the negative impacts of wealth inequality on growth, democracy, net zero and the tax system (although these issues were raised unprompted in follow-up qualitative research, as outlined in the attitudes section of this report).
These views often go hand in hand with underlying mindsets and worldviews that legitimise wealth inequality as the inevitable and even desirable by-product of a meritocratic system. The UK public has a high tolerance for wealth that has been earned through skill and hard work, and polling shows that people overplay the role of merit and undervalue the role of luck in influencing life outcomes. Wealth is often perceived as an ‘achieved’ and therefore legitimate attribute – a view that is enthusiastically promoted by a well-funded ‘wealth defence’ industry that lobbies hard to suggest that any measures to reduce wealth inequality are not only morally suspect but will damage growth and tax revenues, its arguments magnified by a media that is largely owned by wealthy beneficiaries of the status quo. In reality, however, about 60% of all private wealth in the UK is inherited rather than accumulated through work, and inherited wealth is becoming ever more important in determining people’s life chances and outcomes. The large and very unequally distributed transfer of inherited wealth that is set to take place over the coming decades will dramatically increase the size of the wealth gap, which is likely to harden public attitudes towards wealth inequality.
To find out what people think about the impacts of wealth inequality, we commissioned Focaldata to run a poll with a representative sample of 2,012 people from across the UK in July 2024.
What can we do about the wealth gap?
Unless actively checked, wealth inequality is self-perpetuating and the absolute wealth gap will continue to grow, because wealth begets more wealth. This process is amplified by the UK’s tax system, which under-taxes income from wealth compared to income from work. This creates an unfair disadvantage for people in employment compared to people who generate income from assets, and significantly reduces the amount of revenue raised through taxation to fund public services. There are a range of straightforward ways to tax wealth more fairly and effectively, such as equalising tax rates on capital gains with tax rates on employment income. There is clear public support for tax increases to fall on wealth rather than income.
Other proposals that look to redress the under-taxing of wealth, and to tackle wealth inequality, include a separate tax on stocks of (as opposed to incomes from or transfers of) wealth. A new wealth tax has moved from the margins of economic debate to a serious proposal to raise revenue and/or reduce wealth inequality. A one-off wealth tax could be justified as a response to a particular crisis, but would only temporarily reduce wealth inequality. An annual progressive wealth tax could be justified on the basis that it would permanently limit wealth inequality, but public and political support would need to be won, with a concerted effort to ensure that it was well designed and implemented (and not, as has happened in other European countries, watered down by successful lobbying to include loopholes that reduce the revenue raised and thus undermine its legitimacy).
Sharing wealth is another approach. Wealth concentration in the UK has been facilitated by an economic system that often incentivises and rewards the extraction of value from existing financial and corporate wealth, rather than encouraging the creation of new economic value. Mechanisms to prevent this, such as public wealth funds, would ensure that income-generating assets are shared more equitably, allowing all citizens to benefit from economic development. These funds would provide access to excellent investment returns for everyone and mitigate the effects of differential returns, where the wealthy enjoy superior rates of return compared to average savers, exacerbating existing inequalities. Sharing wealth broadly now can also help to mitigate the impacts of future trends that are likely to intensify wealth inequality, such as the increasing power and impact of artificial intelligence.
Another strategy involves conceding that wealth inequalities are entrenched, and focusing instead on mitigating the negative impacts of these inequalities. This has been done in some European countries, as outlined above, which means that there are more opportunities for the wealthy in the UK to buy advantage and influence than in many comparable countries. Many European countries have substantial safeguards to reduce the salience and importance of wealth in everyday life, such as more equitable education systems, a more comprehensive and generous welfare state, and measures to reduce the influence of wealth on politics such as more transparent lobbying regulations and stricter rules on donations.
The challenges posed by the wealth gap in the UK are significant and increasing, but not insurmountable. With sufficient political determination, a range of effective policies, regulations, and reforms can be sold to the public and implemented to address the risks posed by the wealth gap. These policies can support wealth creation, the reward of effort and a strong social contract, while reducing wealth extraction, the reward of unearned privilege and the gutting of public services and the social safety net.
However, left untouched, the wealth gap and its negative impacts on our economy, society, economy and environment will intensify over the coming years to the point where they could spiral out of control. As such, the wealth gap is a strategic risk to the UK, and it requires a multifaceted response across the whole of government, alongside the private sector and civil society. In the absence of such a response, the evidence cited in this report suggests that, contrary to what D:Ream promised, things can only get worse.
