With at least half the Tory party demanding his head over his attitude to Brexit, Chancellor Philip Hammond is letting it be known that his upcoming Budget is to be “radical”. What? Radical like his dementia tax? That went well, didn’t it?
His negative reaction to analysis published by the IFS on the failure of seven years of Tory austerity policies to drive up investment and productivity does not bode well. His Labour shadow, John McDonnell, was right to point out that it means “wages and salaries are lower today than when they came to power, and still falling, whilst their mishandling of Brexit is now also adding to the uncertainty around future borrowing plans”. He added: “Instead of dragging millions of ordinary people through the endless misery of Tory spending cuts, the Chancellor now needs to make a decisive break with past Tory failure and end austerity.”
Maybe as a survival tactic, many Tory commentators, strategists and even fundmasters now think pretty much the same way, understanding that this year’s snap general election shambles resulted in widespread public disaffection with the simple unfairness of austerity politics which make the super-rich even richer, the middle ground still struggling and the poor falling even further behind.
The IPPR think tank, no Marxist organisation, has produced a report which has become required reading – or should do – across the parties. It shows simply that the UK may still be a wealthy nation, but that wealth is very unevenly divided. The report, Wealth in the 21st century, shows how these inequalities exist between individuals and families, between areas of the country, generations and genders, and between people from different ethnicities and class backgrounds.
While wealth inequality fell for much of the 20th century, it is now rising again, and is set to rise further, and the report’s key findings highlight the drivers causing them to rise. Wealth inequality, for example, is twice as great as income inequality. The wealthiest 10% of households own 45% of the nation’s wealth, while the least wealthy half of all households own just 9%. The wealthiest 1,000 individuals and families in Britain have a combined wealth of £658 billion. By contrast, the net wealth of the lowest 30% of households is £200 billion.
Housing inequalities mean the next generation is set to have less wealth. Fewer than half of “millennials” (those born between 1981 and 2000) are expected to own their own home by the age of 45, based on current trends. As it is, every generation since the post-war “baby boomers” has accumulated less wealth than the generation before them had at the same age.
At the bottom of the scale, the average household has on average just £3,200 of net financial, property and pension wealth. This compares to the £1.32 million held on average by the top 10%. The total wealth of the top 10% of households is 875 times the total wealth of the poorest 10%.
The IPPR says debt is likely to rise faster than disposable income over the next decade. At 2017 prices, household disposable income is forecast to rise by 10.3% by 2027 (from £48,000 to £53,000). This implies an average debt per household in 2027 of £85,700, a 21.8% increase from £70,400 in 2017. This includes a projected £28,400 of unsecured debt, a 39.8% increase from £20,300 in 2017.
The North-South divide will also widen, as London and the South East continues to pull away from the rest of the country. The total value of housing stock in London is now greater than the housing stock of all of Wales, Scotland, Northern Ireland and the North of England combined. Median household wealth in London increased by 14% between 2010 and 2014, but in Yorkshire and the Humber it fell by 8%.
By 2030, it is estimated that a quarter of homes in London will be worth £1 million or more, compared to fewer than 1% of homes in the North East, Yorkshire and The Humber, North West, Wales, Scotland and East Midlands. And, if house prices per square metre continue to grow at the rates they have in different regions since 2009, by 2027, a square metre of property in London will be 10.9 times the price of a square metre in the North East.
So will an embattled Chancellor tackle such urgent concerns? Don’t bet on it. Even though many Conservatives now believe that is the only way to save a party whose time has gone.