Wealth gap 'will widen over next five years': Rich spend more on school fees as poor struggle for basics, report says

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The Independent Online
BRITAIN is increasingly divided between rich and poor, with the better-off spending more on school and medical fees and 'luxury goods and services', while the poor shop in discount stores and eat sweets and crisps instead of fresh fruit and vegetables.

The wealth gap, a growing feature of the 1980s, will go on widening for the next five years at least, according to Mintel, the market research organisation. After that, it may depend on the results of a general election.

Mintel's British Lifestyles report for 1994 says that two-fifths of income is earned by one-fifth of the population. 'In simple terms the well-off are getting wealthier while the poor are getting poorer,' according to Peter Ayton, Mintel's head of research.

He said that, while Mintel had no political stance, the growing polarisation had important implications for business markets. 'On the one hand there is an increasing demand for luxury goods and services, while on the other a growing proportion of households only have sufficient income for staple products and necessities.'

At the top end of the market, the polarisation is reflected in the 'huge' growth in spending on school fees, medical insurance and pensions.

The area of spending which saw the greatest proportionate increases between 1983 and 1993 was housing, followed by insurance and pensions, medical and education fees, household services - such as nannies and domestic work for older mothers with careers - and a 'miscellaneous' sector, the largest element of which is the charges made by companies and advisers for providing financial services.

However, the relative wealth of those on above-average incomes has increased, particularly in the last three years for people just below the top 20 per cent. The market base of educational fees has broadened, making this one of the 'most successful individual markets of 1993'.

Spending on education is identified by Mintel as the biggest area of growth for the next five years. Paul Hersey, deputy head of research, said smaller families - one or two children instead of three or four - meant that parents and grandparents could afford to club together to send children to private schools. 'People are starting to make a conscious decision to educate their children as best they can.'

Medical and life assurance, and pensions will see the next fastest growth in spending 'as people become increasingly concerned about preparing for old age and ill health in the face of dwindling government resources', Mr Ayton added.

Mintel predicts that spending will rise by a 'modest' 17 per cent, after inflation, in the next five years. But there will be no consumer bonanza because the 'caution developed during the recession could take a long time to die'. At the bottom end of the market, people will continue to visit discount stores and the corner shop. However, the changes in mortgage tax relief and allowances in April will hit families on low and middle incomes who bought a house on a large mortgage at the end of the 1980s. Value-added tax on fuel will also disproportionately affect pensioners and families with young children.

The share of total income taken by the top 20 per cent of households grew from 35 per cent in 1979 to 40 per cent in 1992. The share taken by the bottom 20 per cent fell from 10 per cent to 5 per cent.

Much of the growth in spending forecast for the next five years is associated with the increase in 35- to 44-year-olds. They will provide a boost for home entertainment, gardening and domestic help. Televisions, hi-fi equipment and recorded music will increase sales and there will be a 'healthy growth' in expenditure on books, magazines, newspapers and stationery.