A more unequal country?

Stewart Lansley and Joanna Mack

Since her death, there has been much discussion of Lady Thatcher’s economic and social legacy. One of her core aims was to move the UK from the post-war consensus of a managed economy underpinned by the welfare state to a more deregulated form of ‘market capitalism’. Although there have been many economic and social changes stemming from this shift – and from other policies of her government - here we summarise what has happened to inequality and poverty, both during her period in office from 1979 to 1990 and since she left and, where possible, look at how this compares to the previous periods.

Of course, the trends in these areas are the results of a number of factors – external as well as internal - and cannot all be attributed to the economic and social changes initiated during the period during which Lady Thatcher was Prime Minister.

What is clear is that the levels of inequality and poverty have both increased substantially. Since 1979, a greater share of the nation’s income and wealth has gone to top income groups, and in particular the very top, than in the period before 1979. In contrast, a smaller share has gone to the bottom income groups, and in particular the bottom decile. This shift, in turn, has been associated with growing levels of income poverty since 1979. The sharpest rises in inequality and poverty occurred from 1979 to 1990.


Figure 1: The fall and rise of inequality, 1938/9 to 2009/10

1938/39 1972/73 1979 1990/91 1996/97 2007/08 2009/10
Top 10% 34.6} 21.4} 21} 27} 28} 31} 31}
Second 10% 12.7}56.9 14.3}48 14}47 16}55 15}56 15}58 15}58
Third 10% 9.6} 12.3} 12} 12} 13} 12} 12}
Fourth 10% ] 10.8 11 10 10 10 10
Fifth 10% ]27.7 9.6 10 10 9 9 9
Sixth 10% ] 8.4 8 7 8 7 8
Seventh 10% ] 7.3 7 7 6 6 6
Eighth 10% } 6.3} 7} 5} 5} 5} 5}
Ninth 10% }15.4 5.3}15.9 6}17 4}11 4} 11 4} 10 4} 10
Bottom 10% } 4.3} 4} 2} 2} 1} 1}
Source: 1938/9 and 1972/3: Royal Commission in Income and Wealth; 1979; 1990/1 JRF 1995; 1996/7 onwards HBAI.
The 1938/9 and 1972/3 figures are not strictly comparable with the later series, and are merely indicative. The figures after 1979 are calculated after housing costs. Figures may not sum to 100 because of rounding.

Figure 1 shows levels of inequality prior to and after 1979. As measured by the shares of total net income received by individuals by decile, the UK became a more equal nation during the post war years. Thus the share accruing to the top decile fell over the 40 years to the 1979, while the share going to the bottom decile rose slightly. However, while those in the bottom three deciles did gain a greater share during this period, the main winners were those just below the top decile and those in middle deciles rather than the bottom.

Since 1979, this process of narrowing inequality has gone sharply into reverse. Between 1979 and 2009/10, the top decile has boosted its share by ten percentage points from 21% to 31% while the share received by the bottom decile has fallen from 4% to 1%. Overall, those below the top decile but in the top half held their share of income with the rise in the top being at the expense of the bottom half and in particular the bottom third. Most of these changes took place during the 1980s, but there has been some further, though smaller, increase in inequality since including during the period of Labour government from 1997 to 2010.

Figure 2 shows that those who have gained most from this process have been those at the very top, with the share of income received by the top 1% rising from 5.7% in 1978 to 15.4% in 2008 before falling to 13.9% in 2010. The trend in the share of income received by the top 1% has taken the pattern of a U-curve, falling from 1937 (when it stood at 17%) until its lowest point in 1978 (the start of figure 2) and then rising again. This process began in the late 1970s but continued through the 1980s, 1990s and mid-2000s before dipping at the height of the recession.

Figure 2: Share of income accruing to top 1, top 0.5 and top 0.1%, UK, 1978 - 2009

Source: Alvaredo F, Atkinson AB, Piketty T and Saez E, The World Top Incomes Database, Paris, 2012


The level of poverty – as measured by the proportion falling below 60% of median income – doubled between 1977 and 1990 (see Figure 3). It then fell slightly from its 1990 peak of 22%, leveled off through the 1990s and fell slightly from the millennium before rising slowly again from 2006/7.

