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Rich get richer in 2018, reversing long-term trends

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Income inequality increased in the financial year ending 2018, but remains below the level seen during the financial crisis in 2008.  

The latest government statistics show average disposable incomes of the poorest fifth of households shrunk around 1.5% in a year – largely because of benefit cuts. The average disposable income of the richest fifth of households, on the other hand, increased by 7.5%. This group has suffered tax rises, but this has been matched by higher wages.

Income inequality among retired people was broadly unchanged, but increased by 1.1% in the wider population. The incomes of retired people are outpacing those of non-retired people: Since 1977, after adjusting for inflation, the median income of retired people rose by an average of 2.7% per year. The income of non-retired individuals, on the other hand, increased by 1.9% per year on average.

The richest 1% of the population hold just over 7% of the total household disposable income. This is unchanged over the past seven years, and below the level seen before the economic downturn in 2008.

Median household disposable income in the UK was £28,400 for the year. Disposable income is defined as the amount of money that households have available for spending and saving after direct taxes (such as Income Tax, National Insurance and Council Tax). It was broadly unchanged in 2018; it has been rising by an average of 2.2% a year since 2013. It may be higher for the next tax year as wages have started to outpace inflation more recently.

Retired households have a median income of £23,900.

Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “The gulf between the richest and poorest in the UK is growing, with the wealthiest fifth of the UK enjoying a boom in disposable income, and the poorest fifth facing a cut.

“The most damaging change for poorer households is a benefit cut of £440, while a tax rise of £83 didn’t help either. Richer households, meanwhile, face higher taxes – up £1,300 on average – but this is more than offset by rising wages.

“Widening inequality is actually a reversal of a longer-term trend, because over the past ten years (partly because of the minimum wage), the income of poorest in the UK has grown at more than twice the rate of the richest.” 

The richest fifth of households have an average income of £95,800 a year – 12 times more than the poorest fifth (£7,700). After accounting for benefits and direct taxes, that shrinks to just under six times more (£13,200 and £76,000).


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