· 1 min read · News

UK income inequality greater than previously thought

Published:

According to the Office for National Statistics (ONS) the gap between the highest- and the lowest-paid people in Britain is greater than previously thought

Revised government figures for income inequality levels across the country have reportedly shown that the divide was as much as 2.4 percentage points higher on average than official figures had suggested over the decade since the financial crisis in 2008.

According to The Guardian the new figures differ to arguments made by the Conservative party that the gap between rich and poor has narrowed since it entered power in 2010.

The new ONS report has been compiled using tax records from HMRC to assess the incomes of the top 10% of earners in Britain.

Since the 1960s, government statisticians have historically carried out surveys to compile this data. The new method was tried as the ONS said surveys do not always fully capture the incomes of the richest families – particularly those among the top 1%. This group has been historically less likely to answer surveys.

The new analysis reported a sharp increase in income inequality, as the average income of the top 10% rose by 28.5% between 2001 to 2002, as well as 2007 to 2008.

However, after the banking collapse damaged earnings of the highest paid incomes for the group fell by 20.8% by the end of 2012 to 2013.

Before the revisions official figures had shown little change over the period.

“Poor data on the incomes of the very richest households has meant that the UK’s inequality story has often been incomplete,” said Adam Corlett, Senior Economist at the Resolution Foundation.

“This has also led to commentators and politicians making misleading claims about inequality falling in 21st century Britain. Today’s innovative new data shows these claims are untrue.

“By better capturing the incomes of the very richest in society we can see that inequality rose dramatically in the run-up to the crash, fell in the midst of the crisis, and has been broadly flat since. Critically, the big picture for Britain has been consistently high levels of inequality that have not fallen outside of financial crises,” he added.

The ONS said it will introduce its new income adjustment for the income inequality statistics for the financial year ending 2019. It is to be published 5 March 2020.