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Osborne: “Income inequality is at its lowest for 28 years”


During the tedious half an hour of The Budget I found myself watching on Wednesday, one thing really grabbed my attention.

George Osborne claimed “Inequality is at its lowest level for 28 years”.

Now, writing my dissertation on the ways in which social class influences levels of health, and the vast economic inequalities in society, I was in disbelief at what Osborne had just claimed.

Over the past several months, I have immersed myself in research into inequalities, be it government or charity reports, statistics on the rising use of food banks, the effects of welfare reform such as the bedroom tax and Atos assessments, and well known pieces such as Marmot’s Whitehall Study (1978) and Wilkinson and Picketts ‘The Spirit Level: Why more equal societies almost always do better’ (2009).

All the research points to one thing: inequality has risen, continues to rise, and has risen dramatically over the last few years since the coalition government came to power.

An article in the New Statesman explains where Osborne got his facts from, and the possibility that inequalities have actually fallen.

Eaton states that “it is normal in times of economic stagnation for inequality to fall as middle class earnings decline and the automatic stabilisers protect the incomes of the poorest. ”

The ONS’s annual report on ‘the effects of taxes and benefits on household income’ (the source of Osborne’s claim) noted: “The Gini coefficient for disposable income in 2011/12 was 32.3%, a fall from its 2010/11 value of 33.7%, and the lowest level since 1986. This fall in income inequality is partly due to earnings (including income from self-employment) falling towards the top of the income distribution but increasing for the poorest fifth of households.”

In addition, Eaton states that in this case, the decision of the rich to delay earnings until 2012-13 in order to benefit from the cut in the 50p tax rate is also likely to have been a factor.

This suggests that whilst Osborne claims inequality has fallen, this brief fall is largely because of the decline in earnings.

In addition, new reports suggest that households at every income level (including the top) have seen their living standards fall since the last election.

Even so, it is difficult to believe that income inequalities have fallen, when thousands of news articles are being published about the damning effects of the bedroom tax, Atos assessments linked to an increase in mental illness and suicides (report from Mind), and energy price increases, in which 1 in 4 people in the UK have had to choose between eating and heating, and 47% of disabled people have had to cut back on meals (Energy Bill Revolution). This, along with a 200% increase in the use of food banks in the three months since the welfare changes took effect (Trussell Trust), does not sound like a country in which income inequalities have fallen.

In addition, it has been suggested that these factors will soon influence the figures, as the IFS predicts that inequality will significantly rise again from 2011–12, almost (but not quite) reaching its pre-recession level by 2015–16.

This increase in inequality will be greatly influenced by Osborne’s decision to cap benefit increases at 1 per cent for at least three years, meaning the poorest will see a sharp fall in their incomes. This is on top of other reductions in earnings, including the bedroom tax, which many suggest is pushing people over the edge, into a spiral of debt and further into poverty.

If as Osborne says, income inequality is currently at its lowest for 28 years, this is a very bleak picture for the future, as things are only set to worsen, and the most vulnerable in society will be even more at risk of poverty, homelessness, and illness.

We can only hope that the Conservatives lose the next general election, so there is a possibility Labour may reform some of these policies, in order to have any chance of tackling inequalities in society.



About Poppy Reece

Hi, I'm Poppy. I graduated from Essex Uni with a Social Psychology and Sociology degree, and now work in the Youth Support Team at Suffolk County Council. I also write articles for disability charity Dancing Giraffe when I can. I'm interested in issues of poverty, inequality, politics, social justice, and health. I plan to use this blog to write about issues which I feel passionately about, comment on news stories which take my interest, and simply post stories and information which may be of interest.

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