Thatcher's legacy, Blair's response

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 scale of the change can be seen in historical context in figure 19.1. Poverty more than doubled between 1979 and 1991, with families with children most deeply affected: between one in three and one in four children lived in relative poverty in 1997. Inequality measures such as the Gini coefficient showa similar pattern.

Some of these changes could be put down to global forces, including a growing premium for skilled workers as technological progress shifted the pattern of labour demand. Demographic change was important too, 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. At the same time, changes to tax policy had shifted the burden of taxation from the rich to the poor, for example through reductions in the top rate of income tax accompanied by a greater reliance on indirect taxes.