Figure 3: Levels of poverty, 1977-2010

Source: IFS

It is more difficult to track living standards over this period but the Poverty and Social Exclusion, and the predecessor Breadline Britain, surveys provide comparative information for the years 1983, 1990, 1999 and 2012.  These surveys find that using a measure of poverty based on the public’s perceptions of necessities, there has been a rise in the proportions of people falling below these publicly set minimum standards. The latest 2012 survey also finds that in some key areas, levels of deprivation, in particular housing, are back at 1983 levels. For more details see Facts and Findings 2: Going backwards: 1983 to 2012.

The reasons for these trends are, of course, complex and for over a third of the period since 1979 a Labour government has been in power. What has been happening is that rising prosperity over the last 30 years has become increasingly unevenly shared, with more of the gains of growth going to those at the top, leading in the process to a more unequal society.

We'd like to thank Ruth Levitas for the data for figure 1.


Publication date: 
Apr 16 2013


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Very interesting article. It makes you wonder which of Thatcher's policies were most responsible for the falling living standards in the lower income deciles, and why New Labour were unable to do more to improve the situation, despite their focus on poverty and social exclusion? Paul McGann, PhD researcher, London Metropolitan University

While it cannot be argued that since 1979 the rich have got richer. A closer look at the figures clearly shows that in the 1938/39 data set (figure 1) wealth at that time was just as heavily concentrated in the top deciles. While the figures do not give a full break down of the distribution of wealth for the lower deciles (from 4 down to 10), so it is not possible to compare the distribution of wealth in this group. Additionally, figure 3 clearly indicates an increase in the number of people earning less than 60% of the median income compared to the early 1980s. However, this figure has been in steady decline since its height in1990 and 1992. The policies of the Thatcher government are largely held to blame for the decline in living standards in the 80's and that carries through into poverty levels today. However, what is largely ignored is that at the time of the election of the first Thatcher government the country was at breaking point. The Unions were the ruin of the Country and the UK was viewed as the sick man of Europe. We had power shortages, three day working weeks, endless strikes and refuse left rotting in the streets. We can only consider what has happened since the election of the first Thatcher government, not what could have happened if Callaghan had survived the confidence vote and stayed in power. Despite the faults and criticism that people level at the Thatcher government, the government addressed the problems of the day and got the country back on its feet. Personally, the biggest scandal that has gone ignored is not from the Thatcher government but the Blair government, with the direct taxation of pension funds and the capping of the amounts pension funds can earn. The consequence is your money is taxed twice, once while in the fund and then when you draw it out. The capping of the funds means pension funds are not as profitable as they used to be, they now have large deficits and the net consequence is you have to work for longer before you can retire. No Government is perfect and all will say what is needed to gain power. The Thatcher government returned pride to the UK which was lacking in the 70s and the country has become a more competitive attractive place to do business. That said no government since has addressed these two key problems. Firstly, a strong economy is built on the back of a strong manufacturing industry. While manufacturing is on the increase in the UK more could be done to help it. Secondly, there has been a tremendous decline in the production of fresh produce in the UK, this needs to be reversed. In 2007, the UK was not considered to be self sufficient in food generation, we imported ~40% of our food and the trend was increasing. Consequently, we are at the mercy of global food market prices - clearly in evidence we do our weekly food shop.

There is such a thing a society and it's a very unfair one. We need to rid ourselves of the idea that people choose to be poor; it's not a choice but something constructed by the more wealthy in society. The present government's policies demonise the working-class and want them to borrow huge amounts of money in order to 'sort their lives out' with. The same short term lack of vision will not help anyone who falls into the lower bracket of society as we enter a 'triple dip' recession. I hope people are WAKING UP and REFUSING TO PARTICIPATE with these government dictators who want poorer families to toss burgers for the whole of their existences.

From my experience I believe that legacy of Thatcherism was to make the rich richer and the poor poorer Her privatisation policy distroyed the UK industrial base and now we become a service economy run by greedy bankers.. As a pensioner my children and grand children have little to look forward to, thanks to her.

