Revealed: how much 13 years of New Labour cost you

Under thenbi-line Rising taxes and soaring house prices that defined the Blair era offer clues to Starmer’s plans the Telegraph has published an opinion piece.

It can be seen here (subscription many be necessary) stating that Sir Tony Blair’s 1997 landslide victory and the subsequent 13 years of New Labour rule brought significant economic and social changes, with clear winners and losers.

Winners

  1. Homeowners: The housing market boomed under New Labour. House prices tripled from an average of £62,000 in 1997 to £171,000 by 2010, peaking at £190,000 in 2007. Homeowners saw substantial gains in their property values, providing many with significant equity and retirement funds .
  2. Low-Income Households: New Labour implemented several redistributive measures that benefited low-income households. The poorest tenth of households gained 13% of their net income due to tax and benefit changes. Absolute poverty fell by 14 percentage points, lifting 7 million people out of poverty .
  3. Pensioners and Children: Significant reductions in relative poverty were achieved for both pensioners and children. The number of pensioners in relative poverty dropped from 2.9 million in 1997 to 1.8 million in 2010, thanks to above-inflation increases in the state pension. The number of children in relative poverty also decreased, from 4.3 million to 3.9 million .

Losers

  1. Middle and High Earners: New Labour’s fiscal policies, including the introduction of a 50p additional rate of tax for those earning over £150,000, and National Insurance hikes, increased the tax burden on middle and high earners. The number of people paying higher tax rates rose significantly during this period .
  2. Aspiring Homeowners: Rapidly increasing house prices outpaced wage growth, making housing less affordable for first-time buyers. Affordability ratios, which measure house prices relative to earnings, nearly doubled from 3.54 in 1997 to 6.85 in 2010 .
  3. Working-Age Adults Without Children: This group saw little change in their income levels and fell behind the rest of the population. Relative poverty among working-age people rose from 6.8 million in 1997 to 7.9 million in 2010 .

Economic Measures and Taxation

  • Stealth Taxes: New Labour employed “stealth taxes,” such as fiscal drag, where tax thresholds did not keep pace with wage increases, leading more people to pay higher rates of tax without explicit rate hikes. This increased the share of the population paying income tax from 56.6% in 1997 to a peak of 65.5% in 2007-08 .
  • Capital Gains Tax: Changes to capital gains tax, including the introduction of taper relief and later a flat rate, increased receipts from £2.5 billion in 1997-98 to £7.85 billion in 2007-08 .

Labour’s Fiscal Legacy

New Labour’s policies led to increased government spending on benefits and health, funded by higher tax revenues. However, the financial crisis and subsequent recession forced significant government intervention, doubling the national debt from around 33% of GDP to 65.3% by the time Labour left office .

Outlook for Keir Starmer’s Labour

With Sir Keir Starmer’s Labour Party’s manifesto being light on specifics, there are concerns about potential tax increases on capital gains, inheritance, and pensions to fund new spending initiatives. Historical patterns from New Labour suggest that similar redistributive policies could be expected, affecting different economic groups variably .

These historical insights provide a lens through which to anticipate the possible economic impacts of current Labour policies under Keir Starmer

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