The Great Debate UK

Inequality in the UK: the paradox under Labour


Alastair Murid B0133P 0248-Ali Muriel is a Senior Research Economist at the Institute for Fiscal Studies. The views expressed are his own.-

Start with two (apparently contradictory) facts about income inequality in the UK:

1. Since coming to power in 1997, Labour has changed the tax and benefit system to make poor people better off, and rich people worse off.

2. The gap between rich and poor is now larger than when Labour came to power.

So Labour has acted to reduce inequality – and yet inequality has gone up. This presents us with something of a puzzle. Your first thought might be that one of the facts above simply isn’t true – that either Labour hasn’t redistributed as much as they claim, or the gap between rich and poor has been exaggerated – but we can illustrate both facts with simple charts.