IFS Looks Into Wealth Gap In UK

by Mike Godfrey, Tax-News.com, Washington

17 January 2008

The outlook for inequality in Britain may depend more on the prospects for the stock market than on Government tax and benefit policies, a study by IFS researchers suggests this week.

The Institute for Fiscal Studies explained that:

"Even though the current Government has increased taxes on people with high incomes, this has not prevented them from them racing further away from the average level of living standards across the country. In recent years, it is only in the wake of extended falls in the stock market that the incomes of the richest have fallen."

It continued: "The incomes of the richest 0.1% of the population increased at an annual rate of 6.6% a year during Labour’s first five years in office. They then fell by 2.7% a year on average in 2002-03 and 2003-04. They picked up again in 2004-05, the last year for which there is data."

However, the IFS analysis went on to suggest that the subsequent strength of the stock market suggests that the growth in their incomes may have accelerated again over the past three years, increasing inequality further, despite additional attempts by the Government to help the less well off.

The Institute observed that: "It remains to be seen what impact recent problems in the banking sector and financial markets will have."

The IFS analysis of high income trends is based on the Survey of Personal Incomes, constructed from income tax records by HM Revenue and Customs, and the Family Resources Survey, which forms the basis of the Government’s official low income statistics.

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