Guess what? The rich are getting richer and the poor are getting poorer

The gap between the richest and poorest in Britain has widened dramatically in the last decade, a new report warns today.

While wealthy households have been able to pay off their debts and pile up savings, the worst off are now even less financially secure than before the financial crisis.

Younger workers have fallen behind older people, while homeowners - particularly those who have paid off their mortgages - are far better off than those paying rent.

The evidence of this growing inequality was revealed by the Social Market Foundation (SMF) which analysed changes in the income and savings of thousands of people in its report Downturn: Winners and Losers.

It found that the average means of the wealthiest fifth of families rose by 64 per cent between 2005 and 2012-13 as they put more money aside to guard against future shocks. Their average savings and investments grew to around £10,000 compared with £6,000 seven years earlier.

The proportion of people in this group with debts - apart from mortgages – dipped from 43 per cent to less than a 33 per cent.

However, the SMF found the poorest 20 per cent of Britons are less financially secure than they were before, with their net wealth falling by 57 per cent and levels of debt and use of overdrafts increasing.

Those homeowners who paid off mortgages between 2005 and 2012 find themselves £2,500 better off.

The wages of those aged 26 to 35 fell steeply and they are far less likely to be property owners, with the proportion in this age bracket who are buying a home falling from nearly three quarters in 2005 to just over half in 2012-13.

Analysis

The findings could partly explain the voters’ resistance to Tory and Labour arguments alike over economic competence: the decade of hard financial pounding has taken place on both their watches.

When George Osborne trumpets that the recovery is under way, many voters do not feel it in their pockets and are still worse off than in 2010. But they still have even less faith in Labour to usher in better times.

• Nigel Morris, the Independent's deputy political editor

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