This week the Marmot Review revealed that life expectancy in England has stalled after a decade of austerity. Even more striking was the finding that women in the poorest communities are living shorter lives than in 2011.
Despite being one of the richest countries in the world, wealth in the UK is deeply unevenly distributed. This is a feminist issue, as women typically own fewer assets than men. This has real world consequences, including shorter lives, poorer health and a more precarious existence. This problem is exacerbated by the tax system, which treats wealth much more generously than consumption or income from work. Addressing wealth inequality, and in particular ensuring that women have better access to resources, should be a priority if the government is to make good its commitment to “level up” the left behind areas of the country.
The Women’s Budget Group want to do something about this. As a group of leading feminist economists, they’ve launched the Commission on a Gender-Equal Economy to develop an alternative economic approach, so that gender equality becomes a reality in the UK economy. I’ve submitted evidence on wealth, tax and gender.
Over the last thirty years wealth inequality has shot up in the UK. Most of this increase happened in the 1980s and early 1990s, and it has left the UK deeply divided. Wealth inequality is double income inequality. Declining rates of home ownership mean that every generation since the post-war baby boomers have less wealth at the same age than the generation before them.
Evidence shows that once women have children, they are much more likely to have little, or nothing, in the way of savings. This means that ownership of wealth is fairly even between men and women until people reach their 30s, when men start to pull away. Overall women have only 40% of the UK’s stock of personal wealth.
There are particularly stark differences in wealth when it comes to the ownership of financial assets, which are often lightly taxed. For example, women are less likely to have private pension pots, and if they do, the size tends to be much smaller. By the time a woman is in her early 60s, her average pension pot is a fifth the size of that of a man her age. Women also receive significantly less income from property, interest, dividends and investments than men.
Research by academics at Loughborough, Birmingham and LSE found that the public associated wealth with security and comfort. We live in a country where housing is precarious, there are high levels of personal debt and the welfare state can’t be relied on when things go bad. Not having wealth is linked to stress, relationship breakdown and a lack of control over your life. It can mean being tied into an unhealthy relationship or even domestic violence due to financial dependence.
So what can politicians do about this?
One important approach is to increase taxes on wealth and use the revenue to fund public services, which women are more likely to use. Even as income from wealth has risen as a share of national income, the amount of revenue raised by taxes on wealth itself has remained flat, or fallen, since the 1980s.
It isn’t totally far-fetched to suggest these ideas under a Conservative government. Leaks in advance of next month’s budget suggest that the Treasury is considering some increases on taxes on wealth to help fund spending promises, though many of these changes are facing resistance from more traditional wings of the party. Focus groups that my organisation, Tax Justice UK, carried out across the country found that people are desperate to see more investment in their areas and are open to higher taxes on wealth to fund this.
A good starting place would be to tax income from wealth at the same level as income from work. The current approach, where capital gains is taxed at a lower rate than income tax, is regressive. It also favours men, since they are much more likely to receive income from capital gains. According to IPPR, increasing capital gains tax to income tax levels could raise £90 billion over five years. Almost 70% of the public would support such a move.
Politicians should also curb the very generous tax reliefs on pension savings. Higher earners receive the bulk of pension tax relief, despite making up a small proportion of the working population. The Resolution Foundation suggests a flat rate of relief at 28%, which would be revenue neutral.
The Treasury and HMRC also need to do a much better job of understanding the gendered impact of tax and spending changes. It’s no longer good enough for the government to ignore the impact that policy changes have on women.
Politicians need to act to tackle the lopsided ownership of wealth in this country, and in doing so improve the lives of women.