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6 September 2022

The UK is the second-most unequal G7 country

Liz Truss says there has been too much focus on redistribution but the US is the only major Western economy that is more unequal.

By Afiq Fitri

As households across the country threaten to refuse to pay soaring energy bills, Liz Truss, the new Conservative leader, responded over the weekend to criticism of her planned tax cuts by arguing that her vision was the best solution to the crisis engulfing the country.  

“To look at everything through the lens of redistribution I believe is wrong because what I’m about is about growing the economy and growing the economy benefits everybody,” she told the BBC’s Laura Kuenssberg. “The economic debate for the past 20 years has been dominated by discussions about distribution.”

But recent data on income inequality shows the impact of limited redistribution. The UK continues to have the second-highest rate of inequality in the G7, behind only the US, according to statistics published by the OECD. 

Truss was responding to a study conducted by the Institute of Fiscal Studies (IFS), which detailed how her plans to reverse the government’s National Insurance increase would disproportionately benefit higher-income households. The latter would gain £1,800 a year from the move while the poorest would gain just £7.66. 

The planned tax cut would cost approximately £13bn per year and while it might spur growth by allowing workers to earn more, it would “not be nearly sufficient to make the reform pay for itself”, the IFS said.

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