Why the UK Leads the Way on Inequality
By Alice Martin / neweconomics.org
Jan 8, 2015

The UK is leading one global race: it is the only G7 country in which wealth inequality has increased steadily since 2000.

Seemingly unaffected by the financial crisis or subsequent recession, our recent report finds two trends posing a particular danger to the UK economy.

Household debt

After a period of retrenchment UK household borrowing is once more on the rise. Unsecured lending – such as credit card debt and payday loans – is now increasing at a rate of close to £1 billion a month. With real incomes falling for most, it is consumer debt that is helping sustain the UK’s economic recovery.

Secured lending is also on the rise. Although the record pre-crash levels of mortgage equity withdrawal – borrowing against the value of your home – have not returned, government-subsidy schemes such as Funding for Lending and Help to Buy are driving more and more people onto the property ladder, despite stagnating wages.

A steady increase in the size of new mortgages compared with borrower incomes suggests households are becoming more vulnerable to income and interest rate shocks. The Bank of England and the International Monetary Fund (IMF) have both warned that inflated property prices and related household indebtedness pose a real threat to UK financial stability.

While rising private debt has so far had only superficial impact on economic growth in the UK, its effects in compounding inequality are real. The financialisation of households through debt – as a compensation for a lack of pay growth – further burdens those at the poorest end of the income scale, while profits flow up to wealth owners.

Asset price rises

Because the value of property has a strong effect on consumer spending through rising wealth and confidence, much government activity since the crash has been focused on reflating prices. They have done this by subsidising mortgage credit through schemes such as Help to Buy. However, the UK’s housing shortage and its low rate of investment in housebuilding has seen this result in rapidly rising prices.

While the financial crash caused an immediate drop in property prices, the bubble did not fully burst and they soon began to rise once more. Two major mortgage lenders recently calculated prices were last year rising at the fastest rate since the crisis.

Since the crash the shape of the UK housing market has seen London and the South East soar ahead of other regions. The total value of housing stock in these regions has risen by £435 billion over the past five years, with a net loss of £206 billion across everywhere else.

Even in areas where property prices are rising it is not the mortgage-laden households that are the prime beneficiaries. Unaffordable housing has led to the rise of ‘generation rent’, and sharpened the appetite of institutional investors for the lucrative private rented sector. Analysts are forecasting that private renting is on its way to becoming a new major asset class in the UK. Private landlords, including increasing numbers of institutional investors, now own 19% of all residential property – up from 12% ten years ago.

Read our full report on the links between inequality and the growth in scale and influence of the financial sector

0.0 ·
0
Trending Today
Today I Rise: This Beautiful Short Film Is Like a Love Poem For Your Heart and Soul
4 min · 12,083 views today · "The world is missing what I am ready to give: My Wisdom, My Sweetness, My Love and My hunger for Peace." "Where are you? Where are you, little girl with broken wings but full...
The Top 100 Documentaries We Can Use to Change the World
Films For Action · 7,911 views today · A more beautiful, just and sustainable world is possible. Take this library and use it to inspire global change!
John Lennon's "Imagine," Made Into a Comic Strip
John Lennon. Art by Pablo Stanley · 1,928 views today · This is easily the best comic strip ever made.  Pabl
Obama's Hidden Role in Worsening Climate Change
Stansfield Smith · 1,455 views today · It should be a scandal that leftists-liberals paint Trump as a special threat, a war mongerer – not Obama who is the first president to be at war everyday of his eight years...
"Desert Goddess" Remembers Arizona's Glen Canyon
7 min · 648 views today · In this excerpt from the award-winning documentary DamNation, filmmakers Ben Knight and Travis Rummel interview the "desert goddess," Katie Lee. When the Glen Canyon Dam was...
18 Empowering Illustrations to Remind Everyone Who's Really in Charge of Women's Bodies
Julianne Ross · 430 views today · When Brazilian graphic designer Carol Rossetti began posting colorful illustrations of women and their stories to Facebook, she had no idea how popular they would...
Dinosaur explains Trump policies better than Trump!
8 min · 385 views today · Donald Trump is actually the corporate triceratops, Mr. Richfield, from the 90's TV show sitcom, "Dinosaurs". 
Make The Serengeti Great Again | Resource Scarcity, Demagogues and How Creativity Can Trump Hate (2017)
5 min · 348 views today · A Familiar Tale of Resource Scarcity, Demagogues, and How Creativity Can Trump Hate A quick, original, illustrated allegory that pokes at the demagogues we’ve got with an...
The Political Elite: Idiots... or Criminals?
Michael Emero · 331 views today · I've been seeing a lot of people convinced that the DNC and all establishment Democrats are total idiots. How could they not be, when they sabotaged an easy win (Bernie) to...
How Mindfulness Empowers Us
2 min · 318 views today · Many traditions speak of the opposing forces within us, vying for our attention. Native American stories speak of two wolves, the angry wolf and the loving wolf, who both live...
The White Man in That Photo
Riccardo Gazzaniga · 255 views today · Sometimes photographs deceive. Take this one, for example. It represents John Carlos and Tommie Smith’s rebellious gesture the day they won medals for the 200 meters at the...
Baraka (1992)
97 min · 247 views today · Featuring no conventional narrative, this film presents footage of people, places and things from around the world. From chaotic cities to barren wilderness, the movie takes...
Deconstructing Hierarchies: On Contrived Leadership and Arbitrary Positions of Power
Colin Jenkins · 246 views today · Bosses don't grow on trees. They don't magically appear at your job. They aren't born into their roles. They are created. They are manufactured to fulfill arbitrary positions...
Defiance in the Face of Oppression - Iranian Artist Atena Farghadani Defends the Right to Draw
Gavin Aung Than · 241 views today · Atena Farghadani is a 28-year-old Iranian artist. She was recently sentenced to 12 years and 9 months in prison for drawing a cartoon.  
Why It's Crucial for Women to Heal the Mother Wound
Bethany Webster · 233 views today · The issue at the core of women’s empowerment is the mother wound
HUMAN (2015)
382 min · 218 views today · What is it that makes us human? Is it that we love, that we fight? That we laugh? Cry? Our curiosity? The quest for discovery?  Driven by these questions, filmmaker and artist...
This Zen Comic Is Full of Timeless Life Lessons
Gavin Aung Than · 213 views today · Desiderata poem by Max Ehrmann beautifully illustrated by Gavin Aung Than
The Invention of Capitalism: How a Self-Sufficient Peasantry was Whipped Into Industrial Wage Slaves
Yasha Levine · 199 views today · “…everyone but an idiot knows that the lower classes must be kept poor, or they will never be industrious.” —Arthur Young; 1771 Our popular economic wisdom says that...
Your Lifestyle Has Already Been Designed (The Real Reason For The Forty-Hour Workweek)
David Cain · 192 views today · Well I’m in the working world again. I’ve found myself a well-paying gig in the engineering industry, and life finally feels like it’s returning to normal after my nine months...
90 Inspiring and Visionary Films That Will Change How You See the World in Profound Ways
Tim Hjersted · 174 views today · The world today is in crisis. Everybody knows that. But what is driving this crisis? It's a story, a story that is destroying the world. It's a story about our relationship to...
Load More
What's Next
Like us on Facebook?
Why the UK Leads the Way on Inequality