Research shows that, on some measures, the internal inequalities are greater in northern countries such as the UK than in southern countries such as Italy. If one looks at GDP per head for the most affluent region with more than 10% of the population (London, including outer London, in the UK, and Lombardia, including Milan, in Italy), the top to bottom inequality is worse in the UK. In Italy the poorest regions, such as Calabria and Campania, have half the income of top regions, while UK regions such as Merseyside or south Yorkshire, do relatively worse. And 63% of the Italian population attain the mean national GDP or better, compared with 32% in the UK. These inequalities are growing, despite substantial internal transfers, and are driving the rise of a new regional nationalism all over Europe.
The (relatively) high inequality in the UK is at least partly to do with regional inequality, not inequality between individuals per se.
If we were to measure inequality on a regional basis (ie, less than 60% of equivalised household income but using regional medians not national) then a lot of the inequality would melt away.
As would a lot of the inequality if we used regional price levels instead of national ones when measuring consumption inequality.
Another way of putting this is that UK inequality is hugely boosted by London. But does the fact that London incomes are much, much, higher than say in the NE, really indicate anything important or reasonable about inequality? We do, after all, tend to compare ourselves to the Jones\’ next door, not to people who live 400 miles away.