As the Guardian has reported:
The richest 20% of the population in Britain will have, on average, the spare sum of £18,680 to put into their savings this year, while the poorest 20% will spend £1,910 more than they earn, latest figures suggest.
In research published this Thursday, the Post Office said saving was still being driven by the wealthiest people while lower earners were suffering a debt crisis. According to the Centre for Economics and Business Research, which undertook the analysis, this trend has been happening for the past 12 years.
This, I am sure, is no surprise to anyone but Chris Giles at the FT, who is claiming that Thomas Piketty's claim that the richest in this country are getting wealthier is wrong.
Now, high income and wealth are not the same thing: I acknowledge that. But as Piketty has noted, and as this report confirms, there is a link between the two. After all, if you can save then you are increasing your wealth.
In fact, for the rich to avoid getting richer they'd have to spend more than their income. And there is not a shred of evidence that they do that. But this glaringly obvious fact appears to have passed Chris Giles by.
It's time he opened his eyes, I suggest.
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These are only surface matters. There are other things going on, structural, demographic, technological which have only just begun to gather pace. We could be in for a greater upheaval than say in the 19th Century but a whole lot quicker.
This does not show that the rich get richer and the poor get poorer. For the simple reason that they are not necessarily the same people over time. You’d have to follow a group of people overtime to find out whether they were getting richer or poorer.
Read Piketty
I read this report with interest, Richard, and also with some irony as it comes from a now privatised Post Office. But the report that had the most impact on me in recent days comes from Saturday’s Guardian, and this passage in particular. It struck a chord with me because the last time I bought a house was the year before the data series begins, and because the current situation affects my children. It concerns house prices:
‘The contrast with 1997 is startling. In population centres across England prices for standard homes were barely above three times local incomes…Today the property map of England reveals how homes are out or reach of buyers unless they are willing to take on huge loans. In real terms, prices in Manchester have doubled, reaching 4.6 times local wages. In Newcastle they are 5.2 times local pay, in Bristol the multiple is 6.2. Meanwhile Brighton now shares the dubious distinction of having house prices that are more than 10 times local wages…Large districts far from the orbit of the London market now suffer from property prices of eight times of more of local wages: the whole of Hertfordshire, nearly all of North Yorkshire, Derbyshire and north Norfolk, with Cheshire following not far behind.’
“Startling” doesn’t really do this situation justice.
I agree
Thanks
I am not so sure. House prices have always been expensive. I caome from a London family our old family home is now worth over £2.5 million. There isn’t anyone in our family who can afford that now.
However since 1995 there has been a big increase in the number of people in the UK. SO we will see house prices and food increasing in cost in real terns. More people need them.
peter s: House price rises are not wholly a supply/demand issue. House prices have risen, especially since the late 80’s by a series of bank induced asset bubbles. between 1997 and 2007 the number of housing units grew by 8%, while the population only grew by 5%-during this time mortgage lending increased by 370% (quoted from “Modernising Money” by Dyson and Jackson).
Peter S
House prices will increase whilst there is scarcity of supply combined with availability of credit. That’s a given. Food prices are entirely different, and prices have fallen significantly and consistently over many years. Short term movements are affected by things like forex rates and harvests, and they can go both ways, but the long term trend doesn’t support the idea that food prices will increase the way that house prices do.
If there’s a shortage of bread in the south east of England then we can bake more bread to address it.. a damn sight easier than we can build more homes there to address a housing shortage.
It’s the land value which has increased, not the bricks and mortar.
“The richest 20% of the population in Britain will have, on average, the spare sum of £18,680 to put into their savings this year”. Convenient, isn’t it, that the ISA limit is now £15k pa.
Richard, Tax Research UK is quite successful financially and you are proud of your non-extravagant living. Such a sum must be easily achievable for you. You should get spending as per your own advice! Or get TRUK employing some people.
I’m 56
If I don’t save now I never will