Why the UK Leads the Way on Inequality
By Alice Martin / neweconomics.org

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
What's Next
Trending Today
10 Provocative Quotes from Ivan Illich's "Deschooling Society"
Daniel Lattier · 14,581 views today · Ivan Illich’s groundbreaking book Deschooling Society (1971) offers a radical critique of the institutionalization of education within modern societies. Illich believed that we...
This Text Message Exchange Between a Mother and Daughter is Pure Gold
Belinda Hankins · 8,261 views today · When Belinda Hankins got a text message from her 13-year-old daughter, who was shopping for period products, it started an exchange that will resonate with women everywhere. Enjoy.
Welcome to Marinaleda: The Spanish Anti-Capitalist Town With Equal Wage Full Employment and $19 Housing
Jade Small · 4,261 views today · With virtually no police, crime or unemployment, meet the Spanish town described as a democratic, socialist utopia. Unemployment is non-existent in Marinaleda, an Andalusian...
What Makes Call-Out Culture So Toxic
Asam Ahmad · 4,198 views today · Call-out culture refers to the tendency among progressives, radicals, activists, and community organizers to publicly name instances or patterns of oppressive behaviour and...
When You Kill Ten Million Africans You Aren't Called 'Hitler'
Liam O'Ceallaigh · 3,511 views today · Take a look at this picture. Do you know who it is? Most people haven’t heard of him. But you should have. When you see his face or hear his name you should get as sick in...
Superblocks: How Barcelona Is Taking City Streets Back From Cars
5 min · 3,510 views today · Modern cities are designed for cars. But the city of Barcelona is testing out an urban design trick that can give cities back to pedestrians.
11 Traits of People With High Emotional Intelligence
Raven Fon · 3,244 views today · Lately, new ways to describe human interactions, social behaviours, and many facets of psychology have emerged on the social network scene. One of those descriptions is “high...
Who Are You? Watching This Breathtaking Video Could Be the Moment You Change Your Life
2 min · 2,170 views today · "Normal is getting dressed in clothes that you buy for work, driving through traffic in a car that you are still paying for, in order to get to a job that you need so you can...
Throw (2016)
10 min · 1,992 views today · The first installment of Invisible Thread, an ongoing ELM passion project series, Throw tells the story of an outsider from East Baltimore, an area challenged by gang violence...
What You Might Notice If You Forgot Your Phone For a Day
2 min · 1,853 views today · There is a moment happening right in front of you, right this second, and you just might be missing it
Ikigai - Finding Your Reason for Being
Chip Richards · 1,729 views today · What Gets You Out of Bed in the Morning? When asked what is the single most powerful contributing factor to one’s health and vitality, integrative medical...
93 Documentaries to Expand Your Consciousness
Films For Action · 1,533 views today · There are over 800 documentaries now cataloged in our library of social change films. That's probably way too many for any mortal to ever watch in a lifetime, let alone a few...
Today I Rise: This Beautiful Short Film Is Like a Love Poem For Your Heart and Soul
4 min · 1,412 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...
Fighting Trump - Residents Opposing Donald Trump's Scottish Golf Resort
14 min · 1,158 views today · Documentary on the residents protesting against Donald Trump's golf development on the Menie Estate in Aberdeenshire, Scotland. Directed and Presented by James Trosh.
Real Change in Democracy Comes Not in the Voting Booth but Activism at the Grass-Roots
Ilze Peterson · 1,087 views today · Many years ago, the late Judy Guay, a low-income woman from Bangor, founded the Maine Association of Interdependent Neighborhoods in order to advocate for the neediest in our...
Doctors Response to Daily Mail Bigotry is Beautiful
Neil Tiwari · 1,027 views today · A poetic open letter to the Daily Mail newspaper from Dr. Neil Tiwari, in response to a bigoted attack on his colleagues, is going viral and it's beautiful.
Forest Man
16 min · 947 views today · Since the 1970's Majuli islander Jadav Payeng has been planting trees in order to save his island. To date he has single handedly planted a forest larger than Central Park NYC...
Schooling the World (2010)
66 min · 871 views today · If you wanted to change an ancient culture in a generation, how would you do it? You would change the way it educates its children. The U.S. Government knew this in the 19th...
How to Criticize with Kindness: Philosopher Daniel Dennett on the Four Steps to Arguing Intelligently
Maria Popova · 771 views today · “Just how charitable are you supposed to be when criticizing the views of an opponent?”
Maya Angelou's 3-Word Secret to Living Your Best Life
3 min · 648 views today · Dr. Maya Angelou says that in order to be the best human being you can be, you must follow one simple directive: "Just do right." Watch as Dr. Angelou reveals how you can never...
Load More
Like us on Facebook?
Why the UK Leads the Way on Inequality