Do you remember the Hills Report? That\’s the one that said that the 90th percentile family had £850,000 of wealth while the 10% percetile one had £8,000?
And thus that there was a 100:1 wealth ratio in this country?
And do you remember me spluttering that this was entirely insane, that they were measuring the market allocation of wealth (and doing so in a very dubious manner, ignoring the State pension for example, but including private pensions) rather than the allocation of wealth after whatever it is that we do to change that allocation of wealth through State action?
Here\’s yet another little proof that that report isn\’t even worth toilet paper:
More than 90,000 people have “inherited” taxpayer-subsidised council houses from their parents or family members, official figures have disclosed.
Note that this does not include those who have inherited and sold, only those still actually holding such inheritances. And what is the value of such an inheritance?
Official figures indicate that the average council house tenant pays £280 a month in rent, compared with £565 in the private sector. In London, the gap is even larger.
OK, so, the subsidy is £285 a month. £3,420. Over a lifetime (say, you get the council house when you\’re 30, just to be fair, keep it until you\’re 80) is £171,000* without using any discounting to give us a net present value. This is, as above, inheritable, meaning that the next generation can be getting exactly that same wealth for them to enjoy.
From the Hills Report we also know that most of those in that bottom 10% either get council housing (which has that average capital value to the tenants) or housing benefit (which for the ease of calculation we\’ll call the same value). And we\’re not even including the value of housing benefit to pay council rents, a lot of which we\’d expect to see in that bottom 10%.
OK, let\’s discount it, can\’t be bothered to do the sums but call it an NPV of £80,000, why not?
Excellent, we\’ve just cut the wealth ratio from 100:1 to 10:1. This is without even straining ourselves, looking only at one small part of what the welfare state provides.
And we\’ve reached an interesting conclusion. There is absolutely no way that anyone at all has only £8,000 of capital in this society. For there\’s something of much greater value than that, the welfare state.
We might even extend this to a very troubling thought. I can imagine (although am certainly not going to try and work it out) that those in the bottom decile, perhaps the bottom two deciles, have more such capital, more such weatlh, that the third and fourth deciles. The value of that council tenancy (plus HB) is so large that it completely dwarfs those just above the allocation point\’s ability to generate capital for themselves. How\’s about that then? The poor in income are actually richer in wealth than those who have higher incomes?
*Interestingly, given the much higher London subsidy (the Westminster gap for a three bed house is more like £20,000 a year), we have the insane probability that there are those who should be paying inheritance tax on their tenancy in a council house. Not that they get charged it but perhaps they should, eh?