GDP may have risen, but the poorest fifth still lose out on £2,000 a year because of rising inequality

What would Britain be like if the income distribution was the same as in 1977?

GDP figures released today have shown a slight increase of 0.3 per cent over the past three months. But what will this mean for those at the lower end of the income scale, or even those in the middle?

We know that income inequality in the UK has been rising since around 1980, and has offset the benefits of economic growth for most people. But how has it actually changed incomes? Who has gained, who has lost, and by how much?

Figures published by the Resolution Foundation Commission on Living Standards found that in 1977, of every £100 of value generated by the economy, £16 went to the bottom half of workers in wages. By 2010 that figure had declined by 26 per cent, to just £12.

To find out what's going on in a bit more detail, we used figures from the Office of National Statistics to calculate what income levels would have been in 2010/11 if the distribution of income had remained as it was in 1977. We’ve then compared this to the actual income levels in 2010/11.

These figures are household income after taxes and benefits, adjusted for the number of people in each household.

The bottom fifth of households are getting almost £2,000 less than they would if total household income was still distributed as in 1977, while the top fifth are getting over £8,000 more. The pay ratio between the top fifth and the bottom fifth also climbed from 4 in 1977 to 5.5 in 2010/11.

If you are in your 30s and 40s and grew up in the UK then you spent your childhood in a society that was significantly more equal than the one we live in now. In the post-war years inequality decreased, reaching its lowest point in the 1970s. The 1980s, however, saw the steepest increase in inequality on record in the UK, with the gap between the top fifth and the bottom fifth increasing by 60% in just a decade, leaving Britain out on a limb (alongside the US) as one of the most unequal countries in the developed world. Since then, successive governments have used the rhetoric of decreasing inequality but failed to reverse this trend.

This rise in inequality is not just affecting the very poor and the very rich. Increasing inequality has meant less income for all households in the bottom four-fifths of the population. Although the pie got larger between 1977 and 2010/11, we can see that the bottom four fifths are all getting a much smaller portion of that pie.

In absolute terms, those losing out the most are not the poorest but those in the middle, who are getting £2,500 less than they would be without the rise in inequality since the 70s. However, it is the poorest that are losing out on the highest proportion of their income. Households in the bottom fifth are living on an average of £10,693 per year, and an extra £1,948 would be an 18% increase on their incomes. With wages lagging behind inflation, a food and fuel poverty crisis and cuts starting to bite, that extra income could be life changing for many of the UK’s poorest families.

Photograph: Getty Images

Annie Quick is a researcher at York University.

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Find the EU renegotiation demands dull? Me too – but they are important

It's an old trick: smother anything in enough jargon and you can avoid being held accountable for it.

I don’t know about you, but I found the details of Britain’s European Union renegotiation demands quite hard to read. Literally. My eye kept gliding past them, in an endless quest for something more interesting in the paragraph ahead. It was as if the word “subsidiarity” had been smeared in grease. I haven’t felt tedium quite like this since I read The Lord of the Rings and found I slid straight past anything written in italics, reasoning that it was probably another interminable Elvish poem. (“The wind was in his flowing hair/The foam about him shone;/Afar they saw him strong and fair/Go riding like a swan.”)

Anyone who writes about politics encounters this; I call it Subclause Syndrome. Smother anything in enough jargon, whirr enough footnotes into the air, and you have a very effective shield for protecting yourself from accountability – better even than gutting the Freedom of Information laws, although the government seems quite keen on that, too. No wonder so much of our political conversation ends up being about personality: if we can’t hope to master all the technicalities, the next best thing is to trust the person to whom we have delegated that job.

Anyway, after 15 cups of coffee, three ice-bucket challenges and a bottle of poppers I borrowed from a Tory MP, I finally made it through. I didn’t feel much more enlightened, though, because there were notable omissions – no mention, thankfully, of rolling back employment protections – and elsewhere there was a touching faith in the power of adding “language” to official documents.

One thing did stand out, however. For months, we have been told that it is a terrible problem that migrants from Europe are sending child benefit to their families back home. In future, the amount that can be claimed will start at zero and it will reach full whack only after four years of working in Britain. Even better, to reduce the alleged “pull factor” of our generous in-work benefits regime, the child benefit rate will be paid on a ratio calculated according to average wages in the home country.

What a waste of time. At the moment, only £30m in child benefit is sent out of the country each year: quite a large sum if you’re doing a whip round for a retirement gift for a colleague, but basically a rounding error in the Department for Work and Pensions budget.

Only 20,000 workers, and 34,000 children, are involved. And yet, apparently, this makes it worth introducing 28 different rates of child benefit to be administered by the DWP. We are given to understand that Iain Duncan Smith thinks this is barmy – and this is a man optimistic enough about his department’s computer systems to predict in 2013 that 4.46 million people would be claiming Universal Credit by now*.

David Cameron’s renegotiation package was comprised exclusively of what Doctor Who fans call handwavium – a magic substance with no obvious physical attributes, which nonetheless helpfully advances the plot. In this case, the renegotiation covers up the fact that the Prime Minister always wanted to argue to stay in Europe, but needed a handy fig leaf to do so.

Brace yourself for a sentence you might not read again in the New Statesman, but this makes me feel sorry for Chris Grayling. He and other Outers in the cabinet have to wait at least two weeks for Cameron to get the demands signed off; all the while, Cameron can subtly make the case for staying in Europe, while they are bound to keep quiet because of collective responsibility.

When that stricture lifts, the high-ranking Eurosceptics will at last be free to make the case they have been sitting on for years. I have three strong beliefs about what will happen next. First, that everyone confidently predicting a paralysing civil war in the Tory ranks is doing so more in hope than expectation. Some on the left feel that if Labour is going to be divided over Trident, it is only fair that the Tories be split down the middle, too. They forget that power, and patronage, are strong solvents: there has already been much muttering about low-level blackmail from the high command, with MPs warned about the dire influence of disloyalty on their career prospects.

Second, the Europe campaign will feature large doses of both sides solemnly advising the other that they need to make “a positive case”. This will be roundly ignored. The Remain team will run a fear campaign based on job losses, access to the single market and “losing our seat at the table”; Leave will run a fear campaign based on the steady advance of whatever collective noun for migrants sounds just the right side of racist. (Current favourite: “hordes”.)

Third, the number of Britons making a decision based on a complete understanding of the renegotiation, and the future terms of our membership, will be vanishingly small. It is simply impossible to read about subsidiarity for more than an hour without lapsing into a coma.

Yet, funnily enough, this isn’t necessarily a bad thing. Just as the absurd complexity of policy frees us to talk instead about character, so the onset of Subclause Syndrome in the EU debate will allow us to ask ourselves a more profound, defining question: what kind of country do we want Britain to be? Polling suggests that very few of us see ourselves as “European” rather than Scottish, or British, but are we a country that feels open and looks outwards, or one that thinks this is the best it’s going to get, and we need to protect what we have? That’s more vital than any subclause. l

* For those of you keeping score at home, Universal Credit is now allegedly going to be implemented by 2021. Incidentally, George Osborne has recently discovered that it’s a great source of handwavium; tax credit cuts have been postponed because UC will render such huge savings that they aren’t needed.

Helen Lewis is deputy editor of the New Statesman. She has presented BBC Radio 4’s Week in Westminster and is a regular panellist on BBC1’s Sunday Politics.

This article first appeared in the 11 February 2016 issue of the New Statesman, The legacy of Europe's worst battle