NIESR General Election Briefing: 'Regional Inequality in Household Incomes In The UK: A Closer Look’
While there has been some increase in regional income inequality since 2010, this has been a result of income property rentals and imputed incomes from holdings of housing assets, new research by the National Institute has found.
The latest of a series of briefings in the run-up to the General Election outlines that:
- When measured per head of the population, gross disposable household income (GDHI) has become more unequal across UK regions since 2010, when the Conservatives entered government for the first time since 1997. It is not, however, higher than its previous 2008 peak, coinciding with the peak of the business cycle.
- Since the onset of the recovery in 2011, regional redistribution in disposable household incomes through the tax and transfer system has increased. Since the crisis, London and other relatively prosperous regions have contributed more to evening out household incomes in the rest of the country. In 2015, each London resident contributed £5,850 more than he or she received from transfers, compared to £20 for each resident of Wales (Table A18).
- Overall , disposable household income before taxes and transfers has become more unequally distributed across UK regions, in particular since the onset of the recovery in 2011.
- An important source of increasing regional inequality in household incomes before taxes and transfers is operating surplus (rent and imputed rent received from dwellings), largely reflecting increasing inequality in home values and rents between London and the rest of the country. While this does reflect increased rental income for owners of London rental properties, it is less obvious that an increase in the value of the housing consumed by Londoners have increased living standards for London owner occupier households or tenants in the private rental sector compared to living standards in the rest of the country.
- There is also a substantial amount of inequality within regions. Every UK region except for Wales and Northern Ireland has at least one local area with GDHI above the national average. For example, Cheshire East has GDHI per head that is 8.6% higher than the UK average, and which is 1.7 times as large as the lowest income local area in the North West.
Co-authors Andrew Aitken, Monique Ebell and Lea Samek wrote: "Regional inequality in employee compensation has been relatively stable between 2005 and 2015. In contrast there is increasing regional inequality dispersion across the country in the operating surplus (rent and imputed rent received from dwellings), largely reflecting increasing inequality in home values and rents between London and the rest of the country”
Notes for editors:
The full briefing, “Regional Inequality in Household Incomes In The UK: A Closer Look ” is available on NIESR’s special General Election page.
It was authored by Andrew Aitken, Monique Ebell and Lea Samek as part of our General Election Briefing series. The series was made possible thanks to funding by the Nuffield Foundation to ensure public debate in the run-up to the General Election is informed by independent and rigorous evidence.
NIESR aims to promote, through quantitative and qualitative research, a deeper understanding of the interaction of economic and social forces that affect people's lives, and the ways in which policies can improve them.
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