Monday 23 May 2016 12:01 am

Think tank's report slams UK's obsession with inequality, saying it is based on misconceptions

The UK's obsession with inequality is in our collective imagination, as many people are far better off than they were just a few decades ago, a report out today argues.

The research paper by the Institute of Economic Affairs (IEA) illustrates that income equality has been relatively stable for the last 25 years, while wealth inequality is not particularly high by historic standards. 

In particular, the report highlights that the average income in Britain was twice as high in 2013-14 as it was 1977, while income for those in the bottom fifth has increased by 77 per cent in real terms.

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"Most claims about inequality in the UK appear divorced from the actual data," said Ryan Bourne, head of public policy at the IEA and one of the report's authors. "On most measures inequality levels have been much the same for a quarter of a century.

"The risk is that embracing 'reducing inequality' as an aim will shift focus away from the much more important task of alleviating poverty."

The researchers also slam politicians for muddling together poverty and inequality to create a skewed picture.

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The IEA warns that focusing too much on inequality could lead to losing sight of other goals, such as improving living standards more generally or creating healthy economic growth.

The report also warns of the danger of applying too much emotion to inequality, pointing out that such measures are purely economic indicators and are neither good nor bad in themselves. For example, while the overall boost of productivity and prosperity in China could be treated as a cause for celebration, it has resulted in increased inequality in the country. 

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Bourne added: 

The political elite have become caught up in an obsession about inequality at the expense of prioritising how to improve the living standards of the poorest in society. Inequality is merely an economic indicator; without assessment of its causes, one cannot make sweeping judgments of whether it is healthy or unhealthy.

However, a 2014 report by the Organisation for Economic Cooperation and Development (OECD) warned that the gap between lower-class households and the rest of society was stunting social mobility which, over time, would dissolve economic growth potential.