Income gap narrows between UK’s rich and poor

The gap between the richest and poorest households in Britain is closing, according to the Office for National Statistics.

The wealthiest fifth of households took home nearly 12 times more in pre-tax income than the lowest-earning fifth in the financial year ending 2016. In 2015 top earners were taking home 14 times more income.

The report found that the average income for the richest fifth of households before taxes and benefits was £84,700 per year and for the poorest fifth it was £7,200.

However, after taxes and benefits were taken into account the ratio fell from 12 to one to four to one — with the richest household incomes at £63,300 as against £17,200 for the poorest.

The ONS also found that the poorest households paid more than a quarter of their entire disposable income on indirect taxes such as VAT on alcohol and fuel compared with 14 per cent for the richest households. Researchers said that indirect taxes “cause an increase in income inequality”.

The figures contradict Labour leader Jeremy Corbyn’s claim that income disparity is getting worse, which led to his call for a cap on executive earnings in January.

He has said repeatedly the Government cannot go on maintaining a “grossly unequal bargain basement economy”.

The report also found the number of households dependent on benefits has dropped from 50.5 per cent from a 53 per cent recent high in 2010.

Daniel Mahoney, head of economic research for the Centre for Policy Studies, said dependence on the state was slowly being turned around but there was more to do. “The Government should be aiming to reduce net dependency further,” he said.

Chancellor Philip Hammond was cheered today by the state of public finances after coming close to hitting the full-year budget deficit target of £51.7 billion as the Government prepares for the general election.