“Income inequality was lower coming into the [pandemic] crisis than when the Conservatives first came into office.”
That was the claim from Rishi Sunak on BBC Radio 4 this morning. He said it showed the government’s “record on reducing inequality is actually very strong”.
But there’s more to this claim than meets the eye.
The latest Office for National Statistics (ONS) analysis finds that in the 10 years leading up to March 2020, when the coronavirus pandemic first hit the UK, “income inequality increased by an average of 0.2 percentage points per year to 36.3%, as measured by the Gini coefficient”.
The Gini coefficient tells us how income is distributed in the economy. A score of 1 (or 100 per cent) would mean a single person had all the income, while everyone else had nothing. Meanwhile, 0 (or 0 per cent) means everyone has exactly the same amount. The higher the Gini coefficient, the more unequal the distribution of income.
The ONS analysis says the UK’s pre-pandemic score of 36.3 per cent was “the highest reported measure of income inequality over the 10-year period leading up to [March 2020]”.
Separately, it also explains that “the gap between the richest in society and the rest of the population has widened over the 10-year period”. The statisticians spell this out: the richest 1 per cent went from receiving 7 per cent of total income in 2010-11 to 8.3 per cent in 2019-20.
And it’s not just these scores: the ONS says that “alternative measures of inequality have increased to highest levels over the 10-year period to financial year ending 2020”. Here they’re talking about technical metrics explained in the ONS analysis – the “S80/S20 ratio”, the “P90/P10 ratio”, and the “Palma ratio” – which are also used by economists to track inequality.
So was the chancellor wrong to say income inequality was lower just before the pandemic than the day the Conservatives took office?
There is some argument to be had about which financial year we should be using to make the comparison.
Given the party entered government in May 2010 (i.e. less than two months after the end of the 2009-10 financial year) we could use 2009-10 as the comparator.
The ONS calculates that the Gini coefficient for disposable income was very slightly higher in 2009-10 than in 2019-20 (36.6 per cent vs 36.3 per cent respectively). So on that basis, Mr Sunak would be correct.
And you get the same pattern from another dataset: the Households Below Average Income statistics, which are compiled by the Department for Work and Pensions. This analysis finds the Gini coefficient was lower in 2019-20 than in 2009-10 (and that’s true whether we include housing costs or not in the calculation). Again: if we used 2009-10 as our benchmark, the chancellor would be right.
But with both the ONS and DWP analyses, the picture changes if we take 2010-11 as our starting point. That’s the financial year that began just weeks before the Conservatives entered Downing Street. Once we do that, we see that income inequality got worse over the period of Conservative rule – even before the current crisis. And the same is true if we use 2011-12, which is the first full financial year that the Conservatives had in power. So if we’re comparing 2019-20 with 2010-11 or 2011-12, Mr Sunak is incorrect.
And either way, there’s some key context missing from the chancellor’s claim: the Conservatives were in charge of the economy for ten years before the pandemic struck (2010-11 to 2019-20) and income inequality was worse at the end of that period than it was at the start.