Socialist Worker

An expert view on inequality under New Labour

Professor John Hills spoke to Charlie Kimber about what the latest wealth statistics reveal

Issue No. 1943

The gap between social classes in Britain remains wide	 (Pic: Guy Smallman)

The gap between social classes in Britain remains wide (Pic: Guy Smallman)

If you look at the whole period from 1979 to the end of the 1990s, you can put it in quite a dramatic way.

Of the total increase in national income, 40 percent of it went to the top tenth, 16 percent of it went to the top 1 percent, 13 percent to the top 0.5 percent. £5 out of every £100 went to the top one thousandth of the population.

To look at the detail, you have to divide the years since 1979 into different periods. And you have to be very careful whether you’re looking at incomes (the amount of money people get each year) or wealth (the total amount of money and assets a person has).

Let’s look first at incomes. From 1979 to the early 1990s, during the Thatcher period, real incomes of people at the bottom hardly grew at all (and if you allow for housing costs they may even have become poorer).

Average incomes rose, but the nearer you were to the bottom the slower your income grew, and the nearer the top you were the faster your income grew.

However if you measure income inequality, it widened during this period considerably.

This more than reversed all the moves towards equality of income that had taken place since the Second World War.

Britain went from being one of the more equal countries in the industrialised countries to being one of the most unequal. It was a faster growth of inequality than in any country except New Zealand and the total scale was bigger than anywhere else because it went on for longer.

Then there were the Major years, from 1992 to 1997. Here less happened. Hardly anyone’s income grew and things like the abolition of the poll tax system helped people towards the bottom more than people at the top. Inequality stopped growing.

Since then it has been much more interesting. I should say we don’t have good figures much beyond 2002-3.

To give a single overview, imagine the income distribution as one of those onion-shaped spires of an Eastern Orthodox church or the Kremlin in Moscow.

There aren’t now so many right at the bottom, there’s a big bulge where most people have their incomes and then the spire is very narrow but it stretches a very long way up.

By and large the bottom of the onion has been squeezed up towards the middle.

Poor families with children have caught up a bit with those above them. They’ve got closer to people in the middle. In 1997 Britain had the worst child poverty rate in Europe. Now there are three countries worse than Britain and it’s closer to the European average.

Even then some at the bottom have been left behind. Not everyone has had their benefits increased above the rate of price increases.

If you’re out of work and you don’t have kids, your benefits have been frozen in real terms over the Blair period.

So for the first time since the early 1970s, average real incomes at the bottom have been increasing, but only slightly more than the average. On that measure inequality has fallen a bit.

But if you compare the very top and the rest then inequality has continued to widen, because the very top continues to accelerate away.

Work by Tony Atkinson at Oxford has shown that the top 0.1 percent have now returned their share of income to the level of the 1930s.

If you look at wealth, not much happened between the mid-1970s and the mid-1990s. What you might call “old wealth”, inherited wealth, continued to decline as it had done since the 1920s.

But that was offset by the rising wealth of the people who got very rich during the Thatcher years.

They saved it and added to their wealth year by year. It was only after 1995 that the overall inequality of wealth began to rise and that process has continued since 1997.

The share of wealth taken by the top 1 percent is back to where it was in the early 1970s.

Other inequalities are intimately linked to income inequality. You life expectancy is closely related to lifetime income level. The gap between social classes remains wide.

We don’t have figures much beyond 1999, but we can say there is not any evidence of improvement. The government has done a lot of analysis of health inequalities, which you couldn’t even talk about under the Tories, but as a Treasury study said there has been enough analysis, now is the time for action.

There have been changes but there is still a great deal to do.

John Hills is director of the Centre for Analysis of Social Exclusion and professor of social policy at LSE. His book Inequality and the State is a detailed analysis of what has taken place. For a brief summary of the book’s findings go to:

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Sat 19 Mar 2005, 00:00 GMT
Issue No. 1943
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