The matrix below plots these solutions on two axes. Along the top, they are ordered according to the strength of the evidence for the impact of the solution. Down the side, they are ordered by the impact of the solution. They are coloured by feasibility. For background, see our methodology. Click on a solution to read about it, and click again for more detail, including a link to the source material(s).
Methodology
This report is not an academic literature review or evidence synthesis; it was not put together using the tools or approaches of such exercises, in part because academic researchers are not the primary target audience (although they are an important audience). It is aimed instead at policymakers and those who formally advise or informally influence them. As such it prioritises accessibility over comprehensiveness, simplicity over complexity, breadth over depth. It is intended to show the overall sweep of the arguments, and does not claim to capture every aspect or nuance of them.
As such, those readers with expertise in any of the topics covered in this report will find plenty to get annoyed about. This report looks at both peer-reviewed academic literature and the ‘grey’ literature of think tanks and other groups. It coarsely summarises complicated and multifaceted research findings. The evidence base in this area is new and sometimes patchy, so there are rarely multiple studies on a single causal (or correlational) relationship to provide corroboration. Few academics would put their name to the unapologetically subjective exercise that we have undertaken to ‘score’ impacts of - and solutions to – the wealth gap based on the strength of the evidence base and the strength of the causal link (and feasibility, in the case of solutions).
Having said that, we have tried to be as rigorous as possible. All evidence is cited, and we have approached as many of the referenced authors as we can to check that they are happy with how their work has been presented in the report. We have cast the net as wide as possible within the various constraints upon us, when looking for available evidence. And we are intending to continue to keep this resource up to date, with an as yet undefined plan for releasing periodic revisions to it.
With that in mind, if you know of evidence that we have missed, or that has been or will be published after this report has gone live, or you think that we have made a mistake, or would simply like to point out a gap in the evidence base that we should be aware of or to comment on some other aspect of the report, please fill in this online form. Thank you!
A few specific points are worth mentioning in relation to our methodology:
- Data on wealth inequality in the UK: Most data is sourced from the Office for National Statistics’ Wealth and Assets Survey, a biennial longitudinal survey which started in 2006 and was last revised in 2018-2020. This survey measures the wealth of UK households and individuals in terms of pensions, property, financial and physical assets, and indebtedness. When comparing the UK to other countries, we have used the OECD’s Wealth Distribution Database, which collects information on household wealth across most OECD countries. In interpreting the WAS and WDD data, we have used in-depth analysis by the Resolution Foundation, the Institute for Fiscal Studies and the Institute for Public Policy Research.
- Income inequality vs wealth inequality: Most research on the consequences of inequality focuses on income inequality, or on deprivation (a measure that includes several things, but not wealth). Identifying the specific impacts of wealth inequality is therefore not always easy. Where there is research on this, we have referenced it. Where there is not, we have noted this, and have incorporated evidence on the impacts of income inequality if this seems reasonable to us, or left it out if it doesn’t. This is inevitably something of a subjective judgement. If you think that we have been too conservative or not conservative enough, please let us know using the form above.
- Extreme wealth vs wealth inequality vs wealth gap vs poverty: The scope of this report is about the impacts of, and solutions and public attitudes to, the wealth gap (defined in the report as the absolute gap in wealth between the wealthiest and poorest households in the UK). However, some of the evidence cited is based on wealth inequality (the relative difference in wealth between those two groups), and some is based on the concentration of (extreme) wealth at the top of society, or the absence of wealth among the poorest half of the population. This distinction is little more than semantic in some cases, but it does mean that the emphasis is slightly different from, for example, the excellent report on the Risks of Extreme Wealth that was published recently by Patriotic Millionaires UK and the Good Ancestor Movement.
- Global vs UK-specific evidence: The report focuses on impacts, solutions and attitudes around the wealth gap in the UK, not around the world. As noted above, there is often less evidence than we would like for the wealth gap in the UK, so in some cases we have cited non-UK evidence where there is a specific cross-country element, or arguments that can be applied to the UK based on empirical evidence from other countries. We also look at statistics from other countries for comparative purposes, and we recognise that wealth inequality in the UK cannot be considered in isolation from the rest of the world, in part because the wealthy are often globally mobile (albeit less willing to move purely for tax purposes than many would have you believe) and in part because wealth inequality in the UK exposes it as a country to global risks (and vice versa).
