INTRODUCTION

In the fifty years following the end of the Second World War, the British people enjoyed the fruits of an unprecedented period of sustained economic growth. Real personal disposable income per capita (i.e. income after direct tax) grew at an average annual rate of 2.4 per cent over the period 1949–95. By the end of the twentieth century the average Briton was about three times better off than in the late 1940s, and in real terms earned and spent £2.95 for every £1 earned and spent in 1949. Yet despite the palpable economic achievements of the post-war period, there has been continuing concern about the failure to distribute the benefits of economic growth to all sections of the population. For example, if we define poverty in terms of having an income less than half the national average, then the number of people living in poverty rose from 5 million in 1979 to 13.5 million in 1990/1 (Hills 1993). If instead we look at physical indicators, the picture is no less depressing: between the mid-1970s and the late 1990s the difference in life expectancy at birth for men in professional and in unskilled manual jobs rose from 5.5 years to 7.4 years (Department of Health 2002).

This failure to eradicate, or even reduce, the level of economic and social inequality is all the more surprising given the significant expansion of public welfare expenditure in the post-war period. Between 1949/50 and 1996/7, real spending on social security benefits grew at an average annual rate of 4.5 per cent, more than 50 per cent faster than the rate of real income growth.