INCOME inequality has widened as a result of cuts to state benefits for the poorest in Britain, new figures show.

Average incomes of the fifth richest people has increased by 4.7 per cent while incomes of the poorest fifth contracted by 1.6 per cent in the financial year ending March 2018.

The Office of National Statistics, which released the figures yesterday, said that the falling average value of benefits is the main driver behind welfare claimants’ decline in disposable income.

This is at the same time that pay and profit has increased for the richest individuals in society.

It also said that median household disposable income growth had plateaued last year at £28,400, ending four years of steady increases to the strength of household finances.

The ONS also said that income inequality had increased slightly last year from 31.4 to 32.5 per cent.

TUC general secretary Frances O’Grady said that the economy needed a complete “redesign” to benefit low-income households.

“The government can do more by reversing cuts to family support and raising the minimum wage to £10,” she added.

Shadow chancellor John McDonnell said: “Today’s evidence of surging income inequality shows that this Tory government is not creating an economy that works for the many.

“With falling business investment, downgraded forecasts of growth, and a manufacturing recession, we have an economy in tatters.

“The next Labour government will be committed to a fair taxation system and building an inclusive, transformative economy.”