Do the poor do better under Labour?

From Burning our Money, this interesting graph.


We regularly hear about how the gap between rich and poor is growing in the UK (See also here). But it seems to me that surely the important thing (at least if one is motivated by concern for the less well off rather than ideological egalitarianism) is not the size of the gap between rich and poor, but how well the less well off are doing in real terms. And figures released by the Institute of Fiscal Studies show that, in real terms, they have been getting richer rather than poorer over the past 50 years.

The graph shows that households at the 25th percentile point for Before Housing Costs income (i.e. those that earn less than the richest 75% but more than the poorest 25%) have seen their income rise by 89% in real terms between 1961 and 2009. (The figures for those at the 5th and 15th percentile point are 80% and 88% respectively, while for those at the 50th percentile point it is 109%.)

Interesting stuff, and Wat Tyler has discoursed thoughtfully on the meaning of poverty.

However, I found myself wondering about something else. Do these less-well-off people (i.e. those at the 25th percentile point) do better under Labour governments or under Conservative governments. Accordingly, I adjusted the graph.


Upon studying it, I was not much the wiser, so I crunched the numbers, and made some interesting discoveries. I calculated that over the 25 years the Conservatives were in power, the people at the 25 percentile point increased their income by, on average, 0.987% per annum, while over the over the 23 years Labour were in power they increased their income by, on average, 1.714% per annum.

And so I might have concluded that the poor do better under Labour.

But I didn't, because there are three obvious problems with the methodology I employed.

1. Britain isn’t isolated from the outside world - and the prosperity of people in Britain is affected by events over which our government has no control.

2. The household income of people in Britain at any given time is affected by where we are in the boom and bust cycle.

3. The economic policies of a new government don’t start having an effect the day they take office - it takes months, perhaps even years. So surely it would be fairer to assume that the prosperity of the country in the first year of a new administration is actually the result of the policies of the outgoing rather than incoming administration.

I don't have the data to take into account the first two factors, but it was easy enough to recalculate the figures on this basis of the third, and so I did so.

The results were very, very different. Under Labour, the average rise in household income for these folk was 1.289% per annum, while under the Conservatives, it was 1.373% per annum*. And the reason is largely that there was such a huge jump in basic household income for people at the 25 percentile point between 1964 and 1965 (I have no idea why) that whichever party gets the credit for this jump comes out ahead.

And so the conclusion that I would be inclined to draw is that over the past 50 years, at least as far as household income of the less well off is concerned, it really didn’t make much difference which party was in power.

*(Incidentally, the figures indicate that the most successful administration was that of Mr. Heath in the early 1970s; the least successful were the Wilson administrations of the 1960s and 1970s.)