Inequality before and after Thatcher: what really happened

Norman Lamont is wrong to suggest that inequality increased "much more" under Labour. It surged under Thatcher and rose slightly under Blair and Brown.

On last night's edition of Newsnight, Norman Lamont declared that while inequality "increased under Mrs Thatcher" it increased "much, much more" under Tony Blair and Gordon Brown. It's a common claim but as the IFS graph below shows, it isn't true. It was during the Thatcher years that inequality surged before stabilising under Major and rising slightly under Labour. Under a Conservative government, less committed to redistribution, the increase would almost certainly have been far worse (not least due to the global forces pulling the rich and poor apart). 

Inequality in the UK 1979 to 2007-08

But Blair and Brown cannot be excused for their failure. Confronted by the widening gap between rich and poor, Blair would glibly remark that he didn’t go into politics "to make sure that David Beckham earns less money". Gordon Brown was less intensely relaxed about the "filthy rich" but doubted whether it was possible to significantly reduce inequality in a country that he continued to view as conservative. By contrast, Ed Miliband declared in his speech at last year's Labour conference, "I will never accept an economy where the gap between rich and poor just grows wider and wider. In one nation, in my faith, inequality matters." Whether he is able to fulfil his ambition of building a more equal society (assuming the voters give him a chance) will do much to determine whether he will prove to be a transformer in the mould of Thatcher or Labour's Ted Heath. 

A statue of Margaret Thatcher stands in the Guildhall Art Gallery in London. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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John McDonnell's seminars are restoring Labour's economic credibility

The Shadow Chancellor's embrace of new economics backed by clear plans will see Labour profit at the polls, argues Liam Young.

It’s the economy, stupid. Perhaps ‘it’s the economy that lost Labour the last two elections, stupid’ is more accurate. But I don’t see Bill Clinton winning an election on that one.

Campaign slogan theft aside it is a phrase Labour supporters are all too familiar with. Whatever part of the ‘broad church’ you belong to it is something we are faced with on a regular basis. How can Labour be trusted with the economy after they crashed it into the ground? It is still unpopular to try and reason with people. ‘It was a global crisis’ you say as eyes roll. ‘Gordon Brown actually made things better’ you say as they laugh. It’s not an easy life.

On Saturday, the Labour party took serious steps towards regaining its economic credibility. In January a member of John McDonnell’s economic advisory committee argued that “opposing austerity is not enough”. Writing for the New Statesman, David Blanchflower stated that he would assist the leadership alongside others in putting together “credible economic policies.” We have started to see this plan emerge. Those who accuse the Labour leadership of simply shouting anti-austerity rhetoric have been forced to listen to the economic alternative.

It seems like a good time to have done so. Recent polls suggest that the economy has emerged as the most important issue for the EU referendum with a double-digit lead. Public confidence in the government’s handling of the economy continues to fall. Faith in Cameron and Osborne is heading in the same direction. As public confidence continues to plummet many have questioned whether another crash is close. It is wise of the Labour leadership to offer an alternative vision of the economy at a time in which people are eager to listen to a way by which things may be done better.

Far from rhetoric we were offered clear plans. McDonnell announced on Saturday that he wants councils to offer cheap, local-authority backed mortgages so that first-time buyers may actually have a chance of stepping on the housing ladder. We also heard of a real plan to introduce rent regulations in major cities to ease excessive charges and to offer support to those putting the rent on the overdraft. The plans go much further than the Tory right-to-buy scheme and rather than forcing local authorities to sell off their council housing stock, it will be protected and increased.

It is of course important that the new economics rhetoric is matched with actual policy. But let’s not forget how important the rhetoric actually is. The Tory handling of the economy over the last six years has been dismal. But at the last election they were seen as the safer bet. Ed Miliband failed to convince the British public that his economic plan could lead to growth. The branding of the new economics is simple but effective. It does the job of distancing from the past while also putting a positive spin on what is to come. As long as actual policy continues to flow from this initiative the Labour leadership can be confident of people paying attention. And as economic concerns continue to grow ever more pessimistic the British public will be more likely to hear the Labour party’s alternative plan.

Liam Young is a commentator for the IndependentNew Statesman, Mirror and others.