Photograph: Ben Birchall/PA
Office for National Statistics figures contradict Osborne’s claim that austerity has not caused inequality.
Britain’s top earners have pulled away from all other income groups, with the top 20% of households increasing their disposable incomes last year while all others fell.
The top fifth of earners saw their annual disposable income rise by £940, while the bottom fifth lost £381 and all other groups lost around £250.
The figures covering 2011/12 to 2012/13 appeared to blow a hole inGeorge Osborne‘s claim that its austerity policies had done nothing to make Britain a more unequal society, according to the Office for National Statistics (ONS).
The chancellor said in his last budget that inequality was at its lowest in 28 years and highlighted data showing that top earners had suffered more than other groups since the financial crash.
Figures from the ONS covering the six years to 2013 show the richest fifth of households saw a 5.2% drop in income and the average income for the poorest fifth grew by 3.5%.
But most of the drop in top pay over the six years came from a collapse in bonuses early in the last recession, when a sharp rise in tax credit and other benefit payments protected the incomes of the poorest.
The TUC said the last few years represented a return to the trend for growing income inequality, and the ONS figures were proof “most people are failing to have a fair share in the benefits of recovery”.
General secretary Frances O’Grady said: “The return of rising inequality should worry everyone as it suggests that nothing has been learned from the financial crisis despite the huge fall in living standards that so many people are still experiencing.”
Duncan Exley, director of the anti-poverty charity, the Equality Trust said the figures showed the government’s main measure of income inequality, the Gini coefficient, had returned to its 2009/10 level. The Gini for disposable household income is 33.2 for 2012/13, up from 32.3 in 2011/12.
He said: “By George Osborne’s own measure, inequality has now risen to the same level as before his government came to power. There is now overwhelming evidence that the UK’s unusually high inequality is damaging our health, society and economy.
“We need a drastic rethink, with policies that address inequality reduction and a commitment from politicians that their policies will have a net reduction on inequality.”
The Bank of England is among many forecasters expecting a rise in average incomes before the end of the year to lift the living standards of people in the middle of the income scale. So far this goal has proved elusive as continue employers maintain a tight grip on pay. The latest ONS figures show pay rising by only 0.7% a year at a time when annual inflation is up 1.5%.
The coalition government can point to the protection offered to the poorest over the last six years and the figures showing the richest, at least in percentage terms, took the biggest hit. Those in the top 20% of households had an average income of £81,300 and paid £20,300 in taxes.
However, the better than expected mean average figures shown by the ONS for all households, especially for the low paid, is skewed by the over 65s, who are the biggest winners over the six years from 2007/8 to 2012/13.
The average disposable incomes of retired households has jumped 7.9% in real terms, or £1,700, since 2007/08 and the largest rise – 14% – was among the bottom fifth.
This provides much of the boost to the average for all low income households.
To emphasise the point, the ONS figures show that excluding retired households, disposable incomes fell overall by 6.3% on average, or £2,100, much further han the £1,200 fall for all households. The bottom fifth of non-retired households saw a 2% fall in incomes in contrast to the 3.5% rise.
Total taxes paid by the ”squezed middle” 20% rose 1% between 2011 and 2013. Cuts in tax credits and other benefits reduced its net dependency by 17%.
Nevertheless, the ONS said the UK was no more unequal than in 2011 once all tax and benefits were taken into account.
A ratio of 15:1 in gross incomes between the highest and lowest fifth of incomes reduces to 6.5:1 after tax and cash benefits.
Non-cash benefits, such as education and health, have been included by the ONS for the first time a calculation that shows 52% of households received more in benefits than they paid in taxes in 2012/13. This figure, equal to 13.8m households, has fallen 1.5 percentage points since 2011, though it is 8.2 percentage points higher than in 2000.
For non-retired households the proportion has fallen 1.8 percentage points – from 39.7% in 2011 to 37.9% in 2013.
Tim Knox, director of the free-market think tank the Centre for Policy Studies, said: “This small fall in the proportion of households who receive more in benefits than they pay in tax is welcome. But the fact that over half of all households receive more in benefits than they pay in taxes should be deeply shocking. There is still so much more to do to get us back to the long term average of around 45%.”
Source: The Guardian
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