There is a widespread view in the UK today that differences in living standards between places are large and enduring. The public cares very much about this issue: more than six-in-ten (61 per cent) people say that the gaps between areas are one of the most concerning types of inequality the country faces. In addition, spatial disparities loom large in politics, with the Government firmly committed to ‘levelling up’ opportunities between different areas. But why are place-based differences of such acute concern, especially when on some key measures the gaps between areas have actually reduced over time?
This briefing note uses a relatively under-exploited source of data to analyse how average incomes at the local authority level have changed since 1997. This allows us to look beyond variations across place in wages and salaries, to other sources of income; study the distribution of incomes at a lower level of geography than is often the case; and observe how incomes in different places have changed relative to each other over a period of more than 20 years. As a result, we present a more complete view of how incomes differ throughout the country than has been possible to date, vital as the Economy 2030 Inquiry seeks to answer the question: how can a new economic strategy address the spatial disparities that have beset the UK for so long?
- Income gaps at the local authority level are substantial. In 2019, before housing costs income per person in the richest local authority – Kensington and Chelsea (£52,451) – was 4.5 times that of the poorest – Nottingham (£11,708).
- The income gaps between places are persistent: the differences we observe in 1997 explain 80 per cent of the variation in the average local authority income per person 22 years on. This means, for example, that the average income per person in Hammersmith and Fulham has stubbornly been two-to-three times higher than in Burnley for more than two decades.
- The places that have seen people’s earnings increase relative to the UK average are not necessarily those that have seen employment rates move in the same direction. For example, Gwynedd (one of the places with the lowest average earnings in 2004) saw its employment rate grow by 1 per cent between 2004 and 2019, while the employment rate in Tower Hamlets (a higher-earning borough in 2004) increased by 34 per cent.
- There are growing spatial disparities when it comes to often-overlooked sources of income, such as from self-employment and investments. These are largely driven by the gains of the richest people in the highest-income places.
- Income from non-labour market sources (benefits, pensions and investments) is far more important in some areas than in others: in the local authority with the oldest population – North Norfolk – just over half (54 per cent) of average total pre-tax income per person came from labour market sources in 2019, compared with 71 per cent in Oxford, the place with the lowest median age.
- High housing costs mean that eight local authorities in the highest-income decile have more households on Universal Credit or Working Tax Credit than four local authorities found in the poorest decile.
Download the local authority incomes data used for the analysis in this report here.
For all research queries about this report, please contact Lindsay Judge. For press queries, please contact the Resolution Foundation press office.