Quite interesting article in today's papers:
"Britain's tax and benefit system reduced income inequality by two thirds last year, according to official analysis.
Average incomes for the wealthiest fifth of households were £88,800 before any redistribution by the state last year, according to the Office for National Statistics. This was 12 times the income of the poorest fifth, who had average incomes of £7,400.
Once taxes and benefits were included, however, household incomes for the top fifth were only four times larger than those for the bottom fifth. Taxes included income tax and VAT, while benefits ranged from cash contributions to benefit-in-kind health and education transfers. After redistribution, the wealthiest fifth of households took home £66,300 a year and the poorest fifth £17,800. Incomes included pay, pensions and investments.
The analysis shows the role of the government in lowering income inequality using taxes and benefits. The minimum wage and the national living wage are other mechanisms.
Claims that the gulf between the rich and the poor is widening were not borne out by the data. Income inequality after tax increased slightly last year “but was still lower than a decade ago”, the ONS said.
The financial crisis, recession and weak recovery have been unexpected social levellers after years of widening inequality. Inflation-indexed welfare immediately after 2008 raised living standards for those on benefits relative to workers on shrinking real wages."