On Air Now
In Conversation With Steve Allen 9pm - 10pm
16 April 2017, 20:40
According to a new report from the giant brains at Oxford Economics, British households are richer than ever.
However, before you start putting out the bunting and the Union Flags and having a special Brexit I-told-you-so-gasm, there's a "but".
British households are richer than ever, BUT that won't translate to a much-needed boost to the economy in the form of increased consumer spending.
That is because those riches are not shared out evenly among all of us. It is an average trend which hides the fact that this wealth is tied up in house prices and pension funds and mostly because it is tied up in the hands of a tiny number of people who got lucky and sit atop the greasy pole.
At the end of 2016, British households' total holdings of properties and assets amounted to £9.2 trillion — up almost 8% on a year earlier.
Consumer spending did not grow at anything like that rate though, because the 8% increase was not spread out over all consumers.
In fact, Oxford Economics' model suggests that a 10% rise in wealth boosts consumer spending by only 0.2%.
If the money is in private pension funds, it isn't being spent - and pension funds represent about half of the wealth in the country, which won't come as any comfort to half of those in the country who have no pension at all.
If the money is in housing, that is not being spent either. In both cases, those with money are the ones that are benefiting the most.
It is the old that are the biggest winners. They bought houses when they were giving them away free with ten gallons of petrol and now they are worth a fortune. The young aren't benefiting from the house price increase, because they don't have the money to buy them in the first place.
They will also miss out on the pension schemes that previous generations are enjoying.
On top of that, the increase in young renters is increasing the income of the property owning class, while depressing the prospects and the spending power of those same young people.
According to Oxford Economics the average household wealth for those in the top 20% of income distribution was £853,000, and just £23,600 for households in the bottom 20%
Despite the obvious disparity of wealth distribution, we are witnessing a further move of wealth from the poor and the young, to the rich and the old.
That could be partly remedied by taxing the rich more and maybe taxing property.
But if you even suggest that, the newspapers will scream about socialism and the Conservatives will bang on about rewarding the job creators, despite the fact that if the money is tied up with the wealthy, who are not spending as much as their wealth is increasing by, there aren't any jobs being created.
What is odd is that people in the lower income brackets go along with all that because they are either easily swayed, or they don't know enough to make a reasoned judgement, or they have never heard of Denmark.
In Denmark, the top line tax rate is about 56% of income. In the UK it is 45% - and guess which of those two countries has happier citizens?
There's a thing called the World Happiness Report, which asks people in 53 countries how happy they are and measures levels of GDP, life expectancy, generosity, social support, freedom, and corruption.
For 2017 it lists the top ten as:
Denmark, Switzerland, Iceland, Norway, Finland, Canada, the Netherlands, New Zealand, Australia and Sweden.
Of those countries, only Switzerland, and Canada pay less tax than we do.
We are 23rd on the list, behind Israel and Mexico, the places with the bombs coming in and the headless corpses by the side of the road.
The countries at the bottom end of the happiness index are, coincidentally, the ones with the lowest tax rates on earth - Saudi Arabia, Qatar, Kuwait, and Bahrain, have a 0% personal income tax rate.
You would think that would make them happy but they are not.
If politicians point out that countries that have a fairer distribution of wealth are full of happier people, they will be shot down in flames, asked to resign, refused a vote and ridiculed by the very same people that would benefit from it.
It is almost as though the poor have been trained to act against their own best interests.