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.

Getty Images.
Show Hide image

Forget gaining £350m a week, Brexit would cost the UK £300m a week

Figures from the government's own Office for Budget Responsibility reveal the negative economic impact Brexit would have. 

Even now, there are some who persist in claiming that Boris Johnson's use of the £350m a week figure was accurate. The UK's gross, as opposed to net EU contribution, is precisely this large, they say. Yet this ignores that Britain's annual rebate (which reduced its overall 2016 contribution to £252m a week) is not "returned" by Brussels but, rather, never leaves Britain to begin with. 

Then there is the £4.1bn that the government received from the EU in public funding, and the £1.5bn allocated directly to British organisations. Fine, the Leavers say, the latter could be better managed by the UK after Brexit (with more for the NHS and less for agriculture).

But this entire discussion ignores that EU withdrawal is set to leave the UK with less, rather than more, to spend. As Carl Emmerson, the deputy director of the Institute for Fiscal Studies, notes in a letter in today's Times: "The bigger picture is that the forecast health of the public finances was downgraded by £15bn per year - or almost £300m per week - as a direct result of the Brexit vote. Not only will we not regain control of £350m weekly as a result of Brexit, we are likely to make a net fiscal loss from it. Those are the numbers and forecasts which the government has adopted. It is perhaps surprising that members of the government are suggesting rather different figures."

The Office for Budget Responsibility forecasts, to which Emmerson refers, are shown below (the £15bn figure appearing in the 2020/21 column).

Some on the right contend that a blitz of tax cuts and deregulation following Brexit would unleash  higher growth. But aside from the deleterious economic and social consequences that could result, there is, as I noted yesterday, no majority in parliament or in the country for this course. 

George Eaton is political editor of the New Statesman.