Public Expenditure 1938–2005 — Defence, Consolidated Fund, Pensions, Transfers from Central to Local Government, Common Administrative Services, Trade, Industry and Transport, Food and Agriculture

The period from the Second World War until the beginning of the twenty first century was a time of increasing economic growth and prosperity in the United Kingdom. Between 1938–39 and 2004–05 the GDP of the United Kingdom grew by a factor of 211 in current market prices, as shown in Figure 7.1. This upward trend was accentuated by the effect of inflationary pressures from the 1970s in particular. The growth of the GDP of the United Kingdom in the second half of the twentieth century brought with it periodic adjustments in the level of inequality and in the direction of change that had profound and far-reaching effects upon the public sector. According to the major estimates of income inequality in the United Kingdom inequality was stable in the 1950s, fell a little during the 1960s and 1970s, but increased sharply during the 1980s. Between 1960 and the early 1990s the share of national income enjoyed by the highest 20 per cent of incomes increased from just under 40 per cent of the total to rather more than 40 per cent, while the share of the lowest 20 per cent of incomes remained stable at about 10 per cent of GDP until the 1980s when it fell to 7.7 per cent.