Inequality: where Labour really did ‘crash the car’

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.

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39 Responses to “Inequality: where Labour really did ‘crash the car’”

  1. 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.

  2. treborc1

    I ready do not know what to make of this, whether I should say we should ask Blair back or vote fecking Tory.

  3. The_Average_Joe_UK


    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.

  4. 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.

  5. 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.

  6. The_Average_Joe_UK

    Who said I wanted Private health care? I just want efficient use of my money. I see from your posting history, your a labour ideologue. No point in wasting time trying to enlighten you. Probably best to leave it there.

  7. Guest

    Oh right, not having mass poverty is a terrible idea, and going on a rampage and slashing jobs is and wages “discipline”. Never mind data like growth rates, etc.

  8. Guest

    You come here because you are trolling, to disrupt discussion, as you make up stories about the left. Most of whom do not support your views, as you call opposing any form of check on the rich’s power “prolific waste”.

    “Elevate” people by slashing their wages. Protect public services from being useful. Your policies, 100%.

    And of course you can’t allow people not to be in dire poverty, as you ignore what actually happened in France, as you use PC bigotry again, and you maunder about the free enterprise your capitalism is a bitter enemy of, as you say your 1% is everyone.

    “Move right” you scream, “Don’t allow the left any options for representation”, ever. You then speak for yourself as “the public”, when you are the one engaged in a Class Jihad, and lie about the rise of the right from, er, the right.

    Of course you need Labour to die, for only the far right to ever be allowed. Democracy is a dead letter for you.

    And you believe the State owns people (aka USSR), the NHS as long as it serves you, corporate welfare, etc.

  9. Guest

    More efficient, so less for the poor and more for you.

    You speak for yourself and your vote rigging now I see.

  10. Leon Wolfeson

    “(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).”

    Yes, that does seem to be exactly what happened.

    Gini is only one measure, however, and the rapid rise of absolute poverty over the last few years…

  11. Leon Wolfeson

    I see no acknowledgement of it whatsoever, only further moves to the right.

  12. The_Average_Joe_UK

    Oh no, the liar has returned.

  13. The_Average_Joe_UK

    No because we seek to advise a wider picture. The Labour party was centrist a while back, now its descended back into its ideological nemesis, its good to point that out.

    You’ll always be a failure and poor because you a class was fighting little dick. Thats why you lie, call people Tory as if thats an insult. The same way as racists call people of another nation names. Fortunately most people laugh at people like you, some feel pity. I think you need medical help.

  14. Guest

    You’re right where you always were in your mirror.

  15. Guest

    “We”, Your personalities seek!

    And keep demanding I be like you, as you think being called a Tory isn’t an insult, then you pretend you’re “most people” as you bang on about how anyone to the left is needs pity blah blah…

    Thanks for the far right, totalitarian, social darwist claim, though, that people with different views from yours should be considered mentally ill and need “help” (no doubt prisons and beatings like any other Junta-run state)…

  16. sarntcrip

    excellent the current problem for labour is Ed has not moved to the left on this ideological position being frightened to death of anything remotely socialist inspite of the middle class’s favourite supermarket waitrose being run on good profit sharing,socialist lines showing there is nothing to be scared of

  17. sarntcrip

    you get hit by a car of have a coronary it’s not a bupa ambulance that turns up for the simple reason there is no profit in emergency medicine

  18. sarntcrip

    i don’t see anyone said you wanted private healthcare

  19. osho

    Joe for PM!
    I would vote for you

  20. The_Average_Joe_UK

    Leon, did you call me a banker? did you say I said things that I didn’t? Its all there plain and simple. Oh and by the way you may think you’re posting as guest, but disqus tells me Leon has replied to you…. Funny that invisibility cloak of yours isn’t working you fool..

  21. Guest

    LordBlagger, you’ve boasted about being a Banker in the past, and I just chose to believe you then, I also chose to believe you are serious about killing off the UK’s workers.

    And yes, my browser tells me you’re posting as LordBlagger. Funny that!

    You want this discussion, you’re having it.