The concept of "Thatcherism" introduced by Margaret Thatcher in 1979, where privatisation of the various services took place - was introduced to make the private sector more competitive, whilst reducing expenditure in the public service - with the aim of the introduction of a catalyst for economic development. The world economy at the time, was geared towards Productivity, Innovation and Competitiveness (Michael Porter ). However,in the absence of a monitoring and evaluation system, I firmly believe these objectives were not realised. Empirical data 1979-2010 has revealed that the upper echleons became richer at the expense of the middle and lower classes. These sentiments were clearly echoed during her time in office and at the time of her demise - which leaves a rather" bitter" legacy for the lower income groups

Thatcherism is a bit of a misnomer. She was 90% artefact - hair and voice extensively remodelled, script written for her; she was an early example of a woman being picked to make a reactionary programme look well softer and more feminine (nowadays they are all at it every army has a female spokesperson). Of course she was in ideological sympathy but there was nothing new about the programme she introduced even privatisation - c'mon guys the East India Company and Cecil Rhodes were private imperialist adventurers and MPs were told then that 'it won't cost the public purse a penny'

Whilst market deregulations are the prime factor for wealth increases at the top deciles, it is the fact that wages are increased in percentages that over time result in such inequalities, even if they are in line with inflation. 3% of £100,000 making one employee £ 3,000 better off, whilst for someone earning £15,000 it will bring in a mere £450 increase. It seems extraordinary to me that this inbuilt systemic inequality is not being raised as a political issue by the Labour Party or poverty campaigning groups. Thank you for providing articles backed up by hard facts. This website is a very important resource.

Very interesting article, thank you. I will also use it for my social research methods module, to stimulate students' understanding and discussion of quantitative datasets.

I have been visiting this site regularly recently and find it to be very interesting, and a valuable resource for not just figures and statistics on inequality, but also for providing the analysis for it. As a tutor working in further education in London, I am particularly interested in figures which show correlations between poverty and educational achievement, from the 1980s through to 2000s, especially among BME students in Further Education – will you be investigating this aspect of poverty in your research? I believe Thatcher’s policies in the 1980s, especially the 1988 Education Reform Act marked the beginning of the privatisation of education - nothing more than accountability through the market by giving advantaged schools and parents the upper hand (continued by Blair) to the stage where now, only an elite percentage of the population can afford to go on to further and higher education. This, I believe, to the detriment of the country.
Poverties.org's picture

It's quite ironic that in the end Thather's policies made a lot of people even more dependent on welfare than before as unemployment and poverty rates went up. Building a middle class and empowering people usually entails making sure that a decent life is secured for them - just like we've seen in many European countries and in the US up until the 70s. The largest growth in middle class in the history of western civilisation. And now governments around the world frequently play around with the data on poverty statistics in an attempt to make it look not as bad (http://www.poverties.org/poverty-statistics.html). But even then, it remains hard to ignore reality and what we see in our daily lives...!

I find this site to be a valuable resource in terms of providing statistical evidence....very well researched!!! In terms of Lady Thatcher's legacy, I have mixed feelings. Her destruction of the mining industry and large scale privatisation, especially of the railways, may not have been in the nation's interest. However, the development and construcion of Docklands was impressive. The riots that took place under her rule were also an indication of social and financial inequality, with an "us and them" approach. This is an unfair reflection of how society should be, and Thatcher's policies led to this social division. Lastly, and perhaps not directly relevent to the issues of poverty, I am still appaled by her 'war crime' of sinking the General Belgrano in the Falklands: the Argentinian ship was well outside the exclusion zone and a thousand sailors died.

I enjoyed reading this article, and I appreciate your attempts at objective, factual analysis. I am however, very aware of how statistics could be spun to support any conclusion you want to. Margaret Thatcher, on the other hand did not need spin or Murdock for that matter to win 3 general elections! As fig. 3 shows, levels of poverty dropped marginally during the Blair government, stabilising rather than decreasing significantly. Lady Thatcher was neither revolutionary nor reformer – what she was, in my opinion, was the greatest moderniser the country has ever known. She made it possible for the likes of my aspiring working class parents to become property owners and share owners when she privatised failing state companies and made us proud to be British again. She modernised the trade unions, making them much more democratic; won the cold war and put the ‘Great’ back in Britain. However, perhaps the only thing, which tarnishes her leadership is the dreadful poll tax, which was an inherently unfair tax and she soon sorted that out too.

