The Labour government that took office in 1997 inherited levels of poverty and inequality unprecedented in post-war history. More than one in four UK children lived in relative poverty, compared to one in eight when Labour had left office in 1979 (DWP, 2004a). Poverty among pensioners stood at 21%1. Income inequality had widened sharply: in 1979 the post-tax income of the top tenth of the income distribution was about five times that of the bottom tenth; by the mid-1990s that ratio had doubled (Hills, 2004a, Table 2.5).

In opposition, the new government had been careful to avoid major commitments to addressing social and economic disadvantage. In practice, it has implemented a broad and ambitious social policy programme, taking on a wide range of social ills, including child poverty, worklessness, area and neighbourhood deprivation and inequalities in health and educational attainment. How much has this programme achieved? Shortly after the election, one of New Labour's prominent strategists had challenged “the doubters” to “judge us after ten years of success in office. For one of the fruits of that success will be that Britain has become a more equal society” (Mandelson, 1997, p 7). There is some time to go before that particular deadline, but as Labour nears the end of its second term in office, this seems a good moment to take stock. This volume aims to assess the impact of government policies since 1997 on poverty, inequality and social exclusion. Is Britain indeed becoming a more equal society than it was when Labour was elected?

The scale of the problem

Figures 1.1 and 1.2 place the changes in poverty and inequality that Labour inherited in the perspective of longer-term historical trends. Levels of poverty and inequality show fluctuation during the 1960s and decline in the 1970s before the sustained increases of the 1980s. By the early 1990s, the lines on both figures have flattened out at what appears to be a new plateau high above the original plain. Unlike every other post-war decade, in which the gains of economic growth were shared across income groups, growth in the 1980s benefited the richest most and the poorest least. Indeed, on one measure, the incomes of the very poorest were lower in real terms in 1994/95 than they had been in 1979 (Hills, 2004a, Figure 2.7).