It isn't just wealth that concentrates; opportunity does too.
It isn’t just wealth that concentrates; opportunity does too
During the New Labour years, Peter Mandelson famously said that the Labour government was ‘intensely relaxed about people getting filthy rich’.
He was eluding to a philosophy which held that it was no longer important how rich those at the top were; what mattered was giving the people at the bottom a leg up so they too could get on in life.
Under New Labour’s meritocracy, those who did well would do so because of merit, but once they had reached the summit they would be allowed to enjoy the copious rewards on offer. Economic equality was out and equality of opportunity was in.
In this vein, from the very beginning of New Labour’s first term in 1997 Tony Blair shied away from policies associated with reducing the gap between rich and poor, such as higher taxes on top earners. Indeed, in 2003 Blair slapped down Commons Leader Peter Hain for daring to suggest that the richest in society should contribute more.
Blair’s response to Hain’s betrayal of New Labour orthodoxy captured New Labour’s philosophy well: ‘My concern is not to penalise the people who are successful and doing well and earning a lot of money, my concern is to lift up the incomes of those who are at the lower end of the income scale’.
Consequently, during his tenure as prime minister Blair did not allow the income tax rate to rise above 40 per cent while his chancellor, Gordon Brown, cut Capital Gains Tax to just 18 per cent. Under New Labour it was no longer important how rich those at the top were; what mattered was giving the people at the bottom a leg up so they too could get on in life.
And ‘get on’ is exactly what some people did. According to the High Pay Centre, in 1998 the average FTSE 100 director earned about £1 million a year – 50 or 60 times the average UK worker. Today they receive around £4.7 million, roughly 174 times the average worker.
All of this had a baleful effect on levels of inequality. The Gini coefficient – used to measure income inequality in Britain – was rated as 26 in 1979. Today it has risen to 34. Government statistics show that, between 1997 and 2010, the real-terms gap in incomes between the highest and lowest earners grew by £237 per week.
New Labour accepted the increasingly extravagant pay packets of Britain’s super-rich in the belief that it didn’t matter if the rich got richer – as long as the proceeds of growth were used to help the poor. Reducing inequality would have meant punishing those who had won themselves a place at the top through hard work. Instead the focus was on helping people at the bottom through things like tax credits and increased public spending on services like the NHS.
To its credit, New Labour managed to mitigate against some of the worst effects of the market by spending increasing sums on welfare and public services. Light touch regulation of the banks was accompanied by working tax credits and Sure Start centres.
As a consequence, both absolute and relative income poverty fell significantly among children and pensioners during the Labour years.
This wasn’t simply the result of a booming economy, but rather was a consequence of deliberate spending decisions taken by successive Labour governments. Tony Blair promised to end child poverty within a generation and Gordon Brown pledged ‘to end pensioner poverty in our country’.
These goals were reflected in where government money was spent.
Between 1997-98 and 2010-11, there was an £18 billion annual increase in spending on benefits for families with children and an £11 billion annual increase on benefits for pensioners by 2010-11. As the IFS pointed out, ‘…child and pensioner poverty would either have stayed the same or risen…had there not been these big spending increases’.
Labour politicians rallied against poverty but rather than tackle inequality they emphasised what they deemed the ‘poverty of aspiration’. Old left-wing notions of class solidarity were considered an archaic throwback; what was important was rising above your station and escaping the stifling confines of working class life.
And yet the New Labour preference for equality of opportunity over equality of outcome failed to recognise that it isn’t only wealth that concentrates; opportunity does too. The more unequal a society is the less mobile it will become, thereby undermining the meritocratic principle. Or to quote the American author Christopher Hayes, whose book Twilight of the Elites touches in more detail on this theme, ‘The Iron Law of Meritocracy states that eventually the inequality produced by a meritocratic system will grow large enough to subvert the mechanisms of mobility’.
And so it has. As was reported back in August, the upper layers of society are increasingly dominated by the gilded children of privilege. As the general secretary of the TUC Frances O’Grady put it at the time, Britain is becoming a ‘Downton Abbey society’ where social mobility ‘has hit reverse’.
If that sounds like hyperbole then a quick glance at the make-up of the ‘cream’ of society ought to drive the point home. Just 7 per cent of Britons are privately educated, yet according to a government report published in August 2014, 33 per cent of our MPs, 71 per cent of our senior judges and 44 per cent of people on the Sunday Times Rich List went to fee paying schools.
If you are waiting for some kind of media outrage about figures like this then you might end up waiting a long time: 43 per cent of newspaper columnists and 26 per cent of BBC executives hail from the private school system too.
Even the grittier sections of the music industry, which once gave expression to working class authenticity, are today increasingly colonised by the affluent. Some 60 per cent of rock music chart acts are former private school pupils, compared with 1 per cent 20 years ago. 93 per cent of children in Britain may go to state schools but their alumni make up just a third of top athletes.
The point here is not simply to create a sense of injustice (although that might help), but rather is to emphasise that inequality matters because the inequality of the parents always and everywhere becomes the inequality of the children. That is the ‘Iron Law of Meritocracy’, as Hayes puts it. Or as the old man Marx said, ‘men make their own history, but they do not make it as they please; they make it…under circumstances…given and transmitted from the past’.
