On March 31, the EU’s statistical agency, Eurostat, published statistics on incomes per capita for the 276 ‘NUTS 2’ regions of the EU.
The statistics are reported on a ‘purchasing power standard’ (PPS) basis, meaning that they are adjusted for the cost of living.
The UK stood out as having by far the biggest income gap among all EU28 countries.
GDP per capita at PPS was calculated at an astonishing 580% of the EU average in the region of ‘Inner London – West’, while the lowest PPS per capita was at 68%, in the region of West Wales and the Valleys.
A key reason for the very large number in west-central London is commuters. Transport for London says it carries 1.34 billion passengers a year. If you have ever travelled to central London in rush hour, you will know that it is a fair guess the majority of those passengers are workers rather than tourists.
Workers travelling into an area push up the output (GDP) of that area. But since the GDP is divided by the small number of people actually resident there, it results in a big GDP per capita number.
Nevertheless, the Eurostat data also shows that, broadly speaking, the further away you get from London, the lower the income per capita.
All the regions in London taken together are 184% of the EU average. The next highest group is South-East London, at 118%, then East of England (an area that includes Essex and Berkshire) at 101%.
At the other extreme, North-East England is 80%, North-West England is 92%, Northern Ireland is 78% and all the regions in Wales are just 76%.
Salary data from the UK’s Office of National Statistics also shows the regional differences. Those living in leafy areas like Putney, Richmond, Twickenham and Wimbledon are the highest earners in the country, with median earnings over the £35,000 bracket.
At the other extreme, those in the tip of Cornwall, northern Wales, and the Dumfries and Galloway region in Scotland earn on average less than £17,000.
How does income match up with Brexit votes?
Unfortunately, statistical regions and voting constituencies are a little different, so we cannot exactly match like for like. But what one can see is that the Brexit vote in Wandsworth (which includes Putney), was just 25% in favour. In Richmond it was 30.7%, while in Merton (which includes Wimbledon), it was 37.1%.
There was less of a correlation in the poorer regions. In the abovementioned poorest regions, the Brexit vote for all of Cornwall was 56.5% in favour of Brexit. The part of northern Wales with the lowest income was a mix: Gwynedd was only 41.9% in favour of Brexit, but Conwy was 54% in favour.
Like much of Scotland, Dumfries and Galloway had a minority in favour of Brexit, at 46.9%, although the vote against Brexit was lower than most other areas of Scotland, apart from areas around Aberdeen.
The regions with the highest Brexit votes were clustered along the east coast around Lincolnshire. They were Boston (75.6%), South Holland (73.6%), Fenland (71.4%) and East Lindsey (70.7%).
While only one part of this region had the lowest earnings (below £17,000), the rest of them were all second lowest (£17,000-£20,000).
More detailed regression analysis by Zsolt Darvas, a Senior Fellow at the Bruegel think-tank, has shown that average household incomes as such did not play a role in the leave vote. However, he did find that “in areas where income inequality and poverty are higher, there were more ‘leave’ votes, even after controlling for the influences of socio-economic and geographic factors”.
In other words, inequality is more important than actual levels of income. A key political lesson, he says, is: “Overall, high inequality and poverty undermine personal well-being and social cohesion, and can also boost protest votes in referenda and elections”.
What can be done about it?
If inequality is the reason for protest votes, then how do governments tackle it?
The Organisation for Economic Cooperation and Development (OECD) has three main recommendations: “promoting employment for all; enhancing access and performance in education and training at every level by investing in people’s skills; and reforming tax/benefit systems to help a fair distribution of income while fostering growth”.
For example, OECD data finds that “public spending on high-quality education, health and family care reduces inequality by about a fifth on average”.
In the past, investing public money in education and healthcare has tended to be promoted by left-wing parties.
But with protest votes threatening all mainstream political parties these days, maybe it is time for all political parties to acknowledge that investing in education and healthcare is an investment in their own future.
