The society Labour inherited when it took power in 1997 looked dramatically different from the one it had left behind in 1979. During the Thatcher years economic growth had disproportionately benefited the better off, leading to a widening gulf between rich and poor. The dramatic nature of the change can be seen in historical context in Figure 14.1. Poverty more than doubled between 1979 and 1991, and families with children were most affected: between one in three and one in four children lived in relative poverty in 1997. Inequality measures such as the Gini coefficient show a similar pattern.

Some of these changes can be put down to global forces beyond the reach of government policy. Falling demand for unskilled labour had placed an increasing premium on skills, affecting countries across the industrialised world. The impact on the UK was particularly great because of the high proportion of the population with low qualifications. Demographic factors also played a role, with increasing numbers of children growing up in one-parent households. But policy under Margaret Thatcher was also crucial. Curbs on trade union power and an end to the minimum wages councils had removed a floor on wages, while the move to linking benefits to price levels rather than incomes had left those without work, from pensioners to the unemployed, increasingly far behind.