Scotland’s household wealth has exceeded £1 trillion for the first time, according to a new report published today (Friday) by the Resolution Foundation.
The report – The £1 trillion pie: how wealth is shared across Scotland – looks at both the scale of assets in 21st Century Scotland and who holds them. It says that wealth is playing a bigger role in shaping Scottish society, and calls for a greater focus on wealth in political debates to reflect this shift.
Typical Scottish wealth now totals £237,000 per household, compared to £259,000 for Great Britain as a whole. Pensions, rather than housing, play a bigger role north of the border, with more than half of household assets accounted for by pension savings, compared to 42 per cent across Britain.
Typical pension wealth in Scotland is just under £70,000 (compared to £58,000 in Britain), while typical property wealth in Scotland is £65,000 (compared to £95,000 in Britain).
The report highlights five reasons why policy makers should pay more attention to wealth in the years ahead:
Wealth has grown much faster than incomes: Scottish wealth has grown from being five times GDP to more than seven times over the last decade. This has made it much harder to close wealth gaps by earning and saving. It would now take a very high income family (in the top 10 per cent of households with a £58,000 income) 19 years of saving every single penny they earn to become a truly wealthy family (in the top 10 per cent wealthiest households with assets of over £1 million).
Generational divides have opened up: Recent wealth booms have largely benefitted older generations, with no cohort born since 1965 seeing higher wealth than their predecessors at the same age. At age 35, those born in the second half of the 1970s had one third less wealth than those born just five years before (£33,000 vs £52,000) This is in part because of big falls in home ownership rates for young adults in Scotland, which have fallen from 48 per cent in 2003 to 32 per cent today.
Inheritances are booming: what you inherit, rather than what you earn, is set to become much more important determinant of your lifetime living standards in the years ahead. Inheritance tax revenue raised from Scottish estates rose by 30 per cent in just two years up to 2014-15.
Wealth is very unequal: wealth in Scotland is nearly twice as unequally held as income. 25 per cent of Scottish people have less than £500 of net savings, compared to 22 per cent across the UK. 7 per cent have zero savings or have negative balances in their current accounts.
The biggest wealth tax is devolved: while wealth has grown in recent years, the same is not true of wealth taxation that across the UK has remained largely flat at 2.5 per cent of GDP for the last 50 years. While some wealth taxes are set in Westminster, including inheritance tax, the biggest wealth tax (Council Tax) is fully devolved. Recent modest reforms have improved council tax in Scotland, in marked contrast to the lack of progress in England, but the tax could still be much more closely tied to property values.
Torsten Bell, Director of the Resolution Foundation, said:
“Wealth in Scotland has grown fast in recent years and will come to play a bigger role in determining life chances in the decades to come.
“This increase in wealth across Scotland has sat alongside falling home ownership rates, particularly for young families, who are struggling to accumulate wealth as preceding generations have been able to.
“The accumulation, distribution and taxation of wealth should be at the centre of policy debates in Scotland in the years ahead. If current trends continue it will become much harder in modern Scotland to earn your way to being truly wealthy, and young people’s prospects will depend less on their ability, and more on whether or not they inherit assets from relatives.”