If New Labour can be said to have ‘crashed the car’, as the Conservatives are so fond of putting it, it is on inequality. Under the previous government widening inequality subverted attempts to create a meritocratic society based on equality of opportunity. The inequality of the parents simply became the inequality of the children.
If the next Labour government wished to create a fairer society it will have to recognise this and act accordingly.
39 Responses to “Inequality: where Labour really did ‘crash the car’”
JoeDM
What utter eocnomic nonsense. These are the sort of ideas that brought Britain to its knees in the the 1960s and 70s. We needed the economic discipline of the 80s and 90s to rebuild and recover.
treborc1
I ready do not know what to make of this, whether I should say we should ask Blair back or vote fecking Tory.
The_Average_Joe_UK
Joe,
The reason that so many centre and right winger frequent blogs is because they have long memories, memories of the 60’s and seventies. Class war. The closed shop, secondary picketing, work to rule, any excuse to strike, blocking modernisation. They have seen Labour governments spray money up the wall calling it “investment in the economy”, only to see that money go into the pockets of the fortunate in the form of consumption. Labour’s prolific waste does not yield long term jobs.
Whilst I am pained to say this New Labour were absolutely right. Elevate the standards of the less well off. Protect public services. Sadly the policies to do it were an unmitigated disaster. It’s very easy to paint an idea as bad when the method to deliver it is flawed.
Note to the author. You can’t mess with people lives in this way. There is a clear example of where tax rises have killed the economy, just look at France. The only people who vote for these ideas, are those who never make it, those who dont understand that growth comes from free enterprise, from that growth we tax to provide services. Idiots will tax more, to disincentive growth and everyone suffers. This is proven in history time and time again, everywhere the left have been.
All the guff about what others earn is precisely that, guff. Its not the real issue. The real issue is jobs and opportunity. This is where Labour fall down, they cant offer growth, just class war and jealousy. Whatever Labour touches falls down. I never voted for Blair, he had the right ideas but Labour could never deliver it. Cheap degree’s for all, tax credits etc. The irony is that things like Grammar schools gave the working classes a leg up, what did the jealous left do? It leveled everything down so that everyone was equally less well off. Social mobility suffered, but the left were happy that streaming was eliminated.
left wing crackpot ideas are why:
The only left wing bank failed.
The left wing press: Mirror, Guardian New Stateman Independent lose money. The right wing press make money.
The NHS is massively inefficient, and any attempt to change that is viewed as an attack on it, oh heaven forbid.
The Mansion tax is being derided by all and sundry (except the class warriors).
The north needs business to provide jobs, the people of the north to start companies (some call this Thatcherism, the left can’t relate to this) and grow for their friends. Can you name one non Blairite senior business person who stand up for Labour regularly? What is Lab
The only model where the left have a positive impact are countries that think like Blair but execute properly. The reason they can do this is because they dont have the deeply ingrained class war legacy of Labour as demonstrated in this appalling P.O.S. article.
Wherever Labour are, there is blight on those it supposedly aims to help. It perpetuates state failure. In the south of England there is a cultural difference from the north. We need to learn from that. The thing that is going to impact the north more than anything else is the people. Labour cannot impact their outlook in a positive way. Labour aims to hook those people on the teat of the State to keep voting Labour.
The public are sick of Labours class war crap, its the reason that UKIP is growing so well in Labour heartlands. Labour needs to the country a favour and change or die out quietly.
Labour has no positive message, the pratts who’ll vote for a Donkey with a red rossette will give Labour 27% – 30% in 2015. The public when making that final choice wont vote for a party that will ruin the economy. Read it and weep.
FWIW The author of this post believes in state ownership, the NHS, the welfare state. He fundamentally believes that none of the major political parties are qualified to run any of them.
GO
New Labour were certainly wrong to think that inequality doesn’t matter, only poverty. I voted for Ed Miliband as Labour leader precisely because he seemed to understand the importance of inequality per se. Still, a couple of points are worth making:
Firstly, it was under Thatcher that inequality as measured by the Gini coefficient rocketed from 26 to 34. Since then we’ve only seen small ups and downs. So while it’s fair enough to blame New Labour for failing to reduce inequality, it’s not really fair to suggest that they allowed it to rise. It stayed pretty much where it was (because, presumably, New Labour’s anti-poverty measures aimed at the bottom of the income distribution pretty much balanced out what was happening at the top).
Secondly, our understanding of the dangers of inequality has come a long way since the New Labour era. The Spirit Level was published in 2010; The Price of Inequality in 2013; Capital in the 21st Century just this year. So it’s not surprising that Blair and Brown had a different perspective in the 90s and 00s.
Teddy7
I can’t be bothered to criticise the ridiculous number of mistakes you have made in this long winded essay. But my pet hate is when people shout about the NHS being inefficient. It is the most efficient health service in the world, as much as you might not like it, it is true. Please stop regurgitating rubbish thats been fed to you since the 80’s and do some of your own research. Private health care is not only grossly inefficient, it is unethical and pretty flipping awful.