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The United Kingdom, despite being one of the most advanced countries in the world, has performed poorly on one of the major indicators of the human development index. Office for National Statistics In a report has stated that the rich- poor divide in the country is wider than previously anticipated. The income inequality in the country was stable at 32.5 per cent on the Gini Index at the end of the financial year 2019 whereas it would have been higher by 1.9% over the period from 2002-2018, if the latest revisions according to the ONS are taken into consideration. There was a small increase in income inequality over the most recent two years although the levels persisted slightly lower than those reached around 12 years back.
The United Kingdom, like many other advanced countries of the world, have a very strong private sector who are responsible for much of the growth in the country. The country is one of the leading countries of the world in terms of international trade and finance, with many multinational corporations having set up shops in the country to cater to the entire European continent with London as its base. The country has over time sought to limit its public expenditure and control its fiscal deficit and move towards financial prudence. However, one of the drawbacks of a limited public expenditure regime is that it could give rise to income disparity within the country. The private sector would concentrate all its activities towards the most profitable ventures in the country. Over a period of time, this would lead to an increasing amount of funds being withdrawn from lower return generating activities and more than proportionate funds flowing into the highly rewarding ones. This would have a disproportionate effect on the pricing of each of the activities in these sectors with the net effect that absolute growth will start to stagnate. One of the factors playing its part in this is the private sector investments crowding out public investments.
Most advanced countries in the world have large industrial enterprises which exhibit strong revenue performance year after year. However, the GDP of these countries grow at a very slow rate, which is one of the effects of the above-mentioned phenomenon. The government expenditure on non-developmental and non-productive activities like the military is also one of the reasons for the disparity. One of the advantages these countries faced is a low population base compared to much of the developing and underdeveloped countries of the world, making full employment possible even at low levels of public expenditure. This, however, was not always the case as most of the times immigrants from other countries came to these countries and took up employment in the private sector while the countryside and the less developed areas of the country would witness lower than commensurate growth. This phenomenon, though is very well known in economics, is not measured very thoroughly leading to its less than optimum understanding among policymakers. The ONS report for the year on this regard accentuates to just that. The rich- poor divide leads to several structural problems that may crop up in a country other than public anger and discontent. However, the most critical effect of this phenomenon is the gradual weakness in public infrastructure as a result of shrinkage of expenditure over a period of time.
During the past few years, when the country was going through the Pre-Brexit turmoil this phenomenon became more prominently visible. The countryside was relatively less affected by the turmoil while people in metro centres like London were leaving the city to less the expensive countryside where the cost of living was much lower. The Conservative party in their poll campaign had stressed that the gap between the rich and the poor over the years had narrowed while the Labour party claimed that the gap had widened, but the ONS data has proved both of these parties wrong and sets the balance right in the middle. The Boris Johnson government in its pre-poll announcements had declared that it would focus more on employment generation in the country as well as bringing back those jobs to the United Kingdom that had been moved to other European Union countries through the last forty-seven years.
The Gini index of the country at present stands 32.5 per cent, which means that disposable income in the country is less than proportionately distributed among the rich and the poor. On the index, a measure of 50 per cent indicates that the disposable income of the country is half as proportionately distributed between the rich and the poor, a measure of 100 per cent means that that only one family in the country enjoys all the disposable income in the country. A measure of zero, on the other hand, means that disposable income is distributed equally among all households in the country- which is an ideal scenario.
The United Kingdom, despite being amongst the top five economies of the world, does not figure among the top five countries based on the Gini Index. Countries like Ukraine, Slovenia, Norway, Slovak Republic and the Czech Republic are placed much ahead of the country. Incidentally, the United States of America, the richest economy in the world, is placed much below the UK on the index and so are several other advanced economies in Europe. Incidentally, the country also does not fare well on the Happiness Index. Smaller European countries like Denmark, Norway, Switzerland, Iceland and Finland occupy the top positions on that index.
The new year and the separation of the country from the European Union has brought with it several possibilities. The country now expects to rebuild itself to face the challenges of the forthcoming decade. It is imperative that the country should invest more and adopt more conducive policies to bridge the rich- poor divide in the country if it wants to champion the aspirations of its citizens. In this regard, Boris Johnson has made some major announcements. The government intends to increase public spending in the country by as much as £1 trillion in the coming few years. This money is intended to be spent in massive infrastructure revamp in the country and to bring about more development in the underdeveloped regions. This move, though harder to implement, would bring about a major shift in the quality of public services in the country, with the poor people in the country being the larger beneficiaries of public service initiatives compared to the rich.
