UK Household Inequality Declined By Most in 12 Years, ONS Finds

(Bloomberg) - UK household inequality shrank by the most in 12 years in 2023 as the richest fifth were hit by high inflation and taxes, according to the Office for National Statistics.

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The typical UK household saw its income drop 2.5% to £34,500 last year, after adjusting for tax and benefits. That's the second annual fall in a row as rising prices and the growing tax burden ate into family finances.

The decline inequality was driven by a fall in disposable incomes among the richest fifth of households while those on lower incomes were helped by government cost of living support measures, according to the ONS.

The package of help, including with energy bills, led to a drop in disposable income inequality to 33.1% in 2023 from 35.5% in 2022, which the statistics body described as the largest year-on-year decrease since 2011.

The richest 20% of households remain roughly six times better off than the poorest fifth and have "greater resilience" because their weekly expenditure is only two times greater, according to the ONS.

Overall, the data showed that the median disposable household income is still 0.8% below pre-pandemic levels. The poorest fifth has seen a 2.4% decline since the onset of Covid and the richest fifth a 4.3% decline.

A surge in inflation meant that real wages shrank between November 2021 and June 2023 as rising prices outstripped pay growth. The government also froze the thresholds at which households pay higher levels of income tax to balance the books, dragging hundreds of thousands of workers into more tax.

-With assistance from Irina Anghel.

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