We’re told in a new report that, well, everything is just terrible
A detailed and startling analysis of how unequal Britain has become offers a snapshot of an increasingly divided nation where the richest 10% of the population are more than 100 times as wealthy as the poorest 10% of society.
The thing is, this just isn’t true. What has been measured is the wealth disparity before the attempts we make to reduce that wealth disparity. For we do indeed make attempts to reduce both income and wealth disparities and we really ought to be measuring the gap after such attempts.
One of the figures used is that the bottom 10% have less than £8,000 in assets and this just isn’t true at all. Think of it this way for a moment: if interest rates are 5% and I’ve got £100,000 in savings then I’ve got an income stream of £5,000 a year. We can also look at this the other way around. If I’ve got a guaranteed income stream in perpetuity of £5,000 a year then I’ve an asset of £100,000. I have, in short, wealth of £100,000.
Now I’m not about to delve into all of the details of the UK welfare state but we do know that there are a number of benefits which are paid as of right. Some depend upon certain circumstances (unemployment say) some upon other income received or not received (housing benefit say) some as a result of contributions made (the State pension) but the net summation of this entire system is that just about no one cannot claim at least £5,000 in income from that welfare state. No one, that is, who has less than £8,000 in savings (have above that amount and some of these benefits are not payable). Which means that everyone has at least wealth of £100,000. It may be in the form of benefits which can be accessed, but it’s still an income stream payable off into the future and is thus wealth that we can assign a net present value to.
We might need to alter that NPV for interest rates (about 4.3% on the current 30 year gilt), for inflation proofing (raising the NPV), for lifespan (lowering the NPV again). We can make all sorts of adjustments, but the basic point still stands.
Everyone in this country has an asset worth vastly more than that £8,000 which we are told the poor don’t have. It’s called the welfare state. And yes, we do have to include this in our calculations of the wealth gap, for how can we argue that there should be more or less done to shrink this wealth gap without looking at the effects upon it of what we already do?