North-South income divide 'has narrowed under Labour'

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The gap in disposable income between the wealthiest and poorest regions of the UK has narrowed since 1997, official figures showed yesterday.

Experts said the narrowing provided tentative evidence that Gordon Brown's redistributive tax and spending policies had helped reduce the traditional North-South divide.

The amount of money available to spend or save for households in inner London was 29 per cent above the national average in 2004, down from 31 per cent in 1997, the Office for National Statistics said. The decline was even more marked compared with the peak of the boom years for the UK economy in 1999 and 2000 when it ran at 36 per cent.

While many regions were unchanged between 1997 and 2004 there was evidence of a narrowing since 2000. Scottish households' disposable income is now 5 per cent below the UK average compared with 7 per cent in 1999.

In Wales the shortfall has narrowed by one percentage point to 12 per cent while several sub-regions of the North and the North-west became poorer.

Meanwhile the South-west was the only southern region to fall below the national average, as disposable incomes fell to 99 per cent of the UK level.

The Institute for Fiscal Studies, the independent body that analyses tax and spending policy, said on the surface the ONS figures showed some narrowing in disposable income. But Luke Sibieta, one of its research economists, said: "In terms of what they mean for standards of living in the regions, that's really difficult because Scotland and London have different prices."

He said the fall in inner London was driven by a slowdown in employees' compensation, adding that a rise in relative incomes in areas of low wealth could be a reflection of the greater impact of the rise in benefits and tax credits for the poorest.

In monetary terms, average disposable income in inner London was £16,500 per person in 2004. This compared with a UK average of £12,800 and £10,793 in Tees Valley and Durham, the region with the lowest disposable income. Incomes rose in all UK regions between 2003 and 2004, with north-east Scotland seeing the biggest jump of 3.7 per cent to £12,900, 1 percentage point above the UK average.

The ONS said earnings from employment were the principal part of people's incomes, with other sources being private pensions and state benefits.

Inner London residents had the highest level of income from employment in 2004 at an average of £15,590 per person, 44 per cent above the UK average and 118 per cent higher than the total for people in Cornwall and the Isles of Scilly, which had the lowest level.