UK Income Inequality Rising Faster Than Other OECD Countries

First Published Monday, 5th December 2011 10:31 am - © 2011 Dow Jones


LONDON -- The gap between rich and poor has risen faster in the U.K. than in any other OECD country since 1975 and the U.K. government should consider increasing taxes on top earners to address the inequality, the Organization for Economic Cooperation and Development said Monday.

In a report on inequality, the OECD said income inequality peaked in the U.K. in 2000 and subsequently fell, but it began rising again in 2005 and is now well above the OECD average.

In 2008, the annual average income of the top 10% of U.K. workers was GBP55,000, almost 12 times higher than the bottom 10%, who had an average income of GBP4,700, the OECD said. In comparison, the ratio in 1985 was 8 to 1.

The report comes at a time when debate continues to rage in the U.K. over the large bonuses paid to bankers. Last Thursday, Bank of England Governor Mervyn King added to the argument when he urged banks to cut bonuses and use the money to increase their capital levels to protect against a potential collapse of the euro zone.

The OECD said the growing share of income going to top earners means this group now has a greater capacity to pay taxes. The organization said the U.K. government should reexamine the tax system to ensure that the wealthy are paying their fair share.

It warned that income taxes in the U.K. have less of a redistributive effect due to the removal of higher-rate tax brackets and a reduction in the basic rate of tax.

-By Ainsley Thomson, Dow Jones Newswires; 44 20 7842 9318; ainsley.thomson@dowjones.com

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