Trends in UK Inequality and Poverty

 

Popular discussion of inequality or poverty in the UK is often confused because there are many different measures of both. [1] Some facts are largely immune to measurement issues, like the fact that UK inequality and poverty increased significantly in the 1980s. Bourquin, Brewer and Wernham provide a good discussion, and this chart is taken from there.

So, for example, the ratio of the post-tax income of the top 10% compared to the bottom 10% rose substantially in the second half of the 1980s (helped by cuts to the top rate of tax), but has, if anything, fallen slightly since then.

In the past I have looked at the outer edges of the income distribution, and in particular the share of income going to the top 1%. That’s an income of around £200,000. Here is data from the World Inequality Database, which unlike earlier is pre-tax. For post-tax data see the IFS here. (For more on the characteristics of the 1%, see here.)

I’ve included data since WWII just to illustrate that the post-war period was marked by a steady and significant decline in the 1% share, which was reversed in the 1980s. The 1% share continued to rise in the 1990s and peaked around the time of the Global Financial Crisis, falling back slightly since then.

Wealth inequality shows a similar story, but there are notable differences. The decline in the 1% wealth share in the post-war period was very marked, reflecting in part very high inheritence taxes,. Wealth inequality rose in the 1980s, but more modestly than incomes, and has been growing slowly but steadily since. In addition over the last few decades the overall level of wealth to income has increased substantially.

Recent trends in the UK are very different to the US, where top incomes have exploded dramatically. For example the top 1% wealth share in the US has risen from a low of around 25% before 1980 to over 35% today. The (pre-tax) 1% income share in the US had also risen steadily since 1980, and is now approaching 20%. At the same time tax rates for the very very rich have fallen dramatically.

Why should we care about the very top of the income distribution? Sometimes it is suggested that very high incomes do everyone else no harm, so why worry about what a small percentage of individuals earn? This argument is in my view simply wrong, for two main reasons. First, the scale of inequality at the top is substantial. After tax, the top 1% earn around 9% of all incomes. To put it crudely, that means that by halving these top incomes we could increase everyone else’s income by over 4%, which is a lot. This is the same as saying that if the rise in the share of the 1% since the 1980s had not happened, everyone else would now be over 4% better off. Advocates for the wealthy would say that reducing top incomes would reduce the size of the overall pie, but we have no clear evidence for that.

Secondly, extreme levels of income and wealth tend to impact all of us through politics. We just need to look at the United States to see how this can completely distort the political process in a way that favours the rich compared to everyone else. One reason that post-tax inequality in the United States has risen much more than in the UK, particularly among the billionaire class, is precisely because the wealthiest have so much political power.

What about the other end of the income distribution? The first chart shows a sharp rise in poverty in the 1980s, and then a decline at the turn of the century thanks in part to decisions made by the last Labour government. Since then poverty has been relatively flat, but the chart doesn’t include recent years, and doesn’t include housing costs. Here the story is all about increasing costs in the last few years, as calculations from the Resolution Foundation clearly show.

From these charts it is clear that, while stagnation in real income growth is not pleasant, the so-called cost of living crisis can only really be called a crisis for those on low incomes. Note also that while pensioners are generally better off than workers, pensioners with the lowest incomes have also been hit hard. These numbers seem to strengthen the case for restricting any help following recent energy price hikes to those on low incomes. The number of children in poverty has been slowly increasing since the end of the last Labour government. A major cause of that was the two-child limit, which has finally been abolished by this Labour government.

This is a very brief discussion of broad trends, but I hope it illustrates one crucial point, which is that the extent of both inequality and poverty depend crucially on political decisions about taxes and benefits. To a considerable extent levels of inequality and poverty are what societies choose them to be. But in democracies inequality and poverty are rarely major election issues, so perhaps it is more accurate to say that levels of poverty and inequality are what political elites and their influencers want them to be.  

[1] The best source of discussion of all kinds of inequality, from income and wealth to geographic, housing, education, health and so on, is the Deaton review by the IFS. This much shorter piece in the FT by Toby Nangle is also interesting.

Immigration numbers and the media

 

According to YouGov, ‘Immigration and Asylum’ was the second most important issue facing the country in May, just behind the economy. According to IPSOS immigration/immigrants was the most important issue, rising well above the economy. Concern about immigration began rising at about the same time as net immigration into the UK started increasing dramatically, to nearly a million a year in 2023. Yet net immigration fell as rapidly as it rose, and at the end of 2025 was at levels typical of the period before the post-pandemic increase.

