Page last updated at 11:16 GMT, Tuesday, 21 October 2008 12:16 UK

Rich and poor gap 'narrows' in UK

A man and a woman walking with a child
Since 2000, income inequality in the UK has fallen, says the OECD

The gap between rich and poor in the UK has decreased since 2000, an international survey has concluded.

The Organisation for Economic Co-operation and Development (OECD) says the decline in inequality in Britain has been "remarkable".

The report's author told the BBC: "...the poor have been getting richer more rapidly than the rich since 2000."

But the report says the UK still has one of the highest levels of income inequality in the developed world.

The Paris-based OECD's 30 members make up the world's richest and most developed countries.

The OECD report, which covers a 20-year period up to 2005, found the wealth gap widened in the UK - as it did in most other developed countries - between the mid-80s and mid-90s.

In the UK, the gap between higher and lower incomes widened by 20% since 1985, it says.

Graph showing wealth distribution

'Hello' effect

But since 2000, measures of poverty and income inequality in the UK have fallen faster than in any other OECD country.

The gap between rich and poor is still greater in the UK than in three quarters of OECD countries.

BBC social affairs correspondent James Westhead said many people in the UK were not aware of being better off and the report blamed the so-called "Hello magazine effect", where the public would read about the super-rich getting richer and would feel worse off as result.

He also said the amount governments spend on taxation and redistributing wealth across developed countries and in the UK is higher than at any time in history.

The report also found:

  • The number of people living alone or in single-parent households increased in the UK more rapidly than in all other countries - average household size in the UK declined from 2.4 to 2.1 between 1985 and 2005 (OECD average decline of 2.7 to 2.6)
  • Income poverty - that is, a household with less than half the country's median income - fell from 10% to 8% in the UK between the mid-90s and 2005
  • For the first time since the 1980s, the UK poverty level is well below the OECD average
  • The number of children living in poverty fell from 14% to 10% between the mid-90s and 2005 - the second largest fall, behind Italy, during this period. But child poverty rates are still above levels recorded in the mid-70s and 80s
  • There is less social mobility in the UK, US and Italy than in Australia, Canada and Denmark, with parents' earnings being a more reliable guide to a child's future earnings

Mark Pearson, who wrote the OECD report, told BBC Radio 4's Today the reduction in the UK wage gap since 2000 was "remarkable".

"To some extent this reflects the Blairite approach; that you do, almost, the redistribution by stealth," he said. " don't advertise the fact that you've actually put an awful lot more resources into helping the least well off in society.

"Both ends of the distribution have been getting richer, but the poor actually have been getting richer more rapidly than the rich since the year 2000."

The main reasons behind fewer people living in poverty in the UK were higher employment - particularly among the low-skilled and mothers - and the redistribution of wealth, he also said.

However, Mr Pearson said that the narrowing of the wealth gap appeared to have "flattened off" in the years since 2005.

"Now we are entering a recession, which may increase inequality and poverty again," he warned.

'Fairer society'

Paul Dornan, head of policy and research at the Child Poverty Action Group, said the report shows that government can make a difference and there is nothing "inevitable" about high levels of poverty and inequality.

"The report may not be a good indication of where we are now," he said.

"It covers the period from 2000-2005 when child poverty was falling but after 2005, child poverty rose again.

"The government was investing in family incomes, tax credits and benefits, and employment rates were rising, and that reduced child poverty."

Work and Pensions Secretary James Purnell said the government had achieved a "more equal and fairer society" by redistributing taxes to benefit hard-working families.

"... we have seen a real change for the better in reducing inequality.

"There is a common and understandable criticism that too often parents' earnings determine their children's earnings.

"But what this shows is that we have one of the lowest levels of people in the poorest fifth, meaning that with most parents in a higher income bracket so their kids follow suit."

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