Has inequality fallen over the course of this government?

This morning on the Today program David Cameron made the claim that inequality has fallen over the course of this government. The claim has been made several times and is met with a large amount of scepticism each time it is made. However the data to a certain extent back up this claim. Inequality was higher in 2009/10 than it was in 2012/13 (the most recent date for which there is data).

There are two caveats which need to be added to this statement though. Firstly whilst this is true according to our preferred measure of inequality (the Households Below Average Income data) it is not true according to the data set that David Cameron and George Osborne have previously referred to when making claims about inequality (The Effects of Tax and Benefits data). If the government is going to make claims about inequality then they should pick a preferred data source and stick to it. If the Effects of Tax and Benefits (ETB) is their preferred data source then it is not true to say the inequality has fallen over the course of this parliament. According to the ETB data set the UK is as unequal now as it was in 2009/10.

The second caveat is that the entire fall in inequality seen in this parliament occurred within its first year. Inequality fell from 0.36 to 0.34 between 2009/10 and 2012/13 since then inequality has been broadly flat. It is possible that this fall was related to policy put in place by this government however most policy changes associated with this government were not in effect within their first year. A more likely explanation would be the effects of financial crisis causing a drop in inequality.

The drop in inequality shouldn’t be seen as a historic low for inequality either. The UK has a similar level of inequality now as it had in 2003-2005. We are still far more unequal than most other developed nations and far more unequal than we were before 1980.

Tim Stacey, Senior Policy and Research Advisor.