The poorest fifth of the UK are the poorest in Western Europe. Reuters

A new report on pay inequality claims the UK is still blighted by Victorian-style inequality, and the country houses the poorest people in western Europe.

The High Pay Centre, an independent think tank which studies the average household disposable income in European Union OECD countries, finds that the UK's lowest average disposable income is amongst the worst in the entire continent - even though our richest people enjoy some of the highest salaries.

The top 20% of UK households have an average disposable income of £31,670 (€39,662, $53,785) a year, which puts us behind only Germany and France. However, the lowest 20% in this country have an average disposable income of just £5,506 – the poorest in western Europe.

According to the report, the plight of Britain's bottom 20% bears closer resemblance to the under-classes of Slovenia and the Czech Republic than anything to be found among Europe's economic powerhouses.

"Simply, for the millions of people comprising the poorest fifth of our population, life is much worse here than it is for the poorest fifth in virtually every other north-west European country - countries we would like to think of as our equals," stated the study.

"These figures suggest we need to be more concerned about inequality and how prosperity is shared, as well as average incomes or aggregate measures like GDP. The fact that the rich are richer in the UK than many other countries hides the fact that the poor are poorer," said High Pay Centre director Deborah Hargreaves.

"Most people think our living standards in the UK are similar to economies like France and Germany, but being poor in the UK is more like being poor in the former Soviet Bloc than in Western Europe."

The report picks up on George Osborne's 2014 budget speech, in which he spoke of a lessening gap in income inequality as a result of the global economic crisis.

However, the chancellor fails to mention that the only reason the gap has been narrowed is because the top fifth's disposable income has lowered, not because of rising income for the bottom 20%, stated the study.

"The Institute for Fiscal Studies predicts that, as the economy recovers, the increase in inequality will resume. The IFS say that income inequality will be 'about the same' as pre-recession levels by 2015-16," it said.