MONEY COMMENT
We're Not As Wealthy As We Think

By Cliff D'Arcy
August 3, 2004

For the last week or so, the news has been filled with articles on the UK's trillion-pound debt. Predictably, the authors of these pieces fall into opposing camps. There are those who believe that, thanks to a 'new paradigm', high levels of personal debt are healthy, versus those who believe that rising debt levels could prove disastrous. For the record, I'm firmly in the second camp.

One argument the 'new paradigm' crew trots out is that the UK is awash with assets, so our debts are unimportant. A £1 trillion debt combined with around £5.4 trillion of assets means that our nation is actually £4.4 trillion in the black. Nice!

The problems really begin when pundits start talking about the dreaded 'averages'. Averages are great for spreading things around evenly but, as I always say, 'averages invite comparisons'. The difficulty with discussing 'average' debt and 'average' wealth is that, generally speaking, the people who have the debt lack the wealth, and those that have the wealth lack the debt! Here's what I mean:

Distribution of UK wealth (including property)

Sharing our £5.4 trillion between the 58.8 million people in the UK gives an 'average' wealth (there it is again!) of almost £92,000 apiece. Pukka! But let's dig a little deeper (the following percentages are from 2001, but are unlikely to have changed much since):

1. The wealthiest 1% own almost a quarter of it (23%).
2. The wealthiest 10% own more than half (56%).
3. The wealthiest 50% own almost all of it (95%).

Or, put another way:

• Nearly a quarter of the UK's total personal wealth (23%, or £1.24 trillion) is in the hands of only 588,000 people. That's an average of £2.1 million each.

• Just 5.9 million people own over half of our wealth (56%, or £3 trillion). That's more than half a million quid each.

• The poorer half of society - 29.4 million people - own just £270 billion. That's an average of around nine grand each, compared to an average of roughly £175,000 for the richer half.

Distribution of UK wealth (excluding property)

If we strip out property and consider only land, savings and shares, the picture becomes even more extreme:

1. The wealthiest 1% own a third (33%).
2. The wealthiest 10% own almost three-quarters (72%).
3. The wealthiest 50% own just about the lot (97%).

Therefore, the poorer half of the populace owns under a thirtieth of the UK's non-property wealth (3%). Indeed, there are millions of people with no savings whatsoever. But I'm willing to bet a large sum that this group has more than its fair share of credit card, overdraft and loan debts (let's call them 'above average' debt levels)!

So, if you're one of the many unfortunate people who have the debts but lack the wealth, visit our Get Out of Debt centre. It could be the wisest move you make this year.

More: Visit our Savings centre.

Many thanks to Professor Chris Hamnett, whose article in The Independent inspired this piece.