So why is public concern about immigration still so high? The straightforward reason is that most of the public don’t know that net immigration has fallen dramatically. According to recent polling conducted on behalf of British Future and the Policy Institute at Kings College London, only 16% of people think net immigration fell over the last year, while around half thought it had increased.

It shouldn’t be surprising that most people have little idea that net immigration has been falling rapidly over the last two years. Most people don’t follow data like this, and unlike issues like health or the cost of living they often don’t have their own or friends/relations experiences to fall back on. [1] When voters are asked about important local issues, immigration falls sharply down the list of issues that matter. They therefore rely to a much greater extent on what they pick up from traditional or social media.

Of course the nature of the concern that some people have about the issue is very real. It could be xenophobia, or just a dislike of change, or a perceived link to other issues like employment, wages, housing or access to public services. But whether immigration is intensifying those concerns does depend on the numbers involved, so it does matter that voters think immigration is increasing when in reality it is not.

What most voters do notice is what issues are talked about on regular news bulletins. If those news programmes involve politicians from Reform, then they will invariably talk about immigration or asylum because that is their issue. Because they want to sustain a concern about the issue, Reform politicians will not be telling the public that numbers have come right down. So voters imagine immigration numbers are still high and rising, because politicians are still talking as if they are.

We can blame government politicians for not emphasising the recent data enough (see below). But voter’s understanding of basic social or economic facts should not have to rely on the communication skills of politicians. It should be the media’s job to keep people informed. For the BBC, informing the public is part of their mission. In the case of immigration numbers it appears as if the media is failing to achieve this mission. As Chris Dillow reminds us, immigration numbers is not the only politically sensitive area where the public is seriously misinformed, and typically the misinformation favours the political right.

A major reason for this is that in some parts of the media, those parts where news is selected to become propaganda, this failure is entirely intentional. The right wing press, GB news and large parts of social media will describe high immigration numbers in terms of ‘floods’ and ‘invasions’, but will give far less publicity to falling immigration numbers. In this sense they act just like the right wing populist politicians they support.

However, for the broadcast media that likes to think of itself as impartial, this disconnect between reality and what voters perceive, for an issue which is politically crucial, should be keeping those who work in it awake at night. It doesn’t, of course. (If I’m wrong about this, let me know!) We often take it for granted that journalists should above all else want to get the facts across, particularly when those facts are not well understood or are simply not recognised, but increasingly In the UK, as in the US, there is little incentive for them to do so.

The obvious response from those in the media is that they do give immigration numbers publicity when this data comes out, and what else can they do? The answer is a lot. When journalists interact with politicians on a day to day basis, particularly those who benefit from popular misunderstandings, they can make a particular point of mentioning the data, like the latest immigration numbers. A regular question for right wing populist politicians is why they are not welcoming the fact that immigration numbers have come right down. The same can be done in the commentary that senior political journalists in the broadcast media regularly give in interpreting political news.

As I suggested earlier, the media doesn’t do this because they don’t have sufficient incentives to do so. The media worries about what politicians think, and as a result is obsessed by balance, but most politicians are more interested in favourable coverage than the facts. In the UK the propaganda news media has an outsize influence on the broadcast media. Finally the UK regulator, Ofcom, is hopeless.

Public misunderstanding of facts in highly sensitive political areas will only be corrected when the media has an incentive to do what it can to correct them. That incentive has to come from politicians and the media regulator, because it is not going to come from anywhere else. In assessing the health of a country’s collective media, the extent of public misunderstanding on key issues should be a critical piece of evidence. Media bosses should be held to account for this, and asked constantly what they are doing to correct it.

Because these public misunderstandings typically favour the political right, and often come from the section of the media that supports the political right, then we cannot expect right wing politicians to apply this kind of pressure. Indeed the political right would be happy to see little or no media regulation. Pressure of the kind I am suggesting has to come from the political centre and left.

Our current Labour government has failed dismally here for many reasons. First, as I noted some time ago, it seems to have little interest in improving media regulation, and has left those imparting a right wing bias to the BBC and media regulation in place. Second, it has enacted some policies designed to reduce immigration numbers that will cause serious economic damage, like helping to cripple one of the UK’s most successful export industries. Third, and most alarmingly, it sometimes adds to public misunderstanding by repeating false narratives like immigration is adding to pressure on public services. In this respect, a government that has seen immigration fall drastically and yet is getting no credit for doing so has only themselves to blame.

[1] I would argue that the term ‘the economy’ can have a similar quality to it.