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The income gap between Londoners and the rest of the UK population has hit a record high, according to the latest statistics that reveal the challenges facing the government in implementing its flagship “levelling up” agenda.
On average, households in the capital had £31,094 available per head to spend or save in 2021, 43 per cent above the national average of £21,679, according to data published by the Office for National Statistics on Thursday. This is the biggest gap since records began in 1997.
When the ONS started tracking the data a quarter of a century ago, London’s gross disposable household income per capita was 22 per cent higher than the national average, rising to 37 per cent in 2008.
The gap closed for a few years after that as the capital’s financial sector recovered from the banking crisis before widening again.
“The big picture here is that Britain is not converting its levelling-up rhetoric into reality,” said Lindsay Judge, research director at the Resolution Foundation think-tank. “To address this we need to focus on our major cities outside London, whose economic underperformance is holding back national prosperity.”
The promise of levelling up was made by then Conservative leader Boris Johnson during his successful 2019 general election campaign. But a recent report by the Institute for Government found it had “stalled” under the leadership of Prime Minister Rishi Sunak. That finding was rejected by Downing Street as “untrue”.
Gross disposable household income is a measure of post-tax household budgets, including benefits, and does not include the cost of housing, which is significantly higher in London than most of the rest of the UK.
The ONS data showed that all other regions reported a decline in per-capita disposable income relative to the national average, except for Scotland and Northern Ireland, where it remained largely unchanged.
In the West Midlands, disposable income per capita dropped from 91 per cent of the national average in 1997 to 86 per cent in 2021. The East Midlands declined from 91 per cent to 87 per cent over the same period. The North East and the North West reported disposable income down 4.4 percentage points and 3.7 percentage points, respectively, to 81 per cent and 87 per cent of the national average.
Jonathan Portes, professor of economics and public policy at King’s College, said “the data demonstrate the depth and persistence of regional inequality in the UK”.
He added that addressing it would “require sustained investment in transport and other forms of connectivity in less advantaged regions, as well as reforms in planning and land use that will allow the growth of more high-productivity clusters outside London”.
