Britain is at risk of following the United States into becoming one of the most unequal nations on earth, according to Nobel prize-winning economist Sir Angus Deaton. He is leading a landmark review of UK inequality for the Institute for Fiscal Studies (IFS), warning that a decade of stagnant pay growth has brought the country to a tipping point.
Deaton said there is a “real question about whether democratic capitalism is working, when it’s only working for part of the population.” He stressed the need to “make sure the UK is inoculated from some of the horrors that have happened in the US,” where pay for non-college-educated men has not risen for five decades and life expectancy has fallen for three consecutive years.
The warning comes as TUC analysis shows real wages in the finance sector have grown by up to £120 a week on average since the financial crisis, while the average British worker is still £17 a week worse off after inflation. TUC general secretary Frances O’Grady said: “It’s not right that pay is racing ahead in the City when most working people are still worse off than a decade ago.”
Deaton highlighted geographical inequality, with London benefiting disproportionately. “People really feel that not everybody is having a fair crack anymore,” he said, noting that outside the capital “lots of bad things are happening.” The IFS Deaton Review, spanning five years, will examine inequalities in income, wealth, health, social mobility and political participation.
Research accompanying the launch shows that “deaths of despair” – from suicide, drugs and alcohol – have more than doubled among British men since the early 1990s, rising from about 30 to 61 per 100,000 adults. For women, the rate rose from 15 to 26. Deaton called these figures an early warning sign of UK inequality mirroring US trends, with hotspots such as Blackpool and the north east but not London.
