Wealth gap grows despite Labour's efforts

By Matt Falloon

LONDON (Reuters) - The gap between Britain's rich and poor widened in the 2005-6 financial year, once more frustrating the efforts of the Labour Party to redistribute wealth, official figures showed on Thursday.

In the last comparative wealth figures it will issue before Tony Blair leaves office as prime minister, the Office for National Statistics said income for the bottom 10 percent after taxes and welfare benefits fell 10 pounds to 11,374 pounds in the fiscal year that began in April 2005 from the previous year.

This group's income was well under half the national average and less than a fifth of the richest 10 percent, whose average income actually grew by more than 2,000 pounds to 60,908 pounds.

In proportion, the figures have barely diverged since Blair, who has said he will quit on June 27, came to office in May, 1997.

In the 1997-8 fiscal year, average final income in the lowest decile was 7,765 pounds, less than half the national average of 17,700 pounds, with the top 10 percent averaging 41,159 pounds, more than five times as much.

A booming financial sector, bumper city bonuses and a decade of strong economic growth have driven wages at the top higher but, despite the introduction of a minimum wage, earnings growth at the bottom has struggled to keep pace.

"The latest evidence suggests that income inequality may be increasing again," the ONS said. "Inequality still remains high by historical standards -- the large increase which took place in the second half of the 1980s has not been reversed."

The declining influence of trade unions, higher demand for a skilled, tech-savvy workforce and the emergence of households with two working adults have exacerbated the gap between rich and poor, according to the Institute of Fiscal Studies.