- Risks vs impacts: As noted in the executive summary, this report is not strictly a risk register, in that is focuses more on actual, realised impacts than on hypothetical future risks. However, we believe that all of the evidence suggests that these impacts will continue to worsen over time (in the absence of concerted efforts to mitigate them), in part because it looks overwhelmingly likely that the wealth gap will continue to grow over time, and in part because many of the impacts are mutually reinforcing and could therefore trigger a negative feedback loop.
- Direct vs indirect impacts: These mutually reinforcing impacts create a complicated pattern of indirect impacts whereby, for example, wealth inequality worsens physical health inequalities because of its impact on housing, labour markets, mental health and opportunity. Fully capturing these indirect impacts is too ambitious an undertaking for this report, so we have limited our analysis to directly observable impacts only, thus inevitably underplaying the full impacts of wealth inequality on many or all of the issues covered in the report.
- Scoring impacts: We have scored the 41 impacts listed in the report in two ways. The first is an assessment of the strength of the evidence base for the impact of the wealth gap on the issue in question, with four options (emerging, moderate, strong, compelling). The second is an assessment of the strength of the relationship between the wealth gap and the issue in question, i.e. how strong an impact the wealth gap has on the issue, also with four options (weak impact, moderate impact, strong impact, very strong impact). This is not measuring the importance of the impact itself. Both scores are subjectively assigned by us, based on the imperfect overview of the evidence base that we have gained from researching this report and from our wider knowledge of the issues.
- Types of solutions: We distinguish between solutions that reduce the size of the wealth gap and those that mitigate its impacts (its spillover effects into other areas, such as political inequality). We also differentiate between solutions that would redistribute currents stocks of wealth and those that would more evenly distribute future stocks of wealth (predistribution). Finally, we make a distinction between solutions that are ‘collectivist’ (that share wealth) and those that are ‘individualist’ (that encourage individuals to accumulate wealth privately).
- Scoring solutions: We do not explicitly endorse particular solutions, but rather assess each of the 29 solutions listed in three ways. The first, as with impacts, is an assessment of the strength of the evidence base for each solution to the wealth gap, with four options (emerging, moderate, strong, compelling). The second is an assessment of the impact of each solution on the wealth gap, i.e. how effective it is at either reducing the wealth gap or mitigating its impacts, also with four options (weak impact, moderate impact, strong impact, very strong impact). The third is an assessment of the feasibility of each solution. This is on a numeric scale of one (low) to four (high) that is calculated as the mean of three scores: affordability, ease of implementation, and average support (each also on a numeric scale of one to four). Average support itself is the mean of three scores (public support, political support and expert support, each also on a numeric scale of one to four). Each of these scores have, again, been subjectively assigned by us, based once more on the imperfect overview of the evidence base that we have gained from researching this report and from our wider knowledge of the issues. The only exception is that where we have found polling evidence on public support for particular solutions (as summarised in the ’attitudes’ section), this has been reflected in the public support score. Political support is interpreted in terms of the level of cross-party support, with some attention also paid to which party is currently in government. Affordability is assessed in relative terms (i.e. something that scores a one is much less affordable than something that scores a four, but we are not making a judgement about whether the first is definitely unaffordable, or indeed whether the second is definitely affordable).
- Matching impacts to solutions: We have also attempted (in the solutions section) to show which solutions relate to each of the impacts. This is an exercise that could be approached in several ways. For example, many of the tax-based solutions that reduce the size of the wealth gap could be argued to relate to all of the impacts of the wealth gap to a greater or lesser extent. We have trodden a middle path between this ‘maximalist’ approach and a much narrower interpretation.
- Assessing attitudes to the impacts of wealth inequality: As noted in the ‘attitudes’ section of the report, the evidence on how people relate to and understand wealth inequality is still developing but is increasingly rich, and we are lucky to have been able to cite and draw on an excellent recent literature review of public attitudes to wealth inequality by the London School of Economics and the Joseph Rowntree Foundation. Because public awareness of and attitudes to the impacts of wealth inequality was outside the scope of this review, we decided to commission some research of our own into this area. We carried out some polling and online qualitative interviews (with an AI moderator) with the help of Focaldata. The report contains details of the samples for each, and links to the full polling data.
Impacts of the wealth gap
Introduction
Wealth inequality has emerged as a critical and divisive problem in the UK, with far-reaching societal implications. Unlike income disparities, wealth accumulates over generations, creating a compounding effect that exacerbates socioeconomic divisions. This long-term accumulation of assets has positioned wealth inequality as arguably the most significant form of economic disparity. Wealth bestows substantial advantages on those who have it, and severely limits the wellbeing and everyday life chances of those who don’t. Having wealth means knowing you have a financial buffer to deal with unexpected life events, as well as access to better opportunities.
