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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Beware, hard Brexiteers - Ruth Davidson is coming for you

The Scottish Conservative leader is well-positioned to fight. 

Wanted: Charismatic leader with working-class roots and a populist touch who can take on the Brexiteers, including some in the government, and do so convincingly.

Enter Ruth Davidson. 

While many Tory MPs quietly share her opposition to a hard Brexit, those who dare to be loud tend to be backbenchers like Anna Soubry and Nicky Morgan. 

By contrast, the Scottish Conservative leader already has huge credibility for rebuilding her party north of the border. Her appearances in the last days of the EU referendum campaign made her a star in the south as well. And she has no qualms about making a joke at Boris Johnson’s expense

Speaking at the Institute of Directors on Monday, Davidson said Brexiteers like Nigel Farage should stop “needling” European leaders.

“I say to the Ukip politicians, when they chuckle and bray about the result in June, grow up,” she declared. “Let us show a bit more respect for these European neighbours and allies.”

Davidson is particularly concerned that Brexiteers underestimate the deeply emotional and political response of other EU nations. 

The negotiations will be 27 to 1, she pointed out: “I would suggest that macho, beer swilling, posturing at the golf club bar isn’t going to get us anywhere.”

At a time when free trade is increasingly a dirty word, Davidson is also striking in her defence of the single market. As a child, she recalls, every plate of food on the table was there because her father, a self-made businessman, had "made stuff and sold it abroad". 

She attacked the Daily Mail for its front cover branding the judges who ruled against the government’s bid to trigger Article 50 “enemies of the people”. 

When the headline was published, Theresa May and Cabinet ministers stressed the freedom of the press. By contrast, Davidson, a former journalist, said that to undermine “the guardians of our democracy” in this way was “an utter disgrace”. 

Davidson might have chosen Ukip and the Daily Mail to skewer, but her attacks could apply to certain Brexiteers in her party as well. 

When The Staggers enquired whether this included the Italy-baiting Foreign Secretary Johnson, she launched a somewhat muted defence.

Saying she was “surprised by the way Boris has taken to the job”, she added: “To be honest, when you have got such a big thing happening and when you have a team in place that has been doing the preparatory work, it doesn’t make sense to reshuffle the benches."

Nevertheless, despite her outsider role, the team matters to Davidson. Part of her electoral success in Scotland is down the way she has capitalised on the anti-independence feeling after the Scottish referendum. If the UK heads for a hard Brexit, she too will have to fend off accusations that her party is the party of division. 

Indeed, for all her jibes at the Brexiteers, Davidson has a serious message. Since the EU referendum, she is “beginning to see embryos of where Scotland has gone post-referendum”. And, she warned: “I do not think we want that division.”

 

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.