1. Living Standards & Inequality
Alastair Muriel
Institute for Fiscal Studies
28th March 2007

2. Headlines – Living Standards
2004/5 to 2005/6
Little growth in average income from previous year
Since 1996/7
Incomes grew 2.3% per year (on average)
Strong growth up to 2001/2
4 successive years of weaker growth since 2002/3

3. Headlines – Inequality
2004/5 to 2005/6
Small rise in inequality
Not statistically significant
Since 1996/7
Small increase in inequality since Labour came to power
Statistically significant

4. How incomes are calculated
Same as the way government does for HBAI:
Net of all direct taxes and benefits
Measured at the household level
Adjusted for family size (equivalised)
Presented both before and after housing costs
UK figures available from
GB figures from before 2001
Based on Family Resources Survey (FRS)
All statistics subject to sampling error

5. The UK Income Distribution in 2005/06
Poverty Threshold £217
Median, £362
Mean, £443

6. Changes in average real incomes since 1979 (GB)
Source: HM Treasury

7. Changes in average real incomes since 1979 (GB)
Source: HM Treasury

8. Changes in mean real incomes since 1979 (GB)
Source: HM Treasury

9. Changes in mean real incomes since 1979 (GB)
Source: HM Treasury

10. Changes in mean real incomes since 1979 (GB)
Source: HM Treasury

11. Changes in mean real incomes since 1979 (GB)
Source: HM Treasury

12. Average income growth 2.1% 1.6% Mean Median
Conservatives: /97
2.1%
1.6%
Labour: 1996/ /06
2004/ /06

13. Average income growth 2.1% 1.6% 2.3% 2.0% Mean Median
Conservatives: /97
2.1%
1.6%
Labour: 1996/ /06
2.3%
2.0%
2004/ /06

14. Average income growth 2.1% 1.6% 2.3% 2.0% 1.3% 1.0% Mean Median
Conservatives: /97
2.1%
1.6%
Labour: 1996/ /06
2.3%
2.0%
2004/ /06
1.3%
1.0%

15. Components of Income

16. Average Annual Growth in Components of Income
Payments

17. Income inequality Popularly defined as ‘the gap between rich and poor’
No single agreed measure of inequality
Important to look at a range of graphical and summary measures

18. Income changes by quintile group, 2004/05 – 2005/06

19. Income changes by percentile group: 2004/5 – 2005/06 (GB)

20. Income changes by percentile group: 2004/5 – 2005/06 (GB)
95% Confidence Intervals

21. Income changes by percentile group: 2004/5 – 2005/06 (GB)
Median growth: 1%

22. Income changes by percentile group: 2004/5 – 2005/06 (GB)
Average growth above median: 1.4%

23. Income changes by percentile group: 2004/5 – 2005/06 (GB)
Average growth below median: 0.2%

24. Income changes by percentile group: 1996/97 – 2005/06

25. Income changes by percentile group: 1996/97 – 2005/06

26. Income changes by percentile group: 1996/97 – 2005/06

27. Income changes by percentile group: 1996/97 – 2005/06

28. Income changes by percentile group: 1996/97 – 2005/06/7

29. The Gini Coefficient: 1979 – 2005/06

30. Summary measures of income inequality 1996/97 – 2005/06

31. Brown’s redistributive record

32. Conclusions Modest growth in average incomes
Fourth successive year of slow growth
Average income growth by 2.3% p.a. under Labour
Income inequality rising again
Income inequality edged up between 2004/05 and 2005/06 on many measures
Now slightly higher than when Labour came to power
The future
Slower growth in public spending may limit scope for more redistribution