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The ONS wealth inequality figures don’t show what people think they do

Summary:
The Office for National Statistics has released the latest wealth figures for the UK. About which The Guardian says:Britain’s total wealth grew by 13% in the two years to 2018 to reach a record £14.6tn, with wealth among the richest 10% of households increasing almost four times faster than those of the poorest 10%. A study by the Office for National Statistics (ONS) also found that the poorest 10% of households had debts three times greater than their assets compared with the richest 10% who amassed a wealth pile 35 times larger than their total debts.The figures highlight the growing divide between those at the top of the wealth ladder, many of whom have retained their pension rights, property values and invested their savings since the 2008 financial crash, while those on low incomes

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The Office for National Statistics has released the latest wealth figures for the UK. About which The Guardian says:

Britain’s total wealth grew by 13% in the two years to 2018 to reach a record £14.6tn, with wealth among the richest 10% of households increasing almost four times faster than those of the poorest 10%.

A study by the Office for National Statistics (ONS) also found that the poorest 10% of households had debts three times greater than their assets compared with the richest 10% who amassed a wealth pile 35 times larger than their total debts.

The figures highlight the growing divide between those at the top of the wealth ladder, many of whom have retained their pension rights, property values and invested their savings since the 2008 financial crash, while those on low incomes live in rented accommodation with meagre pension entitlements and rising debts

This is not quite so. The ONS is producing figures which show the market wealth figures. Which isn’t the thing we’re interested in even if we are one of those who worry about inequality. What we actually want to know is what is the wealth distribution after all the things we do to change it?

When we measure income inequality we study the numbers after the impact of taxes and benefits - what inequality is there left after the welfare state that is. If we were to run around shouting about the pure market distribution of incomes we’d be looked at as the idiot ginger stepchild of the conversation.

With the wealth distribution though we don’t measure the effects of what we do to change it. For example, only fully funded pensions count - the fact that everyone gets either a state pension of the pension guarantee is not included. With housing, it is only equity in private sector housing which counts - the capital value of a below market rent tenancy is ignored. Private wealth which might be used to pay school fees is measured - that any and every child gains some £5,000 a year’s worth of state education is ignored. Private money to pay for health care is counted, the capital value to the citizen of free health care through the NHS is ignored.

Wealth inequality is wrongly measured for we don’t include the effects of all that is currently done to reduce it. Therefore we’re never going to gain any useful guidance about what should be done next by perusing these figures. After all, the thing we’re trying to work out is, well, what should we be doing next? Something that does require looking at the effects of what we’ve already done.

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Tim Worstall
Tim Worstall is a British-born writer and Senior Fellow of the Adam Smith Institute. Worstall is a regular contributor to Forbes and the Register. He has also written for the Guardian, the New York Times, PandoDaily, the Daily Telegraph blogs, the Times, and The Wall Street Journal. In 2010 his blog was listed as one of the top 100 UK political blogs by Total Politics.

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