THE income gap between typical and poorer households could widen even further if the UK Government ploughs on with its regressive approach to benefits, a report has warned.

The Resolution Foundation says "the UK has been living through a period of relative decline that has proved toxic for those on low-to-middle incomes".

It warns poor economic growth, and a failure to fairly distribute wealth, could see poorer household incomes rise by only 2% over the next decade, compared to 12% for typical households and 14% for the those in the top income quintile - widening the income gap between typical and poorer households from £18,000 to £21,000.

This would mean 1.8 million more people, including one million children, falling into relative poverty.

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The report – called Sharing the Benefits - says this “prosperity gap” is a result of the UK Government's regressive approach to the benefits system, where amounts rise by prices rather than wages, meaning basic benefit support is at the same level now in real terms as it was in 1992, despite a 51% growth in GDP per capita since then.

It warns this approach could see the Universal Credit standard allowance fall from 14% of earnings in 2025/26 to 12% in 2035/36 and 10% in 2045-46, compared to 17% in 2000-1.

SNP social justice spokesperson, David Linden, said the report laid bare how Brexit and Westminster mismanagement have sent the UK into long-term decline.

He said: “The UK is in dire need of radical change but neither the Tories or pro-Brexit Labour Party are offering a genuine alternative - showing why Scotland needs to escape Westminster control with independence.

"Brexit, austerity cuts and Westminster mismanagement have set the UK on the path to long-term decline - with stagnant wages, poor economic growth, and worsening living standards.

"Rejoining the EU, and properly investing in Scotland's renewable energy powerhouse potential, is the only credible path to sustained economic growth.

The National: David Linden said rejoining the EU and investing in Scotland's renewable energy potential is the only 'credible' plan to economic growthDavid Linden said rejoining the EU and investing in Scotland's renewable energy potential is the only 'credible' plan to economic growth (Image: NQ)

"The SNP Scottish Government is leading the way with limited devolved powers; delivering progressive policies like the Scottish Child Payment, baby box, Best Start Grant, rent controls, free personal care, and other measures to build a fairer society - but progress is being undermined by Brexit, Westminster cuts and damaging policies that are making people poorer across the UK.

"The SNP will continue to press the UK Government to introduce a real living wage, boost benefits and deliver urgent help for families - but independence is the only route to real change.”

Mike Brewer, chief economist at the Resolution Foundation, warned: “Economic growth – the essential precondition for rising wages – is sorely needed after 15 years of stagnation.”

“But it’s equally important that this rising prosperity is widely shared.”

He called for “a strategy that delivers productivity growth alongside reforms to employment, pay, benefits and housing costs" - including pre-distribution through higher wages and redistribution through the benefits system.

He added: “All political parties say they want to see a return to rising, and shared, prosperity. But only combining an end to Britain’s productivity stagnation with major reforms to our economy and benefits system can make that a reality – getting incomes up and inequality down.”