Canary Wharf and banks
Banks can artificially inflate their profits under current regulations according to a report Luke MacGregor / Reuters

Britain's bankers are being told to cut back on their big bonuses by shareholders, as the gap between rich and poor rises faster here than in any other wealthy country.

In a letter to the banks publicly traded in Britain, the head of the Association of British Insurers (ABI), which represents many investors, calls for total reform to pay and remuneration.

"It is our members' view that it can no longer be business as usual for this remuneration round," wrote Otto Thoresen, ABI's chief executive.

"They expect to see significantly lower bonus pools and individual awards given the current market circumstances."

Thoresen also demands that shareholders see more of the profits and employees less.

"This year is the time to make these changes. Very few banks are recruiting and most are reducing employee numbers.

"Given this lack of competition for staff, our members believe that the retention risk is now reduced."

While bankers are getting a slap-down from their shareholders for over-generous remuneration packages, there's stark news on just how wide the gap between rich and poor is.

A report by the Organisation for Economic Co-Operation and Development (OECD), an international economic think tank, reveals that the top 10 per cent of earners in Britain have an income 12 times higher than the bottom 10 per cent.

In 1985 it was just eight times higher.

This is worse than in any other OECD country.

Currently the top 10 per cent bring in an average of £55,000 a year, while the bottom 10 per cent scrape a measly £4,700.

The OECD's report also shows how the income of the top 1 per cent has doubled over the past 30 years.

It found that the UK's tax and benefits system, which once offset any rise in market inequality, is no longer as effective.

"Employment is the most promising way of tackling inequality," says the report.

"The biggest challenge is creating more and better jobs that offer good career prospects and a real chance to people to escape poverty."

Putting more money into education, skills and training, a more redistributive tax and benefits system, and the provision of freely available, high-quality public services are also touted as ways to address the UK's growing income inequality.

The government has slashed its benefits bills as it tackles the budget deficit. It has also made substantial cuts to education.

As economic growth stalls in Britain and we face a second recession in the start of 2012, there's little prospect that the gap between the top and bottom in society will narrow.

"The social contract is starting to unravel in many countries," said OECD Secretary-General Angel Gurría.

"This study dispels the assumptions that the benefits of economic growth will automatically trickle down to the disadvantaged and that greater inequality fosters greater social mobility.

"Without a comprehensive strategy for inclusive growth, inequality will continue to rise."