The richest fifth of the population are worse off now in terms of disposable income than they were before the 2007 financial crash, but the poorest fifth have typically become better off, according to official figures which could spark controversy among anti-austerity campaigners.
The data from the Office for National Statistics, published on Tuesday, also reveals a generational split, with the average disposable income of retired households now higher than in 2007-08 – in stark contrast to millions of working households, who are typically around £900 a year worse off.
That finding prompted John McDonnell, Labour’s shadow chancellor, to warn that Britain “faces the prospect of a decade over which people will be poorer than at the start,” adding: “These figures further show why it is the completely wrong time for George Osborne to be taking money out of people’s pockets.”
According to the ONS, in 2014-15 the typical household paid £7,700 in direct taxes, which includes income tax and council tax. After these are taken into account, the average income enjoyed by the richest 20% of households is around five and a half times that of the poorest 20% – £67,000 and £12,300 a year respectively.
However, the department said the economic downturn “had a negative impact on the incomes of all but the poorest fifth of the population”. It said the least well-off 20% of households were the only group whose average disposable income did not fall between 2007-08 and 2012-13. In 2014-15 the typical income of this group was £700 (5.8%) above its 2007-08 level.
By contrast, the average disposable income of the richest fifth of households fell the most following the downturn: by 3.2% between 2007-08 and 2014-15. It remains £2,000 below its previous peak. This has largely been blamed on a fall in average income from employment, though the department pointed out there had also been a sizeable fall in the amount of child benefit received by the richest 20% after the government introduced a tax charge affecting parents earning more than £50,000 a year.
The ONS said the increase for the poorest fifth was mainly due to an increase in average levels of pay for this group, along with higher benefit payments such as tax credits and jobseeker’s allowance.
While the report very much focuses on disposable income rather than wealth and assets such as property, the figures are likely to spark controversy among inequality campaigners, and could be seen to oppose other data that shows wealth in the UK concentrating in fewer and fewer hands.
A report from Credit Suisse found the top 10% of the British population have seen their share of total wealth in the UK rise from 52% to 54% since the financial crash.
A separate report from the Institute of Fiscal Studies last year laid bare the extent of inequality in Britain, finding that 9% of households have no assets, while 5% are worth in excess of £1.2m.
But the ONS said more recently incomes had generally begun to recover. Between 2012-13 and 2014-15, average incomes increased for all groups, with the middle fifth of the population seeing the biggest increase: £1,500 in real terms (or 6.4%), reversing the fall following the economic crisis.
The average incomes of retired households were “largely unaffected” by the downturn – in fact, the typical figure grew by £1,500 (or 7.7%) between 2007-08 and 2014-15 to reach £21,000. This was helped by a number of factors, including the fact that annual increases in the basic state pension are protected by a “triple lock”.
However, the average figure for non-retired households fell over this period, and was £2,600 lower in 2012-13 than in 2007-08. Since then, the typical figure has risen to £28,300 – but this is still around £900 below the 2007-08 level of £29,200.
The ONS figures are based mainly on data taken from the annual Living Costs and Food survey, which looks at the income and outgoings of about 5,000 households, including children. The results are weighted so they represent the total UK population based on 2011 census data.
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