View all newsletters
Sign up to our newsletters

Support 110 years of independent journalism.

  1. Politics
  2. Labour
27 September 2022

How redistributive was New Labour?

Though inequality did not fall under Blair and Brown, child and pensioner poverty were dramatically reduced.

By George Eaton

In the BBC documentary series Blair & Brown: The New Labour Revolution, former cabinet minister Ed Balls remarked that the last Labour government was “the most redistributive since 1945”. The line stands out because New Labour is rarely described in such terms. If Tony Blair’s government did redistribute wealth, it is often assumed to have done so in the direction of the wealthiest. Peter Mandelson’s declaration that “we are intensely relaxed about people getting filthy rich” is typically cited (though he did add the caveat: “as long as they pay their taxes”).

So what are the facts? By the metric typically used to judge whether budgets are progressive or regressive, New Labour was highly redistributive. As the graph below shows, the party’s tax and benefit changes led to the poorest tenth of households gaining 13 per cent as a share of net income while the richest tenth lost almost 10 per cent (relative to what would have happened if no fiscal changes had been made from 1997 onwards). In the view of some, this was the fulfilment of the approach advocated by former education secretary Anthony Crosland in The Future of Socialism (1956), which encouraged a focus on ends (a more equal society) over means (nationalisation).

Graph by Ben van der Merwe

The cause of this shift was overwhelmingly the tax credit system introduced by Gordon Brown as chancellor, which dramatically increased benefits for low and middle-income workers and families (tax credit spending accounted for 1.9 per cent of GDP by 2010). But this was redistribution by stealth. Fearful of alienating “middle England”, New Labour avoided making an explicit case for its fiscal approach and failed to build a long-term coalition of support for the welfare state (leaving it more vulnerable to austerity from 2010 onwards).

Graph by Ben van der Merwe

Select and enter your email address The New Statesman's quick and essential guide to the news and politics of the day. The best way to sign up for Morning Call is via morningcall.substack.com Your weekly guide to the best writing on ideas, politics, books and culture every Saturday. The best way to sign up for The Saturday Read is via saturdayread.substack.com Our Thursday ideas newsletter, delving into philosophy, criticism, and intellectual history. The best way to sign up for The Salvo is via thesalvo.substack.com Stay up to date with NS events, subscription offers & updates. Weekly analysis of the shift to a new economy from the New Statesman's Spotlight on Policy team. The best way to sign up for The Green Transition is via spotlightonpolicy.substack.com
  • Administration / Office
  • Arts and Culture
  • Board Member
  • Business / Corporate Services
  • Client / Customer Services
  • Communications
  • Construction, Works, Engineering
  • Education, Curriculum and Teaching
  • Environment, Conservation and NRM
  • Facility / Grounds Management and Maintenance
  • Finance Management
  • Health - Medical and Nursing Management
  • HR, Training and Organisational Development
  • Information and Communications Technology
  • Information Services, Statistics, Records, Archives
  • Infrastructure Management - Transport, Utilities
  • Legal Officers and Practitioners
  • Librarians and Library Management
  • Management
  • Marketing
  • OH&S, Risk Management
  • Operations Management
  • Planning, Policy, Strategy
  • Printing, Design, Publishing, Web
  • Projects, Programs and Advisors
  • Property, Assets and Fleet Management
  • Public Relations and Media
  • Purchasing and Procurement
  • Quality Management
  • Science and Technical Research and Development
  • Security and Law Enforcement
  • Service Delivery
  • Sport and Recreation
  • Travel, Accommodation, Tourism
  • Wellbeing, Community / Social Services
Visit our privacy Policy for more information about our services, how New Statesman Media Group may use, process and share your personal data, including information on your rights in respect of your personal data and how you can unsubscribe from future marketing communications.
THANK YOU

[See also: The BBC’s Blair and Brown: The New Labour Revolution is both compelling and chastening]

However, the effects of stealth redistribution were still real. As the graph above shows, child and pensioner poverty both fell significantly, with 900,000 children and over a million pensioners lifted out of relative poverty (aided by an £18bn increase in benefits for families with children, and an £11bn increase in benefits for pensioners). More than two million children and nearly three million pensioners were removed from absolute poverty.

