According to a new analysis of income distribution, the Major era from 1992-97 was marked by a dramatic shift in the tendency to growing inequality shown during the Thatcher years. Under him, Britain became more equal in terms of incomes. Updating previous work carried out for the Joseph Rowntree Foundation up to 1995, Professor John Hills of the London School of Economics suggests several reasons for Major era egalitarianism, most accidental*.
People on the lowest incomes made up ground in the Nineties thanks to the end of the Poll Tax, which was remarkably regressive, and to falling unemployment. Relatively slow growth in incomes for higher earners had its effect, too, along with higher tax burdens for them.
Because real earnings grew little after 1992, the fact that benefits were linked to prices rather than earnings did not increase inequality as it had in the later 1980s, when earnings ballooned.
Paradoxically, the factors which seem to have done for the Tories - a sense of economic malaise despite growing employment - seem to have worked to make income distribution more equal. Professor Hills even opens the possibility that the unwonted success of Major in reducing inequality may turn out to be more dramatic than under Labour, which has - vaguely expressed - ambitions to cut inequality.
"It is not clear whether these trends towards greater equality will be sustained for long enough - maybe more than a decade - to reverse the previous, rapid growth in inequality," Professor Hills says.
But the halting of Thatcher-era trends towards greater inequality does show that the pressures for inequality "are not inexorable as does the difference in outcome of similar pressures in other countries". Between 1979 and 1995 average incomes grew by about 40 per cent but for the richest 10th of the population they grew by over 60 per cent. For the poorest 10th, income growth was only about 10 per cent. The result of Thatcherism was that by the early Nineties, income inequality was greater than at any time since the 1940s. Thatcherism did not, however, have much impact on the distribution of wealth, whether or the "marketable" kind (saleable assets such as shares or housing) or wealth including non-tradeable pension rights. Britain was and remains highly unequal with the richest 1 per cent owning a fifth of all marketable wealth. Professor Hills wants the Government to publish an annual Poverty Report based on a basket of indicators allowing the Government to set targets, for example, for its policies on social exclusion. "Future numbers with relatively low incomes could reflect a race between the positive effects of measures to increase incomes from work at the bottom, and the negative effects of falling relative incomes for those remaining largely dependent on benefits."
Professor Hills's data confirm that the poor are not a constant group - the poor in any one year are not necessarily poor the next. But the number of permanent "escapees" from poverty are few.
* `Income and wealth. The latest evidence', Joseph Rowntree Foundation.Reuse content