These disparities raise the issue of fairness, especially because much wealth is unearned. Assets generate returns without work. Rent-seeking behaviour has become increasingly prevalent in the UK, rewarding those who extract existing wealth rather than create new wealth. Assets also rise in value not because of the skill or effort on the part of the asset-holder, but from external factors such as public investment or monetary policy. Perhaps most significantly though, wealth is increasingly gifted rather than earned. There is a large, and growing, division between those who inherit wealth and those who have to work to build wealth.
Not only is this unfair, it also has profound impacts for on UK as a whole. Against the old assumptions that inequality is necessary for a dynamic economy, growing evidence suggests that wealth stratification undermines growth. A testament to stagnation and decline, Britain underscores this updated perspective. It is the most spatially unbalanced advanced economy in the world; its markets are increasingly concentrated, restricting competition; persistent social immobility obstructs the supply of talent and new ideas; and chronic underinvestment has compromised state capacity, making the country less prosperous, not to mention more exposed to political and social disintegration.
Evidence
This section of the report presents the evidence for 41 impacts of the wealth gap in the UK, looking at the ways in which wealth inequality (understood in absolute rather than relative terms) already damages our society, economy, democracy and environment. As the size of the wealth gap in the UK is expected to rise over the coming years, the risks are that each of these individual impacts will worsen, but also that their collective impact will become even greater because of the various ways in which these impacts reinforce each other, creating a snowball effect.
Impacts matrix
The matrix below plots these impacts on two axes. Along the top, they are ordered according to the strength of the evidence for the impact of the wealth gap on the issue in question. Down the side, they are ordered by the strength of the relationship between the wealth gap and the issue in question (how strong an impact the wealth gap has on the issue). The impacts can be filtered using the buttons at the top by area, and also by the government’s missions (’growth’ and ‘building’ have been separated out, although they are both contained in the ‘growth’ mission). For background, see our methodology. Click on an impact to read about it, and click again for more detail, including links to source material(s).
Impacts table
The table below lists the same group of 41 impacts, and can be reordered by clicking on a column heading. Search or filter the table by typing a word or phrase into the search bar at the top. Hover over the summary of each impact to read a more detailed description. For background, see our methodology. The complete set of impacts can be downloaded as part of the full PDF version of the report.
Solutions to the wealth gap
Introduction
The wealth gap is not inevitable, despite the powerful structural dynamics that encourage it. The government could employ a combination of policy responses to restrict or reverse the drivers of wealth inequality, thereby avoiding the snowballing impacts and risks described elsewhere in this report while building a fairer, more secure and more prosperous society.
Bridging the chasm between those with the most wealth and those with the least requires solutions at both ends of this spectrum. Various barriers act together to make it difficult for those at the bottom of the wealth distribution to build assets, whereas those at the top benefit from favourable tax conditions and preferential investment returns. A new balance needs to be struck so as to reduce the level of wealth inequality in the UK. This has to involve more redistribution from those with more wealth to those with less, but building a more inclusive economy must also involve strategies that share wealth more widely to start with, challenging the extractive processes that redistribute resources upwards.
The institutional context in different countries can significantly influence the extent to which wealth inequality affects people's everyday lives, and the broader functioning of societies. Unlike many continental European countries, the UK has not put in place the guardrails that mitigate the most damaging spillover impacts of wealth inequality. As a result, those who possess a lot of wealth enjoy undue luxury and power, while those who do not are denied decent living standards, financial and physical security and opportunities to progress. There are many ways to reduce the importance of wealth and wealth inequality, such as a stronger social safety net and measures to reduce the influence of the wealthy on the political system, that have worked well elsewhere. Alongside policies to reduce the size of the wealth gap, these would help to reduce its negative impacts on our society, economy, democracy and environment.
Evidence
This section of the report presents the evidence for 29 solutions to the wealth gap in the UK, examining a range of policy levers that could be used by government either to reduce the size of the wealth gap or to mitigate the impacts outlined elsewhere in the report.
Solutions matrix
The matrix below plots these solutions on two axes. Along the top, they are ordered according to the strength of the evidence for the impact of the solution. Down the side, they are ordered by the impact of the solution. They are coloured by feasibility. Click on the arrows to navigate between three versions of the matrix, with different ways to filter the solutions displayed on the matrix. For background, see our methodology. Click on a solution to read about it, and click again for more detail, including a link to the source material(s).
