The richest have been hit hardest, but yes, it hurts them lessby Paul Johnson / January 23, 2013 / Leave a comment
Published in February 2013 issue of Prospect Magazine
George Osborne’s insistence throughout the recession that “we’re all in this together” has been criticised. Yet new figures show that the income of the wealthy has fallen (photo: HM Treasury)
At the start of the 1980s we experienced a deep recession. Unemployment soared to more than 3m—12 per cent of the workforce. During the following decade benefit levels were cut, earnings rose very fast especially for higher earners, and tax rates were cut for those on top incomes. Inequality grew at an unprecedented rate. By the end of that decade, on almost any measure, the UK was a much more unequal society than at the start. To have claimed that we were “all in it together” would have been fatuous.
Since 2008 we have experienced a much deeper and more prolonged recession than we did in the 1980s. Output fell by more and has still not recovered its pre-recession levels. Household incomes have fallen by more than at any time in many decades.
But the rest of the story is very different. We can debate exactly what we mean by “all in it together,” but 2010/11 saw the biggest fall in income inequality in the last 50 years while tax and benefit changes have hit the richest harder than any other income group.
Perhaps the most important feature of the last four years has been the relatively modest growth in unemployment which at 8 per cent is considerably lower than in was even in the early 1990s let alone the mid 1980s. Indeed employment levels have actually risen despite a loss of half a million public sector jobs. Whilst the unemployment rate is too high, we have—given what has happened to national income—escaped much more lightly than we might have feared.
Those in work have seen their incomes squeezed. Earnings have rise…