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UK income inequality is falling

  • IFS analysis suggests that poorer working age households have been hit most by changes to the tax and benefit system since 2010.

  • But this does not reflect the overall impact of government policies on household income, largely because of the major increase in employment.

  • The bigger picture shows that the final incomes of the poorest households have – despite or because of the tax and benefit reforms – grown faster than the richest.

  • From 2010-2014, the final incomes of the poorest 40% of households increased by 11%, while those of the richest 20% fell by 4.5%.

  • As a result, UK income inequality has fallen over this period. The Gini coefficient is down from 33.7 to 32.4.

  • However, wealth inequality is on the up. Rapid growth in asset prices has increased the richest quintile’s wealth by 14% in two years, according to the ONS.

Daniel Mahoney & Tim Knox - Friday 8th April 2016

Daniel joined the Centre for Policy Studies as Head of Economic Research in November 2015. He was promoted to Deputy Director in March 2017. Prior to joining the CPS, he worked in research roles for a number of parliamentarians.

Tim Knox was Director of the CPS from 2011-2017. Before he was Director, Tim was the Editor at the CPS - a position in which he was responsible for publishing papers by every Conservative leader since Mrs Thatcher as well as by hundreds of leading academics and opinion formers.