Solutions table
The table below lists the same group of 29 solutions, and can be reordered by clicking on a column heading. Search or filter the table by typing a word or phrase into the search bar at the top. Hover over the description of each solution to read a more detailed version. Hover over the bars on the ‘feasibility breakdown’ graphs to see what feasibility sub-score each coloured bar represents. For background, see our methodology. The complete set of solutions can be downloaded as part of the full PDF version of the report.
Mapping impacts to solutions
The visualisation below shows an illustrative example of how different solutions relate to different impacts. Hover over an impact or a solution to see which solutions or impacts it relates to (according to our analysis). You can also filter the impacts by the government mission that they relate to.
Attitudes to the wealth gap
What people think about wealth inequality
A literature review and report published by the London School of Economics and Joseph Rowntree Foundation in May 2024 found that public understanding of wealth inequality is ‘thin’ but nuanced, influenced by individualism, aspiration, and a preference for fair process over equal outcomes:
- There is no shared public understanding of wealth inequality as a social problem.
- Public estimations of levels of economic inequality tend to be inaccurate. People make sense of the world using local references, which are generally more homogenous (and therefore more equal) than national distributions.
- People have an intuitive understanding that the economy is rigged, and that some people don’t play by the rules.
- While there is strong public support for some forms and levels of wealth, the public is also aware of its potential harms in certain contexts.
- People aspire to have wealth and understand its value in securing against risk and saving for a better future.
- The public does not demonstrate unconditional support for wealth equality and is often strongly supportive of some degree of wealth inequality.
- Acceptance of inequality is related to how people explain economic outcomes with internal (individual) explanations leading to higher tolerance for inequality and external (structural) factors leading to the reverse. ‘System-justifying beliefs’, such as meritocracy, tend to make people believe not only that the status quo is fair and legitimate, but that individual agency, rather than the force of political and economic structures, is the primary cause of individuals’ economic outcomes at both ends of the spectrum.
- It is easier to raise levels of concern about economic inequality than to convert this concern into commitment to act. Concern about wealth inequality is higher than support for redistribution.
- Information matters, particularly in increasing the salience of inequality as a problem, but narratives are also effective, particularly in supporting moral reasoning linked to redistribution preferences.
- The public tends to be more accepting of inequalities they perceive as legitimate or fair – including wealth inequality – and perceptions of legitimacy and fairness can be shaped by prior beliefs, socioeconomic status and political/ideological views.
- Increased inequality does not straightforwardly increase opposition to inequality.
The review cited some of the recent attitudinal research that has provided new evidence about the complex ways in which people in the UK think about wealth and wealth inequality:
- Public understanding of the economy and inequality is ‘thin’ and is considered to be too low to sustain public debate. The economy is thought of as a container (money in, money out) rather than a system of relationships.
- Public understanding of the economy and inequality, however, is also complex. People are ‘simultaneously aware of potential benefits to society as well as harms’.
- The public recognises that not all forms of wealth are financial. They associate having wealth with wellbeing, and they recognise it as a source of security and protection against risk. They aspire to have some. ‘Ordinary’ wealth is often understood to be aspirational and associated with positive feelings of security, success and comfort. People ‘identify with the wealthy as their imagined (or aspirational) future selves’.
- Current ways of talking about the economy can make people feel fatalistic. The public feels that the system is rigged. When people feel powerless to change something, they can disengage.
- The public has a shared understanding of the difference between being rich and being very rich. But there is no consensus about how much is too much. The public does not in fact judge being very or extremely rich negatively.
- The public sees certain sources of wealth as more or less legitimate. Those more closely linked to perceived effort, like earnings from labour or entrepreneurship, are considered more legitimate than those linked to luck or chance.
- Perceived legitimacy is also influenced by behaviours. The public is generally supportive of even very high levels of wealth ownership, and does not like messaging that vilifies the wealthy. However, if wealth holders fail to demonstrate pro-social or ‘cooperative’ behaviours (for example, job creation, philanthropy, playing by the same rules as everyone else) then views become harsher.
What people think about the impacts of wealth inequality
How much are people aware of the impacts of wealth inequality on our economy, society, democracy and environment, and how concerned are they about these ‘spillover effects’?
- While there is a growing body of research on the public’s perceptions of the fairness or legitimacy of wealth inequality, there has been far less attention paid to the public’s understanding of the effects of wealth inequality on our society, economy, democracy and environment.
