Poorest and elderly worst hit as income inequality rises
Income inequality in the UK increased last year, with the average household disposable income falling to £32,300.
The poorest were once again hit the hardest by the cost of living crisis, with the median disposable income for the poorest fifth of the population tumbling by 3.8% to £14,500 because of reduced original income and cash benefits, according to the Office for National Statistics (ONS).
On the other end of the spectrum, the fifth richest households saw a 3.3% increase in disposable income.
Inequality rose by 1.3 percentage points to 35.7% in the financial year 2022 compared with 2021.
Pensioners also appeared to be struggling, as the average income for retired households fell by 1.6% last year, from £26,300 to £25,900.
Read more: UK rents rise by 4.2% amid cost of living squeeze
Meanwhile, the middle of the income distribution remained stable.
Wages and salaries increased by 3.2% across all households, however, the poorest fifth saw a 7.5% decrease, while the richest fifth saw a 7.8% increase.
Lalitha Try, researcher at the Resolution Foundation, said: “The government provided unprecedented support to households through the pandemic. But the withdrawal of key support like the £20 a week uplift to Universal Credit drove down the living standards of poorer households last year – who saw their incomes fall by £600 – even while the richest households saw income gains of around £1,000.
Recently, Nobel prize winning economist Joseph Stiglitz called for the super-rich to be subjected to taxes as high as 70% to help tackle widening inequality.
Myron Jobson, senior personal finance analyst at Interactive Investor, said: “The pandemic and rampant inflation robbed Britons of purchasing power, with disposable income falling the most (almost 4%) among the poorest fifth of the population in the 2021/2022 financial year, compared to a decrease of 0.6% on average.
“It is clear that the cost-of-living crisis has widened this wealth inequality further. The eyewatering rise in seemingly all areas of expenditure hit low-income households the hardest as they spend a greater share of their income on core needs, such as housing, energy, food and clothing.
“In the new world of spiralling costs, just getting by has become the normal for many households. Our spending power is being pummelled by high inflation which continues to outstrip growth in earnings, resulting in an unprecedented shift in household spending the upending long-standing consumer habits. Official data shows that spending on ‘nice-to-have’ goods have waned considerably in the face of rising food and energy bills."
The number of UK billionaires increased by a fifth since the COVID pandemic, according to a report by the Equality Trust charity.
The Equality Trust said interventions by governments and central banks during the pandemic allowed for an “explosion of billionaire wealth” in Britain at the expense of the rest of society, after fuelling a boom in property values and on the stock market.
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“This sudden explosion in extreme wealth was in large part due to measures aimed at lessening the impact of COVID-19 on the economy, as central banks pumped trillions of dollars into financial markets, leading to a stock market boom which effectively lined the pockets of shareholders,” Jo Wittams, co-executive director of the Equality Trust, said in the report.
Tax Justice UK has called on the government to introduce five tax reforms targeting the super-rich, who the campaign group said had done “really well financially” during the coronavirus crisis and national lockdowns.