Mathew Lawrence: Why inequality on this epic scale costs us all dear

Crucially, as IPPR’s recent report on wealth inequality sets out, one of the biggest – and fastest-growing – divides is regional. The route to a wealthier nation is through a richer, more equitable North.

The scale of wealth inequality is staggering. Private wealth is made up of pensions, property, physical and financial wealth.

The wealthiest ten per cent own 45 per cent of the nation’s wealth, almost 900 times more than the poorest tenth. By contrast, the least wealthy half of the population have only nine per cent.

Moreover, things are getting worse: between 20ten-2012 and 2012-2014, over half of the increase in personal wealth went to the top ten per cent of households. At the same time, inter-generational inequalities are growing: every generation since the post-war ‘baby boomers’ now has less wealth than the generation before them had at the same age,

While wealth is unequally held by age, gender, ethnicity and occupation, a critical and under-acknowledged dimension to wealth inequality is regional differences.

For example, while median household wealth in the South-East is £342,400, in Yorkshire and the Humber it is only £173,000. Indeed, a quarter of households in the South-East are millionaires (due to rising property prices), compared with only one in 20 in Yorkshire and the Humber. Moreover, wealth disparities are growing.

While median household wealth in London grew by 14 per cent between July 2010 to June 2012 and July 2012 to June 2014, it actually fell in Yorkshire and the Humber by eight per cent.

Though median private pension wealth grew by 18 per cent in during that period, median net financial wealth of households in Yorkshire and the Humber fell by a striking 31 per cent, while median net property wealth fell by eight per cent and physical wealth by five per cent

News that median weekly earnings in Yorkshire and the Humber are among the lowest in the country (approximately £500 compared to £692 in London), and the slowest-growing, only compounds the problem. As a nation we are becoming more unequal, and Yorkshire is becoming poorer.

The single largest source of regional wealth inequalities is the variation in property values across the UK.

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 combined, and homes in the two London boroughs of Kensington and Chelsea and Westminster alone are valued at more than two thirds of all the homes in Yorkshire and the Humber.

In Kensington and Chelsea, the average price of property per square metre is £19,400, eight times the average for England and Wales as a whole.

Critically, regional inequalities of property wealth are expected to grow. On average, house prices are estimated to rise 23 per cent by 2020 and 97 per cent by 2030. Yet prices are expected to grow at significantly different rates in different regions.

While a quarter of London’s housing stock is expected to be worth £1m or more by 2030, and an estimated seven per cent of the stock in the South-East at a similar level, fewer than one per cent of homes in Yorkshire and the Humber, the North-East, North-West, Wales, Scotland and East Midlands in 2030 will be worth that much.

The disparities between house prices in different parts of the UK effectively creates a growing ‘postcode lottery’ in the distribution of wealth.

Those in London and the South-East in particular have enjoyed significant unearned economic windfalls, while those living in other parts of the country have fallen behind.

This is both unjust and inefficient. For example, the escalating cost of housing in London and the South-East creates major economic distortions, raising costs and reducing the ability of people from other parts of the country to move for work or family.

Without a change in policy direction, wealth inequality is expected to worsen, with acute and deepening divides in wealth between regions, generations and households.

That is why IPPR’s Commission on Economic Justice is exploring ways to create more broadly shared wealth and a more equal distribution of existing wealth, as well as ways to rebalance the economy more generally.

From fairer taxation of wealth to a more effective housing market and new mechanisms to hold wealth in common, we can ensure all the people of the UK share fairly in the country’s prosperity. But only if we are bold enough.

Mathew Lawrence is a senior research fellow at IPPR and co-author of ‘Wealth in the twenty-first century: dimensions and drivers’.