Why Britain's Wealth Gap Is As Big As Ever

Any supporter of the British Labour Party should know its guiding principles. Just look at the declaration on the membership card. The party seeks to create "a community where power, wealth and opportunity are in the hands of the many not the few." Fairness is all. A child's chance of success in life should depend on ability rather than background. But something's gone wrong. As a resurgent Conservative Party now loves to point out, after 11 years of Labour government the gap between rich and poor is at its widest in at least 50 years and continues to broaden. Data from the Institute for Fiscal Studies (IFS) shows that while the real income of the very rich continued to grow last year, the poorest 20 percent in Britain saw their incomes fall. Worse, the chasm between the haves and have-nots is no easier to cross. Social mobility is lower in Britain than in any other developed nation, according to the Organization for Economic Cooperation and Development. A 2007 report from an independent research group found that children born in 1970 were less likely to have climbed the economic ladder than their counterparts in the late '50s, and there's no sign of improvement in recent years.

Such figures make for bleak reading for Labour Prime Minister Gordon Brown, a longtime advocate of equal opportunities for all.

He has called these reports "a spur to action," and promised this summer to offer a series of new proposals to tackle the problem by the end of the year. Among the more likely reforms: giving additional aid to disadvantaged kids in their early school years. Brown has no time to waste. His poll numbers are steadily dropping, and his party's defeats in recent by-elections in the longtime Labour strongholds of Crewe and Nantwich and Glasgow East—a particularly bleak pocket of Britain that few of the young manage to escape—illustrate just how hard it has become for the party to come up with a message that resonates.

Meanwhile, if the Conservatives once saw inequality as no more than a painful byproduct of efficient capitalism, it is now changing its message and capitalizing on Labour's failures. The new-look party of David Cameron is keen to buff its image as a champion of social justice. "In the past we may not have always recognized the scale of the social challenges that we face," says Chris Grayling, the shadow secretary for Work and Pensions. "We can't just walk by on the other side of the street. What we are now trying to do is adapt Conservative ideas and philosophies to achieve progressive goals." A policy document issued by the Tories last week painted a grim picture of a segregated country where super-affluence and extreme poverty are both spreading, but with no crossover between the desolate, crime-ridden housing projects and millionaire neighborhoods in the same city. It called Britain a "divided nation."

The charge is hard to deny. Superficially at least, Brown's Britain still looks like a country where the accident of birth can insure a lifetime on the right side of the tracks. Schooling provides the neatest example. Despite soaring fees—up an average 40 percent over the last five years, more than twice the rate of inflation—parents clamor for places at private schools, and the figures suggest that's still a smart investment. A bare 7 percent of children attend fee-paying schools, but a survey last year found that 70 percent of the country's senior judges were privately educated, a figure barely changed in 20 years.

Who's to blame for such disparities and rigid barriers to mobility? Sociologists point first to some big economic trends largely beyond the control of government. From the 1960s to the '80s the number of white-collar jobs exploded as older smokestack industries vanished, making it easier for smart young people to climb into the middle class. But this trend has now largely run its course, leaving behind a working class core with few obvious openings. At the same time, research suggests middle-class students tend to take a disproportionate share of the places offered at the country's much expanded universities, leaving fewer spots for the poor.

Beyond that, Conservatives and Labour point the finger at one another. Tories lay the blame on the 1960s Labour policy of closing most of the nation's selective grammar schools, which provided a solid free education to the brightest working-class kids. Labour argues the goal of that program was greater fairness, claiming at the time that it was inequitable to consign the less able kids to the second best schools. Today, Labour ministers contend that any responsibility for entrenched divisions belongs at least in part to the Conservatives and the wealth-at-any-price policies pursued in the 1980s government of Margaret Thatcher. Brown himself has talked of the "lost generation" of "Thatcher's children," damaged by the experience of their parents' unemployment. The government also points to a slew of recent Labour initiatives aimed at bolstering the wealth and opportunities of the poorest. Thanks to a mix of benefit reforms and tax credits some 600,000 children have been lifted out of poverty in the Blair-Brown years, according to the government. Labour has also lavished money on schooling and a program that guarantees a free, part-time education to 3- and 4-year-olds.

But at the same time, the wealthy have gotten far wealthier, increasing the gap between the rich and poor. Since it took over in 1997, Labour has left tax rates broadly the same as under the Conservatives for fear of alienating middle-class voters. As a result, the top 10 percent of the population now enjoy the same share of the nation's total income as in the 1940s, with the superrich faring best, according to the IFS. The collective wealth of the country's 1,000 richest people jumped 15 percent last year. In the words of Peter Mandelson, the former Blair aide who is now the European Union's trade commissioner: "We are intensely relaxed about people getting filthy rich."

The public may be less at ease with it. One recent poll of social attitudes suggests three quarters of the population now believe that income differences are too great, while 70 percent believe a parent's wealth plays too large a role in determining a child's chances in life. "Last year £14 billion was paid out in City bonuses," says Martin Narey, who heads the Social Mobility Commission for the Liberal Democrats. "There is an instinctive loathing for that sort of inequity."

But finding solutions may be tricky. The Conservatives are ideologically leery of top-down solutions imposed by central government. Its party literature talks of a stronger role for volunteer groups and local communities. Party thinkers believe that whenever possible, it's best to act at grass-roots levels, encouraging local role models to coax the young into taking up opportunities for self-improvement. Moreover, they see no merit in attempting to level out incomes with a more progressive tax code. "It is misguided to think of this as an equality issue; it's an equality of opportunity issue," says M.P. David Davis, who heads the Conservative Party's Social Mobility Task Force. "The simple truth is that whatever you try to do at the top end of society is of very little use at the bottom."

Now with both parties making social mobility a central component of their platforms, they appear to be edging ever closer to one another. The Tories are fretting publicly about such old concerns of the left as a divided society, while Labour is espousing some familiar ideas from the right on how to pull or prod the poor out of poverty. Last week the government unveiled a package of measures billed as the greatest revolution since the creation of the welfare state in the 1940s. On the list: forcing the unemployed to work in return for benefits after two years, and requiring the unskilled to take up training. Tony Blair once talked a similar talk, but didn't follow up. Brown's message is that the many can't hope to join the few without individual effort. It is a Labour principle that any Conservative might share.