Sunday, 20 January 2008

The very rich get richer under New Labour

The very rich have grown richer at double the pace of most Britons under New Labour and their incomes may have accelerated further in recent years on the back of a rising stock market, research from the Institute of Fiscal Studies shows. More information is here: IFS

Using the most detailed analysis of tax returns to date, the IFS showed that the income of the very richest person in every 1,000 adults grew on average by about 4 per cent above inflation every year between 1996-7 and 2004-5, compared with growth of about 2 per cent for those on middle incomes.

To join the top 0.1 per cent of earners, you need to earn a little more than £350,000 in today's prices. There are about 47,000 people with incomes of that level, most of them in London and the South-East with the borough of Kenington and Chelsea home to one of the largest concentrations of high-income earners in the country.

The high earners are predominantly made up of middle aged men working in finance or business services. Interestingly, the one group outside law and finance in the top 1 per cent of incomes works in the health sector (although least part of their income may be derived from private practice rather than the NHS). Some £100,00 a year is required to claim a place among the top 1 per cent of earners, while £35,000 qualifies you for the nation's top 10 per cent.

The government has never had any ambitions to curtail income growth among the super rich, 80 per cent of whose income comes from occupation rather that investments. It has sought to bolster the incomes of the least well off, particularly the working poor and families. However, some of the drivers for these widening gaps are structural rather than policy related with globalisation being a key factor. Without the government's interventions, income distribution might have been even more skewed.

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