  22. Leon Wolfeson

    Stuff “Socialist”, it’s a label.

    Broad left-wing policies have support when polled for. But Ed won’t do even the most minor things like enabling councils to borrow to build assets – houses – on their land!

  23. Norfolk29

    Why did you not include the full sentence that Peter Mandelson said about the filthy rich? Same reason the right wing press do not give the full sentence either. Same with the need to drink five litres of water a day, used by the water companies despite the same sentence ending “most of this they get from their food”. Blair made a mistake in underestimating the upper classes and the rich. He had been to a private school but he married a girl from the working class so he had first hand advice on what was wrong with UK society in 1997. If the filthy rich had paid their taxes as Peter Mandelson had said in that sentence we would have been able to do more for the poor than was done. I was in Local Government in the 1990’s when the schools were falling apart and hospitals were closing wards because they could not afford to keep them open and the Tory party was falling apart. There was not much talk about inequality then, more about whether we would survive.
    Having said that, we now have Ed Miliband who mumbles about increased taxes when it is tax avoidance that is the problem. Cameron is creating a quagmire for Labour to sink into if they get into office next May but we hear nothing about it from Labour. Are they blind as Kinnock was in 1987 when the Tory Manifesto promised to introduce a Community Charge (Poll Tax) to replace the rates and not a word was said by any of them. It makes me weep.

  24. The_Average_Joe_UK

    Its great putting a lefty prick down but when he / she is going to blatantly lie its a waste of time.

    Disqus only permits one name or guest. you cannot use two names on one account. Your browser cannot tell you I am anything but The_Average_Joe_UK. You can search my history front to back and it will always be the one name that I have. I call myself The_Average_Joe_UK because thats how I see myself.

    So please FOAD as your standard of debate has hit a low I cant stomach.

  25. The_Average_Joe_UK

    Lying prick.

  26. AWR

    It is decent jobs and reliable managment with British companies who believe that people make the company. Not just a few at the top in charge. And share the profits to all who help build the work they produce. The National insurance is not a tax it is to help all to be able to live with hospitals and pentions during thier lifes and when they retire. To call it a tax is a theft from being a healthy society. Remeber Mrs Thatcher stoll a lot of our money from the National Insurance to spend on nucular armements. Which should of come from taxes not from the peoples weathfare.

  27. Teddy7

    I don’t enjoy people putting me in a box, I think it’s rude, dismissive and assumes a great deal more knowledge about me, than you currently have.

  28. Teddy7

    Come on, saying the labour party is currently left wing is laughable! All 3 parties (4 if you include UKIP) are stood very much to the right, all following neoliberalism to the hilt. Political commentators know this, members from all parties know this, the average guy in the street knows this, i.e “their all the same”, is the most common criticism of politicians. Please criticise the labour party by all means, but for being left wing?! Come on mate, at least try.

  29. The_Average_Joe_UK


  30. Guest

    “Lying prick.”

    So you are. And?

  31. Guest

    Ah yes, you want to put people down, like the dogs you view the “prick” left as.

    You can (and have, thou doth protest too much) have multiple accounts, of course, and your distorted self-image, with your very marginalised political views, is not my issue.

    Keep trying to silence left-wing views, as ever, LordBlagger. Don’t like it? Well, perhaps you shouldn’t have started it.

  32. Guest

    Exactly, but don’t expect reason and sweetness there.

  33. Keith M

    The economic discipline of Thatcher which ruined communities and individual lives.

  34. Keith M

    Neoliberalism is a curse.

  35. Keith M

    I wonder what Joeland would be like?

  36. Keith M

    Ed needs to read his dad’s books.

  37. Keith M

    Strange how Mandelson has gone quiet – probably off swanning on a Rothschild yacht. How could Labour tolerate him?

  38. Keith M

    Wouldn’t it be the same thing?

  39. Norfolk29

    It is always a problem with Mandelson and Brown. Where do they go. Come back Peter, we need you, badly to do for Miliband what you did for Kinnock.
    Go away, Gordon Brown, we don’t need you or anyone who helps David Cameron, ever. And that includes John Reid on Proportional Representation.

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