If you’re young and in the northeast, wealth inequality bites hard

Here’s a question: what is the median household wealth in Britain – the wealth of the middle household, with as many richer households on one side and as many poorer ones on the other?

The answer from the Office of National Statistics (ONS) was published on Friday, and it’s £302,500. That is for the whole country. For a household in the southeast, however, the median household is worth £503,400.

So, a typical family in the southeast of England is halfway towards achieving millionaire status. In the northeast, by contrast, median household wealth is £168,500.

These figures refer to the period April 2018 to March 2020, so they are pre-Covid. The number will be higher now, given the rise in property prices during the pandemic. Property is a major chunk of family wealth. According to the home lender Halifax, the average property price rose by £24,500 last year, the largest cash increase since 2003.

Among other facts unearthed by the ONS is that the £302,500 figure is up 20 per cent in real terms (that is, allowing for consumer inflation) on the period prior to the banking crash, July 2006 to June 2008, which perhaps is not so surprising. But what certainly will be surprising to most people – it was to me – is that wealth inequality, as measured by the Gini coefficient (a measure of the distribution of income across a population developed by the Italian statistician Corrado Gini in 1912), has remained stable over the past 14 years.

Can that be right, given what has happened to house prices? I would trust the ONS on this one, but it does run counter to what you would have intuitively thought has happened over that period.

What chimes in more with our experience is that huge disparities of wealth do exist. One obvious distinction is the north/south divide. The ONS reports that “between April 2018 and March 2020, median individual wealth was £157,000 higher in the southeast than the northeast of England and this regional disparity has increased over time”.

There are other differences, including the disparity between men and women. Men have, on average, more assets than women. But the greatest difference of all is between the young and the old. The median wealth of a household where the head is aged between 55 and retirement age is 25 times larger than one where they are 16 to 24.

You would expect that. Someone in their late teens or early twenties has not had the time to build up much wealth, whereas someone about to retire would be at peak wealth. After people stop working, they typically run down their savings, drawing down their private pensions or, for people in the public sector, using up, so to speak, their pension rights as they get older. (You can calculate the value of a public sector pension, even though that form of wealth is in a flow of money, not a stock of it.)

You can catch a feeling for this by looking at the various constituents of wealth at different ages. Overall, the largest single source of wealth is a pension, not property. Property comes second. This is particularly the case for someone just about to retire. But for someone who has already retired, typically their biggest asset is property. Downsizing comes later, as people release some of the value of their homes to boost their pension income, or bump up their gifts to their children.

Well, this is the data. What are the takeaways from it? The biggest one stems from the crude fact that the old have the money and the young are struggling. But at some stage, the young will inherit that money. It will be the largest transfer of wealth that we have ever experienced in this country. For many people, that will be wonderful.

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Another paper by the ONS looked at home ownership by age and found that nearly three quarters of Britons aged 65 and over owned their own homes. But this is also unfair. It is unfair geographically, in that people whose parents live outside the southeast will not do nearly as well as those who do. It is unfair socially because it increases the benefits that flow through to children whose parents have been both well-paid and been good at saving and investing. And it is unfair on families where parents live in social housing.

All societies have inequalities. All have aspects that are unfair. We cannot choose our parents, or whether we have good brains or not. Ultimately, the build-up of wealth must be something to celebrate, for we can all relate to the words of the great Russian-born comedian Sophie Tucker when she said: “I’ve been rich and I’ve been poor. Rich is better.”  But let’s be aware, too, of the unfairness of it all, and do whatever we can to tackle that.