Senior analyst says coalition has chosen policies likely to ‘fall on the back of the poor population groups’
The OECD has warned that Britain faces rising levels of inequality by pursuing austerity polices that are widening the gulf between rich and poor.
In a report examining the developed world’s response to the global slowdown, the thinktank warns that the “financial crisis is squeezing income and putting pressure on inequality and poverty” across the board.
It says that income inequality in the UK “remained pretty steady” between 1995 and 2007 but jumped during the first three years of the recession.
A fresh analysis shows that in 2010, the disposable income of the top 10% of UK households was an average £53,600 a year – 10 times higher than the bottom 10th, which survived on just £5,300. Five years earlier the ratio was closer to 9:1. In Europe only Greece, Italy and Spain appeared more divided societies after the first three years of the crash than the UK.
“The concern is inequality will rise much more once the full impact of public spending cuts is felt,” said Michael Förster, senior analyst at the OECD social policy division.
Förster said that in the UK the coalition had chosen policies that were likely to “fall on the back of the poor population groups”. By attempting to prune back welfare directed at poorer people, such as housing allowances, he warned, inequality will rise in the short term.
Förster argued that proponents of austerity defended the strategy on the grounds that more people will get jobs eventually – and help reduce inequality in society. “The theory is that in the medium term more people will go into the labour market and this low-wage employment will help equalise household incomes,” he said.
However this has only worked in one country in recent years – Germany – and that was unique, Förster said. “Germany had the benefit of a weak euro and high exports and also a model of social partnership where trade unions were always at the table, asking for very modest wage increases. But both these elements are not there in Britain.”
He warned that austerity would “not be enough” to make Britain more equal, pointing out that among 18 to 25-year-olds poverty rose by more than a percentage point annually during the first three years of the recession. Only young people in Estonia, Spain and Turkey fared worse. The report says the old have been protected while the young fall back: “On average, elderly poverty fell by almost 20% across OECD countries. In fact, children and youth now face larger levels of poverty than the elderly, on average.”
Source: The Guardian