Wealth gap has widened further under Labour, say researchers

The gap between rich and poor in Britain has continued to widen since Labour came to power in 1997, research published today suggests.

The gap between rich and poor in Britain has continued to widen since Labour came to power in 1997, research published today suggests.

The findings will encourage the Chancellor, Gordon Brown, to press ahead with a plan for the Government to pay up to £500 into a savings account for every newborn baby so that everyone would have some assets on which they could draw from the age of 18.

The scheme has been floated by ministers but there was concern that the Government's enthusiasm had cooled because it was omitted from the three-year spending blueprint published in July. Mr Brown is now expected formally to approve it in his draft Budget in November, or in the Budget itself next March.

The report by the Institute for Public Policy Research (IPPR), a think-tank with close links to Downing Street, will prove difficult reading for ministers because there is little sign that Labour has started to close the "wealth gap", despite its pledge to eliminate child poverty. Although poverty is normally measured by income, ministers are keen to switch the focus to the distribution of wealth because of growing evidence that it affects people's life prospects.

They are worried that, despite rising prosperity in Britain, wealth is concentrated amid the richest people.

According to the IPPR, the value of personal wealth in the United Kingdom rose from £500bn in 1979 to £2,752bn in 1999, an unprecedented increase. However, the top 2.4 million households have assets worth £1,300bn, while the bottom 12 million own only £150m. The share of wealth held by the richest 1 per cent rose from 17 to 23 per cent between 1988 and 1999.

Even more worrying, the IPPR argues, is that the number of households without any assets at all doubled to 10 per cent between 1979 and 1996. The share of the 20 to 34-year-old age group who had no assets doubled to 20 per cent. Almost a third of those in the bottom 10 per cent of the income scale have no assets, while virtually everyone in the top half of the income distribution has an asset.

"At present it is the privilege of a few to have assets, particularly at important times in their lives such as early adulthood. Without considering the importance of wealth, genuine equality of opportunity will not be possible," the think-tank says.

"If these worrying trends are to be reversed then bold policies are required."

The IPPR argues that a more even distribution of wealth would reduce dependency on the welfare system and give people more control over their own lives.