Income inequality has fallen in the last 20 years – but only thanks to the Labour government

Labour's expansion of benefits and tax credits boosted the incomes of poor families

These are dark days for Labour. The party is at war with itself, MPs are resigning and local council seats are being lost. Worst of all, national support is plummeting and, according to the Fabian Society, Labour could be left with as few as 140 seats after the next general election. Considering all this, it’s very easy to get disillusioned.

But we should remember that the work of successive Labour governments between 1997 and 2010 continues to benefit working families, despite Tory attempts to turn back the tide.

New analysis from the IFS, shows that although pre-tax pay inequality has risen in Britain over the last 20 years, post-tax income inequality has fallen thanks to the Labour’s redistributive economic policies, particularly the expansion of tax credits.

The lasting impacts of those decisions — taken mostly between 1997 and 2004 — demonstrate the power of progressive government to bring about social and economic change.

Indeed, while Labour (understandably) took lots of the blame for the 2008 financial crisis, its earlier policies ensured that working people were shielded from the very worst effects of the collapse. While earnings plummeted across the board, the availability of tax credits and benefits cushioned the blow for poor households.

Of course, seven years of Conservative government have taken their toll. While the Tories crow about low unemployment, in-work poverty is at a record high, as more and more workers grapple with low pay, part-time and precarious work, and increased caring responsibilities.

And, as Helen Barnard of the Joseph Rowntree Foundation points out, the combination of stagnant earnings and increasing costs means that growing numbers of families are struggling to pay for the essentials.

The Labour legacy —  and the families who depend on it —  can only withstand so much.

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