UK income inequality greater than previously thought, says ONS

The gap between the best and worst paid people in Britain is greater than previously thought, according to revised government figures for income inequality levels across the country.

Illustrating the scale of the national divide as Boris Johnson promises to “level-up” the country, the Office for National Statistics said that income inequality was as much as 2.4 percentage points higher on average than official figures had suggested over the decade since the financial crisis in 2008.

In a reassessment of the income gap between the country’s top earners and lowest-paid, the official report into the years between 2002 and 2018 found that inequality levels have remained relatively static since the turn of the millennium.

The new figures dispel arguments made by the Conservatives that the gap between rich and poor – on official measurements of income inequality – has narrowed since the party entered power in 2010, while also casting aside Labour claims that the divide has skyrocketed.

Taking account of the latest revisions, the ONS said the UK’s Gini coefficient – the most common international measurement of inequality which uses a score of 0-100%, whereby 100% would indicate one person controlling everything – should have been 34.5% in the financial year ending in 2018, rather than 32.5% as official records show.

It said the score would have been around 1.9 percentage points higher on average in the years between 2002 and 2018 if the latest revisions had been taken into account.

The new assessment compiled by the ONS used tax records from HMRC to assess the incomes of the top 10% of earners in Britain, rather than the traditional surveys used by government statisticians since the 1960s. Surveys do not always fully capture the incomes of the richest families, particularly those among the top 1%.

According to the fresh analysis, income inequality rose sharply in the years up to the financial crisis, fell during the economic collapse, and has been broadly flat since.

It said the average income of the top 10% rose by 28.5% between 2001-02 and 2007-08. As the banking collapse damaged the earnings of the highest paid, incomes for the group which is likely to include bankers and highly paid professionals fell by 20.8% by the end of 2012-13. Before the revisions, official figures had shown little change over the period.

Britain has one of the highest Gini scores for income inequality in the western world, after the divide between rich and poor ballooned in the late 1970s and early 1980s. It has remained relatively unchanged with a score in the mid-30s since the early 1990s.

Some economists question the usefulness of the Gini coefficient, warning that it can mask nuances in income and wealth divisions. According to research from the Nobel prize-winning economist Angus Deaton and the Institute for Fiscal Studies, the UK is at risk of following the US to become one of the most unequal wealthy nations.