Huge rise in average income inequality between south-east England and rest of the UK, study finds

Institute for Fiscal Studies cites weak earnings growth as ‘primary reason for malaise in living standards’ as wage disparity worsens

David Hughes
Wednesday 19 July 2017 00:00 BST
Incomes in the south of England (excluding London) and Scotland have grown faster than in Britain as a whole over the last 40 years
Incomes in the south of England (excluding London) and Scotland have grown faster than in Britain as a whole over the last 40 years

Average household incomes in the South-east are almost 25 per cent higher than in the West Midlands, according to a major new analysis of poverty and inequality.

The report found that average incomes in the West Midlands, East Midlands, northern England and Wales were no higher than incomes in the South-east in the late 1990s.

The Institute for Fiscal Studies (IFS) also identified weak earnings growth – with employment income in 2015-16 lower than its pre-recession levels – as “the primary reason for the malaise in living standards” in the UK.

The IFS analysis showed that the median weekly income net of taxes and benefits for a childless couple in the West Midlands (over the three years from 2013-14 to 2015-16) was £427.50 before housing costs, or £370.07 after housing costs.

For the South-east the figures were £531.89 before housing costs or £454.62 after housing costs.

The report was funded by the Joseph Rowntree Foundation, whose chief executive Campbell Robb described the findings as “alarming”.

The analysis showed:

  • Average incomes in the south of England (excluding London) and Scotland have grown faster than in Britain as a whole over the last 40 years.
  • Southern England is now 13 per cent above the national average, compared to 7 per cent in the 1970s.
  • One in four poor children live in the most deprived 10 per cent of local authorities.
  • Inequality remains lower than before the Great Recession, with the main reduction between 2007-8 and 2011-12 due to rising benefit income and falling real earnings.
  • But income inequality is likely to increase over the coming years if earnings grow and planned benefits cuts “significantly reduce the incomes of low-income working age households”.

The Midlands has suffered particularly badly, the report showed. Having had slightly higher incomes than average in the mid 1970s, average incomes in the East and West Midlands are now 6 per cent and 9 per cent below the national average respectively.

Mr Robb said: “These alarming figures highlight how far behind some parts of the UK have fallen, with millions of people seeing their incomes stagnate or even worse decline. Rebalancing our lopsided economy must be a priority if we are to create a country that works for all.

“Average incomes in the Midlands, Wales and the north of England have fallen further behind the rest of the country. Low earnings are an increasingly important driver of poverty, with the proportion of children in poverty in working households rising sharply in recent years.

“The Government must make urgent progress with its industrial strategy, working across party times to deliver a plan that drives up skills and productivity across the country. That will deliver more and better jobs and higher living standards that people desperately need.”

IFS research economist Agnes Norris Keiller, one of the authors of the report, said: “There are important gaps between the average incomes of different regions, though inequalities within regions are far larger than those between them.

“While London remains the most unequal part of the country, inequality in the capital has seen a dramatic decline over the last decade.”

A Treasury spokesman said: ‘We are building an economy that works for everyone by sharing prosperity and opportunity throughout the UK so nobody is held back because of where they come from.

“We have recently agreed seven devolution deals worth £4.8bn, giving local leaders extra money and powers to create jobs, boost skills, build homes and improve local transport.

“Our National Living Wage is also helping to deliver the fastest pay rise in 20 years for the lowest paid across our country.”

But Liberal Democrat welfare spokesman Stephen Lloyd said: “This report shows for the first time we are creating geographical ghettos of poverty that are trapping a generation of people and their children.”


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