The Chancellor claims his policies are helping the poor

Report Highlights "Unprecedented" Gap Between Rich and Poor

The IFS study found that the richest 10% of the population now have as much income as the whole of the poorer half of households and that this state of affairs will continue.

Over the past 20 years there has been an "unprecedented" increase in income inequality, widening gap between the richest and poorest regions and sections of the population, according to the report called Inequality in the UK.

London is the richest region, but is by far the most unequal and poverty is increasing almost everywhere.

Down-and-outs are here to stay

Paul Johnson, one of the authors, said: "The increase in inequality is probably the biggest social change we have experienced in the past 20 years. With no apparent chance of higher social security benefits, higher taxes or better earnings prospects for the low paid, this change - with all its consequences - is here to stay."

The report also disclosed that families with children now make up a much greater proportion of the poorest group.

The Chancellor, Gordon Brown, said the Government would close the gap between rich and poor with welfare reforms and improved training and education.

He told BBC TV's Six O'Clock News programme, the root causes of inequality were "mass unemployment, which has been going on for many years without a government prepared to tackle it as we are and, of course, lack of skills to enable people to get decent jobs." He claimed: "We're tackling both those major problems."

Hattersley Argues For Higher Taxes

Labour's Roy Hattersley, however, urged the Government to act immediately to alleviate poverty by raising taxes.

"I would like to see an increase in the top rate of tax and that money being spent on welfare," he told the BBC's World At Oneprogramme.

He said it had been a strategic mistake for Labour to commit itself to the previous Tory government's tax levels. "That's a promise that has to be kept for a while, but isn't a promise that can possibly be sustained for the length of this Parliament," he claimed.

Top earners were only paying 40% in taxation, and could afford to give more, he suggested.

"The question we have to ask ourselves is a moral question," He said Should the very rich be paying less in tax while the very poor are getting not only relatively poorer but poorer in absolute terms? My answer is that one or two per cent on the top rate wouldn't be politically damaging, would be economically right and, my God, it would be morally justified."