Poorer households are twice as likely as high-income households to increase their debt during the coronavirus pandemic, laying bare “Britain’s wealth gaps”, a report said.
Lower income households are 50 per cent more likely to be saving less than usual, even though “those most at risk in the crisis have the weakest private savings safety net to fall back on,” according to think tank the Resolution Foundation.
It found that a typical worker in a shut-down sector of the economy – and therefore most at risk of unemployment – had average savings of just £1,900, far less than the average savings (£4,700) of someone who has been able to work from home during the crisis.
Twenty-four per cent of poorer workers are worried about making ends meet if they lost those their jobs for a month, compared to 17 per cent among those working from home.
Virus exposes UK ‘wealth gaps’
Lower-income households are far more likely to run down their savings and turn to high-interest debt, said the survey called Rainy Days.
The report said: “These very different experiences of this crisis reflect both how focused its negative effects have been on lower-income families, and the big wealth gaps across Britain before the crisis struck.”
The report shows that the wealth gap between the richest and poorest tenth of households grew by more than £370,000, in real terms, between 2006 to 2018 to hit £1.4m. Wealth gaps across the country have also grown, with London and the South East accounting for 38 per cent of all wealth in 2016-18, up from 32 per cent in 2006-08.
The Foundation adds that while wealth inequality has not increased in recent years, it remains almost twice as high as income inequality.
Resolution Foundation economist George Bangham said: “Pre-coronavirus Britain was marked by soaring wealth and damaging wealth gaps between households. These wealth divides have been exposed by the crisis.”
He added: “While higher-income households have built up their savings, many lower-income households have run theirs down and had to turn to high-interest credit.”
Last year, another think tank, the Institute for Fiscal Studies, found widening inequalities in pay, debt levels, health and opportunities in Britain are undermining trust in democracy.
It warned of runaway incomes for high earners but rises in “deaths of despair”, such as from addiction and suicide, among the poorest.