As the subsequent record of Conservative governments shows, there was nothing inevitable about falling poverty – its level depends on political choices, perhaps most crucially whether to cut or raise benefits. The share of children in relative poverty (23 per cent) was at its highest rate in 2019 since the start of New Labour’s second term in 2001.

Graph by Ben van der Merwe

Blair and Brown’s record is more vulnerable on the issue of inequality. As the graph above shows, New Labour left office in 2010 with inequality at the same level as when it entered government in 1997.

This was a reflection of surging incomes at the top during the long financial boom – the share of wealth held by the top 1 per cent increased by 0.6 per cent under Blair, a postwar record. It was also a reflection of New Labour’s reluctance to tax such gains. The top rate of income tax remained at 40 per cent for all but one month of the party’s time in office (finally reaching 50 per cent under Brown in April 2010) and no attempt was made to reform wealth taxation.

Only after the 2008 financial crisis did Brown feel liberated to raise income tax on earnings over £150,000. No concerted effort was made to reverse the dramatic increase in inequality during the Thatcher era, which has been linked to social ills from crime to drug abuse, obesity, educational failure and mental illness.

Yet had New Labour not redistributed wealth to the extent that it did, inequality would likely have surged to new heights. Ed Balls and others can be justifiably proud of the government’s record on poverty – not least in view of what followed.

This article was originally published on 18 October 2021

[See also: Keir Starmer’s speech showed he is a prime minister in waiting]

Content from our partners
Development finance reform: the key to climate action
Individually rare, collectively common – how do we transform the lives of people with rare diseases?
Future proofing the NHS

Topics in this article : ,
Select and enter your email address The New Statesman's quick and essential guide to the news and politics of the day. The best way to sign up for Morning Call is via morningcall.substack.com Your weekly guide to the best writing on ideas, politics, books and culture every Saturday. The best way to sign up for The Saturday Read is via saturdayread.substack.com Our Thursday ideas newsletter, delving into philosophy, criticism, and intellectual history. The best way to sign up for The Salvo is via thesalvo.substack.com Stay up to date with NS events, subscription offers & updates. Weekly analysis of the shift to a new economy from the New Statesman's Spotlight on Policy team. The best way to sign up for The Green Transition is via spotlightonpolicy.substack.com
  • Administration / Office
  • Arts and Culture
  • Board Member
  • Business / Corporate Services
  • Client / Customer Services
  • Communications
  • Construction, Works, Engineering
  • Education, Curriculum and Teaching
  • Environment, Conservation and NRM
  • Facility / Grounds Management and Maintenance
  • Finance Management
  • Health - Medical and Nursing Management
  • HR, Training and Organisational Development
  • Information and Communications Technology
  • Information Services, Statistics, Records, Archives
  • Infrastructure Management - Transport, Utilities
  • Legal Officers and Practitioners
  • Librarians and Library Management
  • Management
  • Marketing
  • OH&S, Risk Management
  • Operations Management
  • Planning, Policy, Strategy
  • Printing, Design, Publishing, Web
  • Projects, Programs and Advisors
  • Property, Assets and Fleet Management
  • Public Relations and Media
  • Purchasing and Procurement
  • Quality Management
  • Science and Technical Research and Development
  • Security and Law Enforcement
  • Service Delivery
  • Sport and Recreation
  • Travel, Accommodation, Tourism
  • Wellbeing, Community / Social Services
Visit our privacy Policy for more information about our services, how New Statesman Media Group may use, process and share your personal data, including information on your rights in respect of your personal data and how you can unsubscribe from future marketing communications.
THANK YOU