Treasury minister claims income inequality falling

A Treasury minister sparked Opposition astonishment in the Lords by insisting income inequality is falling in Britain.

Lord O'Neill of Gatley told peers at question time: "Income inequality is falling and is close to its lowest level since the mid-1980s."

He said the Government had taken action to cut inequality by boosting incomes through the new national living wage.

But his comments were greeted with incredulity on the Labour benches, with peers pointing to the rising levels of remuneration for company bosses compared to lower paid staff.

Labour spokesman Lord Davies of Oldham said he could only assume the minister was using data for the last few months when some of the inequality had been reduced because "assets have dropped in value for the very rich".

Lord Davies added: "Let's be absolutely clear, from 2010 onwards wages were effectively frozen in this country with no pay rises for workers at all.

"I cannot understand how you are suggesting the Government has been pursuing policies of reducing inequality."

Lord O'Neill said it was "very dangerous" to challenge the statement given his background in data, adding: "There is considerable and widespread data published completely independent of the Government on these matters.

"The data shows that the so-called gini coefficient, which is one of the widely accepted global measures of inequality, has been showing a slow decline in British inequality since the mid-1980s."

Labour former minister Lord Clark of Windermere said the minister's assertions had surprised many peers.

"Does that take into account zero-hours contracts and regional variations?" he demanded.

Lord O'Neill told him: "It is a reality of life that where evidence gets in the way of perception it surprises people.

"But on the widely accepted measures, on a global basis, measured inequality has been declining slowly since 1980s whether it includes disposable income or without it."

Labour former minister Lord Foulkes of Cumnock said that when FTSE 100 chief executives were earning 183 times the median earnings of a full time worker and the "chief executive of HSBC is getting £7.5 million in a year when their profits went down 17% it's a miracle there isn't more social unrest in this country".

He urged the Government to set up a commission to tackle "this terrible income inequality".

But Lord O'Neill said he was happy to provide plenty of data to back up his assertions and insisted that chief executive remuneration depended on the decisions of their company boards and shareholders.

Labour's Lord McFall of Alcluith said the salaries of the chief executives of the largest corporations in the US were now 333 times the average wage, while in Britain it was 180 times that.

He said inequality in Britain was now "at the level of World War 2" and warned that if the trend continued in 20 years time it would be "at Victorian standards level".

Lord O'Neill said it was the responsibility of boards and their shareholders to "analyse and support" the salaries of chief executives.

He said they should "think carefully about the justification of those levels of remuneration".