In response to PearlSS83, not sure where you were during the Thatcher years but I worked in the Media and I can tell you categorically that Mrs Thatcher existed on spin. Remember that poster Labour isn't Working with that picture of a dole queue that helped her win one election only for unemployment figures to rise through the roof once she got into office? That was spin and there was much, much more. Murdoch and his papers played a large part in her repeated election successes and he privately boasted at the time that he was the Shadow PM of the UK, why do you think all subsequent governments have courted Murdoch prior to the phone hacking scandal? Mrs Thatcher never received more than 44% of the public vote and yet thanks to our ridiculous electoral system was able to systematically destroy much of what was good about this country. Selling off the utilities for example (they weren't failing by the way), Gas and Electricity providers are now making record profits whilst the poorest in society are being forced to choose between heating and eating. How is this modernising? It is going back to the dark ages. National Rail under Thatcher was the ONLY public transport system in Europe expected to make a profit and it was totally under-subsidised, now however companies such as Virgin Rail get massive subsidies from the tax payer to run a much more expensive service, how's that progress? And as for your parents being able to buy their council house, well brilliant for them but I am surprised that you cannot see what the long term repercussions of that policy were, especially when she refused to allow councils to spend the money raised to build new social housing. The lack of affordable housing is a stain on this country's reputation, but the very fact that you can use the example of your parents being able to buy their home as evidence of the good Thatcher did just goes to show how successful she was in appealing to basic human greed and self interest. Short term gain for a few, long term pain for the many. As for the stuff about trade unions, she emasculated them, that is why wages and conditions at first stagnated and are now declining; it is the reason why many who are in work have to rely on benefit and then get called scroungers by the likes of you - they cannot earn a living wage because of the undermining of Trade Unions. The Poll Tax was the only thing that tarnished her leadership and she sorted that out too? What's that if it isn't spin? It was a disaster and if, like me, you had sat through all the debates in the House - assuming you could remove your blinkers - would have seen that it was plainly a disaster and was never going to work. It was some of the worst riots we have seen in Britain that forced her to rethink. What about sinking the Belgrano, as it was sailing AWAY from the Falklands with the loss of over 1,000 lives, wasn't that a disgraceful thing to do? What about refusing to support sanctions against Apartheid in South Africa (due to her husband's massive business interests there) or calling Mandela a terrorist? You've swallowed too much of that Spin that you say didn't exist.

Thank you for tweeting the excellent article by Danny Dowling about how the Thatcher era led to the greater impoverishment of Britain’s poor. I do not usually read the New Statesman, and would have missed it. Also I think It complements your article by Stewart Lansley and Joanna Mack and the PSE report really well, because his explanations (class and poverty) are funnier, easier to understand and remember for exams! Would your research also be considering the levels of funding for the NHS during the Thatcher period compared with the Labour period? I think the nation’s health should also be a measurable indicator of poverty. Thank you, Richard (undergraduate, economics)

Richard: Danny Dorling has written a “Think Piece” on "Narrowing Health Inequalities" which is published on the Centre for Labour and Social Studies website (http://classonline.org.uk/) and looks at changes in health inequalities over time and compares trends in health inequalities between Labour governments and Conservative ones. Under every Conservative government there has been since WWII health inequalities between areas have risen. The ‘think piece’ only briefly mentions the increase in health spending under New Labour, but notes that either that was not enough to reduce health inequalities as previously Labour governments had reduced them, or that allowing the rich to become richer, if they occasionally paid their taxes, was in hindsight perhaps not a great policy. It is almost certainly the case that had New Labour not funded increases in health care provision inequalities in health would have widened and overall population health would probably have suffered. Hope this helps. Sasha, PSE Web Moderator

Thank you very much Moderator for this additional information. I really enjoyed reading this article and made good use of it for my term paper. It inspired me to get his new book, Unequal Health which I am looking forward to reading and using for my dissertation. Richard Rawls (economics 3rd year)

an excellent and really useful commentary which gives very helpful background for a paper I'm writing on Thatcherism