Gap between rich and poor growing fastest in Britain

The Organisation for Economic Co-operation and Development, a leading economic forum, said that the wealthiest tenth of society now earn 12 times as much as the poorest, up from eight times as much in the 1980s.

In addition the amount of total income taken by the top 1 per cent of earners - including bankers, managers and executives - has doubled to 14 per cent.

By contrast, the top tax rate has fallen while benefits for the poorest have become less generous.

The OECD says the growing inequality in Britain is mainly down to the soaring wages of the super-rich, as well as the fact that the wealthy work longer hours.

But it says part of the explanation could be that more people are marrying within their own class or living in single-parent families.

The think-tank wants governments to ensure that the rich pay their “fair share” of the tax burden, not just by raising rates but also by reducing avoidance and removing tax reliefs.

Angel Gurría, the OECD’s Secretary-General, warned: “The social contract is starting to unravel in many countries.

“This study dispels the assumptions that the benefits of economic growth will automatically trickle down to the disadvantaged and that greater inequality fosters greater social mobility.

“Without a comprehensive strategy for inclusive growth, inequality will continue to rise.”

Overall the OECD study, published on Monday, found that the gap between rich and poor in its 34 member states “has reached its highest level for over half a century”.

Across the developed world, the average income of the wealthiest 10 per cent is now about nine times that of the poorest.

This ratio has widened even in traditionally egalitarian countries such as Sweden and Germany over recent years.

It reached a peak in 2000 and despite a subsequent drop, “it has been rising again since 2005 and is now well above the OECD average”.

In Britain, the gap in earnings between the richest and poorest in the working-age population has risen from eight to one in 1985 to 12 to one in 2008.

Workers in the top tenth now earn an average £55,000 a year, compared with £4,700 for the poorest 10 per cent.

Using a measurement which works out how well income is distributed throughout society, known as the Gini coefficient, inequality has risen faster in Britain than in any other country since 1975.

The reason for this increase is mainly down to the fact that the share of total income taken by the richest 1 per cent has doubled, from 7.1 per cent in 1970 to 14.3 per cent in 2005. Within this group, the super-rich 0.1 per cent of top earns took some 5 per cent of total pre-tax income.

But the report points out that the highest rate of income tax has fallen from 60 per cent in the 1980s to 40 per cent in the 2000s, before the recent introduction of the 50p rate.

Although tax and benefits do reduce the gap between rich and poor somewhat, their effect has declined in recent years as they have not kept pace with rising wages for the better-off.

However the OECD points out that public services have more of a levelling effect on inequality in Britain than almost anywhere else, with their impact rising in recent years as Labour increased spending on health and education.

A Government spokesman said: “The OECD recognises that the causes of inequality are complex. As we have seen, just putting billions of pounds into the tax and benefit system cannot alleviate poverty on its own and has the perverse effect of trapping thousands of families in a life on benefits.

“The OECD rightly points out that governments need to facilitate and encourage employment of low income groups - something we are directly focusing on through the Work Programme and Universal Credit.

“Our wide-ranging reforms will have a dramatic impact on the poorest families, improving the life chances of children at an early age and lifting almost a million people out of poverty through the Universal Credit.”