, Labour’s Shadow
Chancellor, responding to a report on
the impact of capital gains and how inequality has increased
significantly over the last decade, said:
"This groundbreaking research demonstrates clearly how
capital gains reveal an unequal society and the challenge ahead
to undo a decade of rising inequality.
“This pandemic has shown how many low-paid workers are
taking enormous risks to keep us all safe. We must have a fairer
settlement after this crisis - with those with the broadest
shoulders making more of a contribution".
Ends
Notes to Editors
· The report ‘Capital
Gains and UK Inequality: New evidence from tax microdata’ is
published today (Thursday) by CAGE Warwick and LSE International
Inequalities Institute
· Key findings
include
o Capital gains are highly
concentrated. Ranking people by their taxable gains,
the top 5,000 people receive over half (54%) of all gains. For
comparison, the top 5,000 people ranked by income receive just 2%
of all income.
o The vast majority of gains come
from business activities rather than passive
investments — increasingly so among those with the highest gains.
These gains are often in substitution for labour income.
o For some, capital gains are
regular part of their remuneration, rather than a rare or
once-in-a-lifetime event. A third of those with gains over
£20,000 in 2017 also averaged gains over £20,000 in the previous
four years.1
o Gains are concentrated amongst
those who already have high incomes. Nine out of ten
people who were in the top 1% by total remuneration (including
income and gains) were already in the top 1% by income
only.
o Some people receive most of their
remuneration in gains, though many of these individuals
have high incomes as well. Among those in the top 0.01% by total
remuneration, almost 60% receive at least 90% of their
remuneration in gains.
o The one in ten people who “join”
the top 1% when capital gains are included, are older and more
likely to be female. They are also more likely to be
business owners and pensioners, rather than employees.
o The top 1% share rises to 17% when
including gains, compared with 14% based on income
only. You would need at least £132,000 to make it
into the top 1% by total remuneration — this is £8,000 more than
when measuring income only.
o The effect on those at the very
top is even larger. The average remuneration of those
in the top 0.01% (roughly 5,000 individuals) rises from £4.9mil
to £8.4mil, increasing their share of all taxable income and
gains from 2.2% to 3.6%.
o The impact of capital gains on UK
inequality peaked in 2008, coinciding with record reported
gains on the eve of the Financial Crisis. Following a large fall
in 2009, the scale of gains and their impact on
inequality increased over the past decade and reached
their second-highest level in 2018.
o Including capital gains reveals a
rise in inequality over the past two decades. While
the share of all income going to the top 1% has remained at
around 14% since 1997, including gains it has risen to 17, with
the largest growth towards the very top.
