Abstract
Personal wealth has grown since the 1970s twice as fast in real terms as national income. Has this rise in the wealth-income ratio led to a corresponding increase in the wealth being passed on from one generation to the next? Are we returning to the levels of inheritance found in the 19th century? The aim of this paper is to construct UK evidence on the extent of the transmission of wealth in the form of estates and gifts inter vivos. It takes a long-run view of inheritance, starting from 1896, when the modern Estate Duty was introduced, and exploits the extensive estate data published over the years. Construction of a long-run time series for more than a century is challenging, and there are important limitations. The resulting time-series demonstrates the major importance of inheritance in the UK before the First World War, when the total transmitted wealth represented some 20 per cent of net national income. In the inter-war period, the total was around 15 per cent, falling to some 10 per cent after the Second World War, and then falling further to below 5 per cent in the late 1970s. Since then, there has indeed been an upturn: a rise from 4.8 per cent in 1977 to 8.2 per cent in 2006. This increase was more or less in line with the increase in personal wealth, and has to be interpreted in the light of the changing net worth of the corporate and public sectors of the economy.
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This research was stimulated by the work of Thomas Piketty on France (2011). The author is grateful to him and to Facundo Alvaredo and John Hills for helpful suggestions. Financial support from ESRC/DFID (through grant ES/I033114/1) and the Institute for New Economic Thinking (through Grant INO14-00023) is gratefully acknowledged.
Appendix: Data sources
Appendix: Data sources
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1.
Total national and personal income
The national income series is from Mitchell (1988, pages 828–830) up to 1980, then the National Income Blue Books 1997, 2004 and 2010, Table 1.1.
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2.
Total personal wealth
The personal wealth series is compiled by linking several different series, with definitions that are not necessarily identical. It works back from the HMRC series for total marketable wealth, 1990–2005 from the HMRC website, Table 13.4, 1984 to 1989 from IRS 2000, Table 13.4, 1981 to 1983 from IRS 1998, Table 13.4, 1979 to 1980 from IRS 1996, Table 13.4, 1976 to 1978 from IRS 1992, Table 11.4, linked at 1976 to series 1948 to 1976 from Blake and Orszag (1999), Table 12 (not including pension wealth), linked at 1948 to series 1920–1948 from Solomou and Weale (1997), Table 6 (net personal wealth including durables). The series has been extrapolated beyond 2005 in line with household net worth as given in the National Income Blue Book 2011, Table 10.10.
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3.
Mortality rates
The series for total deaths at age 20 and over is from the Annual Abstract of Statistics (AAS) and its predecessor, the Statistical Abstract for the United Kingdom (StA): 1911 to 1925 from StA 1911–1925, Table 21, where the deaths for the age group 15–19 has been taken as half that for 15–24; 1926 to 1930 from StA 1913 and 1917–1930, Table 24, where the deaths for the age group 15–19 has been taken as half that for 15–24; 1932 to 1941 from AAS 1935–1946, Tables 20 and 21; 1942 to 1965 from AAS 1966, Tables 28–31; 1966 to 1978 from AAS 1981, Table 2.29; 1980 and 1981 from AAS 2002, Table 5.18, 1982–2002 from AAS 2004, Table 5.19. These figures relate to the calendar year.
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4.
Wealth of the excluded population 1896–1923
The method is similar to that used by Clay (1925) to make estimates for 1912 and 1921. His total is made up of household goods plus “working-class savings”. For household goods, we have taken the 1921 figure of Clay and assumed a constant real value in other years, applying the ONS composite consumer price index. For each of the savings categories, we have obtained comparable series for the totals of each type, using the sources listed below. It should be noted that we have not included the funds of Friendly Societies, Trade Unions, of the National Health Insurance Fund, nor the Unemployment Insurance Fund, on the grounds that these do not form part of inheritance. This reduces Clay’s UK total for 1912 from £546 million to £452 million. Clay adjusts his total by a factor to allow for the part of these types of saving that are held by those covered by the estate duty statistics. He adjusts by subtracting 14 per cent in 1912 and 21 per cent in 1921. Here we have instead followed the estimates made by Radice (1939) of the proportions attributable to the excluded population; see Atkinson and Harrison (1978, pages 302–3).
The sources for specific categories are as follows:
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a.
Savings Banks deposits: Post Office
From Mitchell (1988), pages 671–2.
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b.
Savings Banks deposits: Trustee Ordinary Departments (railway not included)
From Mitchell (1988), pages 671–2.
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c.
Savings Banks deposits: Trustee Special Investment Departments
From Mitchell (1988), pages 671–2.
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d.
Government stock held by Post Office and Trustee Savings Banks
From StA 1890–1904 (Cd 2622), Tables 88 and 89, StA 1899–1913 (Cd 7636), Tables 93 and 94, StA 1910–1924, Tables 88 and 89.
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e.
Building societies
From StA 1890–1904, Table 92, StA 1899–1913, Table 98, StA 1906–1920, Table 87, StA 1908–1922, Table 84 (Great Britain figures extrapolated), StA StA 1910–1924, Table 92, figure for 1923 based on proportionate growth in share capital (change in form of table), which agrees with increase in deposits shown in Radice (1939, Table VII).
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f.
Industrial co-operative societies
From StA 1890–1904, Table 93, StA 1899–1913, Table 99, StA 1908–22, Table 85, StA 1910–24, Table 93 (increase of 1923 over 1922 used to link to earlier series), where sum of share capital and amounts due to depositors is used to link to 1912 and 1921 figures given by Clay (a linear fit to these two numbers).
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g.
Registered Friendly societies (not included)
From Report of the Chief Registrar of Friendly Societies for the year ending 31 December 1899, page 36, for the year ending 31 December 1901, page 29, year ending 31 December 1901, page 25, year ending 31 December 1903, page 28, year ending 31 December 1904, page 31. Year ending 31 December 1907, page 48, year ending 31 December 1908, page 44, year ending 31 December 1909, page 42, year ending 31 December 1910, page 37, year ending 31 December 1911, page 41, year ending 31 December 1912, page 60, year ending 31 December 13, page 80, year ending 31 December 1917, page 93, figures for 1896–7, 1900, 1904–5, 1917–20, and 1922–3 interpolated linearly.
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h.
Industrial life assurance, life funds
Taken from StA 1890–1904, Table 94, StA 1899–1913, Table 100, then 1914 to 1923 from Report of the Industrial Assurance Commissioner for the year ended 31st December 1925, page 124 (industrial assurance companies, to match figure of Clay), figure for 1913 interpolated.
The resulting total for 1921 is £650 million, which, on the basis of Clay’s estimate of 13.5 million persons, amounts to some £48 per head. The estate duty threshold was then £100. The Atkinson and Harrison (1978) central estimate for 1923 was £825 million, adjusted to a Great Britain basis. As noted in the text, this included jointly held property that is not covered in the estimate here.
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Atkinson, A.B. Wealth and inheritance in Britain from 1896 to the present. J Econ Inequal 16, 137–169 (2018). https://doi.org/10.1007/s10888-018-9382-1
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DOI: https://doi.org/10.1007/s10888-018-9382-1