UK inequality projected to rise to record highs, poorest households to be hit the hardest

General income growth has slowed and is expected to continue on the same trajectory for the next 5 years, according to one of the UK's leading think-tanks.

According to a study from the Resolution Foundation, low or middle income workers will be specially affected by this stagnation, with inequality expected to reach record highs by 2022-23.

It said the rise in inequality will match that of the 1980's; however, this time around only the gap between lower income households and the rest of the population was projected to widen, while that separating middle earners and high earners is set to stay at the same level.

Incomes for low working-age households are expected to stagnate for at last three years and account for the bulk of the increase in inequality, as the rate of growth in wages slows to just 1.3% by 2022-23 .

Before the last financial crisis, they had grown at a pace of over 2% per year.

Strikingly, they found that the last decade has been the weakest for income growth in centuries with two main reasons are to blame. First was the hit the economy took after the financial crisis and second the inflation spike in the aftermath of the Brexit referendum.

The study also concluded that the UK is expected to miss its international commitment of Sustainable Development Goals to deliver higher growth to the poorest 40% of the population from 2016-17 to 2022-23.

Cuts to government benefits are also expected to play a big hand behind rising inequality, while freezes and other curbs on benefits growth mean that key benefit programmes will be less valuable in 2020 than in the 1980s.

Nonetheless, government action might help to mitigate the effects of low wage growth, through changes to Westminster's policies on taxes and benefits in order to fairly distribute the benefits of growth.

The think tank's director Torsten Bell, said: "This parliament risks seeing the first sustained rise in income inequality since the 1980s.

"But the story this time around is less about the rich soaring further away, and more about poorer families falling further behind as they bear the brunt of £14bn of welfare cuts.

"Lots of factors lie behind projections of a parliament of weak income growth, many of which are beyond the government’s immediate control. But it is policy decisions, not capitalism, which look set to drive living standards of low and middle-income families down and inequality up in the years ahead."