Austerity in divided Britain makes the South richer and the North poorer

The Economist magazine gave a breakdown recently of the political divide between the north and the south in Britain. With the unfortunate passing away of Margaret Thatcher, this divide has resurfaced largely due to the harsh underlying economic connotations (see video). An independent study, carried out for the Resolution Foundation last year by the Institute for Fiscal Studies and the Institute for Employment Research, has highlighted this deep divide of a nation increasingly polarised between a poorer half whose incomes are set to fall (largely in the north) and a top half whose living standards will continue to rise (largely in the south). Entitled Who Gains from Growth? (full report available here), the study makes clear that future prosperity for the bottom half of earners depends on a policy revolution on several fronts: increasing the number of women in work, boosting training and skills, and raising wages for the lowest paid. Without this, the report finds, a typical low-income family will see its net income fall in real terms by 15% by 2020 – down from £10,600 (at 2009 prices) to just £9,000 at the end of the decade (again at 2009 prices). A typical household close to middle income could expect to see an income of £22,100 in 2020 – a 3% fall from £22,900 in 2009. Overall, by 2020 families who depend on benefits could expect to see an annual decline in income of 1.7%. Meanwhile, the top 50% of households can expect their living standards to grow by 0.2% a year to 2020; and faster for the most affluent. A typical middle income for a working-age couple is roughly £30,000 before tax, rising to £42,000 for a couple with two children. Austerity seems to benefit the wealthy south while making the impoverished north poorer. Question is - how long can this continue without casing significant social consequences?