New Labour failed to make Britain a more equal society, according to the latest data from the Office for National Statistics.
With inequality becoming one of the major themes in the Labour leadership contest, the ONS said that income inequalities in 2009-09, the latest available, show little change on the previous year, and are "almost unchanged" from the average over the past 10 years.
The ONS said that the recession had made no difference to the levels of inequality in society. The slump saw bankers' bonus payments collapse, but also many more people fall into unemployment. The ONS say that income before taxes and benefits for the top fifth of households stood at £73,800, compared with £5,000 a year for the bottom fifth. After taking account of taxes and benefits, the gap between the top and the bottom fifth was reduced with average income of £53,900 per year and £13,600, respectively, a ratio of four to one.
However, the Institute for Fiscal Studies recently pointed that, had Labour maintained the same taxation and benefits structure that they inherited in 1997 until they left office, the disparities in income would be much greater than they are now. The broad picture is one where the benefits and taxation system has acted to make for a more equal society, but trends in salaries and other transfers have acted in the reverse direction.
In the case of retired households the trend to equality is more pronounced – the post-tax ratio is now 3:1.
The ONS say that households with children do relatively better than those without children due to the cash benefits and benefits in kind, such as health and education services, received by these households. These households benefited even more from the tax and benefit system than during 2007-08.
The statistics also reveal that the poor do not receive the great bulk of welfare benefits: the bottom two fifths of society only received 56 per cent of benefit payments.
Households paid an average of £7,200 per year in direct taxes such as income tax and national insurance, and £4,700 in indirect taxes, for example VAT and fuel duty. The amount of indirect taxes paid fell as a proportion of gross income, from 14 to 13 per cent in 2008-09, mainly due to cuts in stamp duty and VAT to boost the economy made during the period.Reuse content