- For example, recent research demonstrates that people perceive high levels of wealth inequality as undesirable, but wealth accumulation is still aspirational, and is not necessarily seen as contributing to other forms of socio-economic inequality.
- There has been very little research into the public’s understanding of the causal relationships between wealth inequality and the societal outcomes examined in this report.
- For example, while we find evidence to suggest that wealth inequality has a negative effect on the environment, few studies have tested public perceptions of the causal relationship between these two variables.
- Of course, people are concerned about these harms independently, as shown for example by evidence of attitudes to the climate crisis and to the cost of living.
Quantitative research
To find out what people think about the impacts of wealth inequality, we commissioned Focaldata to run a poll with a representative sample of 2,012 people from across the UK in July 2024.
We found that the strongest views about the negative impacts of wealth inequality were associated with more ‘obvious’ issues such as crime, the cost of living, housing, mental and physical health, and some other forms of inequality, but that there was much lower awareness of deeper impacts on public services, the economy, democracy and action on net zero (mirroring the findings of previous research on attitudes to the impacts of inequalities more broadly). Political beliefs had a limited impact on answers.
We also found that two in three people are worried about wealth inequality in principle (echoing earlier research), but that the proportion of people who are concerned rises to 78% when asked about the impacts of wealth inequality (also reinforcing previous findings).
Qualitative research
Polling doesn’t tell us how people think, or why they hold those views. To dig into this, we commissioned some qualitative research in July 2024 from Focaldata AI, which carried out 50 one-on-one depth interviews with a cross-sectional sample of Britons to find out what ‘wealth inequality’ means to them, and what impact they think it has on our economy, political system and society.
The interviews highlighted broadly and deeply held concerns about the negative impacts of wealth inequality.
People are very aware of the link between wealth inequality and poverty, exacerbated by the cost-of-living crisis over recent years.
Many talked about how wealth inequality depresses economic growth by reducing people’s spending power.
People talked about how wealth inequality distorts our political system, by giving the wealthy undue influence on decisions.
Many argued that wealth inequality undermines social cohesion by causing division and resentment.
There was strong recognition of the damage from wealth inequality to mental and physical health, for example due to stress and poor living conditions.
Changes over time, especially differences between generations in terms of prospects and attitudes, were picked up by some respondents.
What people think about the solutions to wealth inequality
What does the existing evidence base tell us about levels of UK public support for the policy solutions to the wealth gap that have been included in this report?
We reviewed previous polling and research into public attitudes for each of the 29 solutions above, and found data for 13 of them. For many of the others, there was some attitudinal data for the broad-brush solution, but it was not directly aligned to the specific solution, so we excluded it.
The chart below shows net support (the percentage in favour minus the percentage opposed, omitting neutrals or don’t knows) for 13 of our 29 solutions. Where there is more than one dot on each line, we found more than one data source. Dots are coloured by the effect of the solution (where it reduces the size of the wealth gap or mitigates its impacts).
Mouse over a dot to see who carried out the research, on behalf of which organisation and when. Click on a dot to see a link to the source data.
About this report
This report is part of our work on Deep Opportunity, which argues that we need to tackle the underlying barriers to opportunity - wealth inequality, our unfair tax system and aspects of our democracy - to make progress on issues such as poverty, poor housing and insecure work that undermine the educational prospects of disadvantaged children.
Further reading
Acknowledgements
Thank you to the many partners and colleagues who kindly reviewed early drafts of this report, in particular those named here. Any errors or omissions are ours alone. Inclusion on this list does not imply endorsement of this report.
Ligia Teixeira, Centre for Homelessness Impact Daniel Turner, Centre for Progressive Policy Max Schroeder, Durham University Ann Raymond, Health Foundation Rachelle Earwaker, Joseph Rowntree Foundation Ben Tippet, King's College London Anna Vignoles, Leverhulme Trust Sam Friedman, London School of Economics Ruth Lister, Loughborough University Will Hutton, Observer Michele Crepaz, Queen's University Belfast
Stephen Walcott, Runnymede Trust Dan Hoyer, Seshat: Global History Databank Charlie Trew, Shelter Rose Whiffen, Transparency International UK Andrew Purves, University College London Stewart Lansley, University of Bristol SJ Beard, University of Cambridge Peter Taylor-Gooby, University of Kent Richard Wilkinson, University of Nottingham Rob Jenkins, University of York Ignacia Pinto, Women's Budget Group