Rachel Reeves is being called upon to focus on the wealthiest individuals in the upcoming Budget, as research reveals a significant widening of the wealth gap between the rich and the poor. Analysts have highlighted that the growing wealth inequality poses serious threats to society, including social unrest, environmental challenges, economic stagnation, and potential democratic decline.
A recent report from the Fairness Foundation disclosed that the absolute wealth disparity between the top and bottom 10% of the population in the UK surged by 54% from 2011 to 2021, largely driven by the escalating value of assets like real estate. The report also indicated that inheritances and gifts have doubled over the last twenty years to £100 billion, with projections suggesting another doubling by 2040. Notably, the wealthiest 10% of families consistently hold more than half of the total wealth.
Conversely, the poorest 10% of households possess a combined net worth, including assets like work pensions, vehicles, household items, and financial and housing wealth, totaling £15,400 or less. Will Snell, representing the Fairness Foundation, emphasized the urgent need for decisive action to address the escalating wealth inequality, advocating for effective wealth taxation and equitable distribution to mitigate the social and economic repercussions.
In light of the impending Budget, the Chancellor is contemplating a mix of tax increases and spending reductions to mitigate a projected £22 billion deficit. Rachel Reeves has hinted at targeting the wealthiest individuals in the Budget, stressing the importance of fair taxation for those most financially capable. However, there is reluctance to implement a dedicated wealth tax.
During a visit to Saudi Arabia, Reeves emphasized the significance of economic growth in the upcoming Budget, underscoring the need for a balanced approach to tax and spending to ensure economic resilience and adherence to fiscal rules. The Labour Party had pledged to shield working individuals from national insurance, VAT, and income tax hikes in its manifesto, though speculation is rife on whether Reeves may need to reconsider this commitment.
While not ruling out a potential income tax increase, Reeves affirmed her commitment to supporting the working class by striving to keep their tax burdens minimal.