Yes, the rich are getting richer under New Labour - but then so are the poor

The claim that the gap between rich and poor is widening has become the journalistic equivalent of an urban myth

The gap between rich and poor has continued to grow since Labour came to power. We hold this truth to be self-evident, that everyone is created equal, that they have been made unequal by that horrible Margaret Thatcher, and that the traitor Blair is continuing her evil work.

This has become the journalistic equivalent of an urban myth. Everyone believes it so strongly that evidence which contradicts it does not get reported, whereas the flimsiest piece of cod research that appears consistent with the thesis is headlined, as it was this week: "Rich-poor gap 'has widened under Blair'". Or "Gap between rich and poor growing fast under Blair". So everyone believes it even more.

But what was the evidence? A report by a "Blairite think-tank" (The Guardian's double sneer: Blair is terrible and even his own tame wonks say so), the Institute for Public Policy Research, published on Monday. The first bullet point of its "10-point factfile" - I am not making this up - read like this: "Since 1997, the richest have continued to get richer. The richest 1 per cent of the population have increased their share of national income from around 6 per cent in 1980 to 13 per cent in 1999."

When? Measuring from the start of Margaret Thatcher to the start of Tony Blair: 19 years, 17 of them under Conservative governments, and it's all Blair's fault? What is more remarkable is that journalists did not put the press release from the IPPR in the bin and look up the figures for what has actually happened since 1997. Some newspapers reprinted the "factfile" verbatim, word for nonsense word.

If you had listened carefully to the Today programme on the IPPR report, you might have heard Nick Pearce, the author of the report, say that income inequality has remained about the same since 1997, having increased a lot under the Tories. But that is not the myth that we all hold to be self-evident, so most listeners would probably have come away with a dim conviction that the figures said otherwise.

This may have been because the one statistic that Pearce committed to radio was that the share of wealth held by the richest 10 per cent of the population has increased from 47 per cent to 54 per cent over the past 10 years. For those without the benefit of the IPPR factfile, that was from 1990, when Mrs Thatcher was still prime minister, to 2000, which is still quite a long time ago.

Now, I know I do not get out much, but not only is the IPPR, again, eliding a large chunk of the Tory record with a smaller chunk of the Labour record, its figures are also out of date. The most recent numbers, which have been available on the Inland Revenue website for several months, show that the share of wealth owned by the richest 10 per cent rose from 54 per cent in 1997 to 56 per cent in 2001, which is the most recent (provisional) figure available. It is impossible for anyone to say how significant that change is (for example, the figure dipped to 52 per cent in 1998). The Gini coefficient, an overall measure of how unequally shared something is, has oscillated insignificantly between 69 and 70 per cent since Tony Blair became Prime Minister.

The same is true - as Pearce briefly acknowledged - of the distribution of income. The best data are probably in the Office for National Statistics analysis of the distribution of disposable income, that is, after taxes and benefits. Last year, Paul Waugh, who was then the deputy political editor of this newspaper, secured something of a scoop. He became the first journalist ever to make a news story out of the Gini coefficient. He noticed that the measure of inequality of the distribution of disposable income had risen from 34 to 36 per cent between 1997 and 2001. That's the myth! That's a story.

Earlier this year, the Office for National Statistics published a new analysis, taking the figures up to 2003. It showed a three-point drop in the Gini coefficient, to a level lower than that inherited from the Conservatives. That's not the myth! The figures were therefore not reported anywhere.

So, the evidence, as opposed to the "Blair's a sellout" prejudice, is that the gap between rich and poor widened under the Conservatives and stopped widening under Labour. Not good enough, says the IPPR. "Ministers need to do more." Minister obediently trots into the Today programme studio. "There is more to do," he intones. John Healey, economic secretary to the Treasury (for it was he): take your cue from Teresa Heinz Kerry and tell the IPPR to shove it.

Until the so-called Blairite think-tank comes up with an analysis of inequality that is based on what is really happening, not what "everyone knows" is happening, and until it comes up with a programme for making Britain a more equal country that is electorally and economically viable, it has no right to be taken seriously. Trends in income and wealth distribution in free economies are mostly beyond the power of democratic governments to influence except at the margins.

But the redistribution that has taken place under the Blair Government has been substantial. Simply taxing the rich more and paying higher benefits to the poor is one of the less effective policy responses (even when Nigel Lawson cut the top rate of income tax from 60 to 40 per cent it had surprisingly little disequalising effect). The most important factor is the labour market, and the fact that more people have jobs than ever before is the best counter to global wage inequalities that are still being imported to Britain. It is quite an achievement that the income gap has not increased over the past seven years.

Technically, the IPPR did not say it had. That first bullet point began: "Since 1997, the richest have continued to get richer." It could have gone on: "And so have the rest of us, at roughly the same rate." Instead, it recited a spurious statistic that allowed the gap wideners their mythic headlines.

Under its breath, the IPPR admits that the Labour Government has done some good, but then lists a lot of bad things, such as the fact that "parental social class and ethnicity still heavily influence life chances", without any evidence that they have got worse since 1997.

Bizarrely, part of the Government's "mixed record" that the IPPR praises is that it has "reduced poverty, particularly for children". Given that poverty is officially measured in relation to average incomes, that means, by definition, that the incomes of households with children are becoming more equal. The same applies to old people. The people who are being left behind are "working-age adults without children" who now constitute, says the IPPR, an "unfavoured group". So who would you choose to help first? Children, pensioners, or people of working age, at a time of close to full employment?

The next time you read that headline, "gap between rich and poor still widening under Blair", just pause. And wonder. Do you hold this truth to be self-evident?

j.rentoul@independent.co.uk

The writer is chief political commentator on the Independent on Sunday