The wealth gap may not be growing, but wealth continues to be redistributed upwards

Rentoul is wrong to pity the rich their "burden". The big divide in the UK is less between the top, middle and bottom, than between the super-rich and everybody else


In the last week, John Rentoul has written three articles which argue that ‘the income gap between rich and poor has not changed significantly for about 20 years, not since the increase in inequality that occurred when Margaret Thatcher was Prime Minister in the 1980s.’ (26 Dec) He then makes a second claim - that during the last four years of crisis, the rich have done as badly as the poor: 'And even now, as we all get a bit poorer again as a result of the bust, the losses are spread pretty equally with, if anything, the rich bearing the greater share of the burden.'

Static but unequal

Rentoul is correct in part. For the bulk of the population, the income gap has remained pretty static both up to 2007 and between 2008 and 2010/11 ( the latest year of available data ). Incomes amongst the well off ( just below the top one per cent ) have increased at roughly the same pace as those in the middle and those at the bottom. But this only tells part of the story. First, it still means the income gap is much higher than it was in the 1970s so that we are still a much more unequal country than for the whole of the immediate post-war era. Secondly, the capping of the jump in the growing income divide of the 1980s has only been achieved through a substantial, public-spending sucking process of redistribution (especially since 1997) to the lower third of the distribution financed largely by a tax hike on those on middle and slightly higher incomes. Without this, the income gap would have continued to widen.

Thirdly, and most importantly, Britain has been building a new form of inequality, close to the searing gap of the Victorian era. Along with the United States and a number of other countries, Britain has in the process, turned itself into a near-plutonomy, a society where spending power and economic decision making has become increasingly dependent on the unpredictable and capricious actions of the few.

The 'super rich' swindle

As shown in Figure 1, the  gap between the very rich and everyone else has continued to rise since the end of the 1980s. Between 1978 and 2007, the share of total income taken by the top one per cent rose almost threefold from 5.7 per cent to 15.4 per cent while that of the top 0.1 per cent rose fivefold to reach 6.1 per cent. Though these top shares dipped a little in 2009 (the latest year for which data is available) at the height of the recession, they will almost certainly have risen since then. Over the last thirty years, the top one per cent have grabbed a tenth more of the pie, a substantial squeeze on everyone else. (Moreover, because of the way the rich have been able to hide their incomes, these figures are likely to understate the growth in incomes at the top over this period).

Other evidence suggests the very rich have continued to pull away since 2009. Figure 2 shows that while the gap between the earnings of FTSE 100 chief executives and the middle earning employee dipped slightly in 2009, it has continued on its upward path since then. That the rich have got richer through the crisis is also confirmed by the wealth of the richest 1000 from the Sunday Times Rich List ( figure 3 ). Again, after dipping in 2009, the wealth of the top 1000 grew by a further £60 billion to reach a record high in the 2012 List.

A weakened economy

The big divide in the UK is less between the top, the middle and the bottom than between a small group of the super-rich and nearly everyone else. Rentoul’s answer to the way the over-sized rich has been accumulating larger and larger fortunes and securing a bigger chunk of the economic pie is to dismiss them as ‘untypical’. This may be true in a literal sense, but viewing them in this way is a grave error. The behaviour of the super-rich has a greatly leveraged effect on the rest of us. Most of the rich's income surge has come not from the building of a more robust economy triggered by an entrepreneurial leap forward but the very opposite - a clever process of wealth and income transfer from the bulk of the working population.

This sustained process of upward redistribution is not just a matter of social justice. By stifling demand for productive output while fuelling the asset bubbles that took us over the cliff in 2008, it has made the economy weaker and less resilient. Until this gap begins to close, and Britain loses its unwelcome plutonomy status, the economy is likely to remain locked in crisis.

Stewart Lansley is a visiting fellow at Bristol University and the author of The Cost of Inequality, Gibson Square.

React Now

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

Year 5 Teacher

£80 - £140 per day: Randstad Education Leeds: Year 5 Teacher KS2 teaching job...

Software Developer

£35000 - £45000 Per Annum Pensions Scheme After 6 Months: Clearwater People So...

Systems Analyst / Business Analyst - Central London

£35000 - £37000 per annum + Benefits: Ashdown Group: Systems Analyst / Busines...

Senior Change Engineer (Network, Cisco, Juniper) £30k

£30000 - £35000 per annum + Benefits: Ampersand Consulting LLP: Senior Change ...

Day In a Page

Read Next

i Editor's Letter: A huge step forward in medical science, but we're not all the way there yet

Oliver Duff Oliver Duff
David Cameron has painted a scary picture of what life would be like under a Labour government  

You want constitutional change? Fixed-term parliaments have already done the job

Steve Richards
Two super-sized ships have cruised into British waters, but how big can these behemoths get?

Super-sized ships: How big can they get?

Two of the largest vessels in the world cruised into UK waters last week
British doctors on brink of 'cure' for paralysis with spinal cord treatment

British doctors on brink of cure for paralysis

Sufferers can now be offered the possibility of cure thanks to a revolutionary implant of regenerative cells
Ranked seventh in world’s best tourist cities - not London, or Edinburgh, but Salisbury

Salisbury ranked seventh in world’s best tourist cities

The city is home to one of the four surviving copies of the Magna Carta, along with the world’s oldest mechanical clock
Let's talk about loss

We need to talk about loss

Secrecy and silence surround stillbirth
Will there be an all-female mission to Mars?

Will there be an all-female mission to Mars?

Women may be better suited to space travel than men are
Oscar Pistorius sentencing: The athlete's wealth and notoriety have provoked a long overdue debate on South African prisons

'They poured water on, then electrified me...'

If Oscar Pistorius is sent to jail, his experience will not be that of other inmates
James Wharton: The former Guard now fighting discrimination against gay soldiers

The former Guard now fighting discrimination against gay soldiers

Life after the Army has brought new battles for the LGBT activist James Wharton
Ebola in the US: Panic over the virus threatens to infect President Obama's midterms

Panic over Ebola threatens to infect the midterms

Just one person has died, yet November's elections may be affected by what Republicans call 'Obama's Katrina', says Rupert Cornwell
Premier League coaches join the RSC to swap the tricks of their trades

Darling, you were fabulous! But offside...

Premier League coaches are joining the RSC to learn acting skills, and in turn they will teach its actors to play football. Nick Clark finds out why
How to dress with authority: Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear

How to dress with authority

Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear
New book on Joy Division's Ian Curtis sheds new light on the life of the late singer

New book on Ian Curtis sheds fresh light on the life of the late singer

'Joy Division were making art... Ian was for real' says author Jon Savage
Sean Harris: A rare interview with British acting's secret weapon

Sean Harris: A rare interview with British acting's secret weapon

The Bafta-winner talks Hollywood, being branded a psycho, and how Barbra Streisand is his true inspiration
Tim Minchin, interview: The musician, comedian and world's favourite ginger is on scorching form

Tim Minchin interview

For a no-holds-barred comedian who is scathing about woolly thinking and oppressive religiosity, he is surprisingly gentle in person
Boris Johnson's boozing won't win the puritan vote

Boris's boozing won't win the puritan vote

Many of us Brits still disapprove of conspicuous consumption – it's the way we were raised, says DJ Taylor
Ash frontman Tim Wheeler reveals how he came to terms with his father's dementia

Tim Wheeler: Alzheimer's, memories and my dad

Wheeler's dad suffered from Alzheimer's for three years. When he died, there was only one way the Ash frontman knew how to respond: with a heartfelt solo album