It's still about child poverty

For ten years, Labour has been shifting resources to the least well off. Why are the poor still with

Ten years ago this month it first became clear that new Labour, for all its revisionism, was genuinely willing to shift substantial public resources to promote social justice. "For the first time that many of us can remember," I wrote in the New Statesman following the 1998 Budget, "the Chancellor made a big, explicit giveaway to poor families, and made it look respectable."

Ten Budgets, one Chancellor and three New Statesman editors later, I am still writing about Labour's efforts to divert resources to poor families. The continuity of this underlying theme is remarkable, backed by a main delivery method introduced in 1998. This is to give tax credits to selected low-income groups, at a favourable rate compared to money spent on benefits. The first group to be so favoured was working families with children. Gordon Brown's tax credit generosity subsequently spread to out-of-work families and to low-income pensioners through the pension credit.

The cumulative effect of this strategy has been to raise the cash support for the average family with children by more than £70 a week for the poorest fifth, compared to less than £10 a week for the richest fifth. The minimum income guarantee for pensioners has doubled in real terms since 1998, while average household incomes have risen by only about a quarter.

Why has this doggedly redistributive Budget practice not led to a transformation of the distribution of income in Britain? In some respects it has - notably a sharp fall in pensioner poverty. One of the least noticed achievements of the present government is to make poverty, almost certainly for the first time in history, less likely after retirement than before it. This Budget's boost in the winter fuel allowance will stop some pensioners slipping back into hardship with recent rises in energy prices.

But when it comes to the big headline target, halving child poverty by 2010 and ending it by 2020, the dream is becoming a nightmare for ministers. Later this month, the latest annual poverty figures are likely to confirm that an initial fall in child poverty has tailed off less than half way to the first of those targets.

The Budget threw what limited spare resources Alistair Darling could find into getting closer to meeting it. The additional amount given directly to poor families with children is very modest - only £1 a week per child more than previously announced. But an imaginative new measure will also help poor working families (which account for half of poor children) to a much greater degree. They will be able to keep up to £17 a week more in housing and council tax benefit, reducing the trap whereby the gain from moving into work is lost by having to pay for more of your rent and council tax. Together with other measures announced in the past year, this should restore momentum to the fight against child poverty. Its reduction by 600,000 since 1999 could grow to about a million by 2010, though meeting the target cut of 1.6 million still looks highly unlikely.

More inequality

Part of the problem has been that the actual scale of these redistributive measures has waxed and waned. But more fundamentally, the cumulative effect of all the redistributive measures of the past decade has been offset by an underlying budgetary system that works in the opposite direction. Both the tax and the benefit system are for the most part uprated, by default, in line with prices rather than earnings. This means that as earnings rise, people pay a growing share of their incomes in tax, and get a falling percentage of earnings when they are not working. A powerful report being published next month by the Joseph Rowntree Foundation will show that the poor get hit hardest by this system, with devastating results for inequality.

Out-of-work families are being given generous child tax credits with the Chancellor's right hand, while his left fist keeps tightly closed around benefits for adults in the same families. Basic income support remains around £60 a week, the same in real terms as a generation ago, while average income is up two-thirds. Little wonder that relative poverty is so hard to crack.

Can Darling help square these circles by raising money under the mantle of green Chancellor? The government is undoubtedly growing more willing to regulate our lives to save the planet, from the bags we put our shopping in to how we pay for our domestic gas. The extension of differential treatment of "clean" and "dirty" drivers through car taxes proceeds apace.

The idea of taxing polluters to pay for social justice is very far from being realised. In the first place it's a risky strategy: the more you succeed in curbing emissions, the less revenue you raise for good causes. And for most of the measures announced, the effect on the Exchequer will be piffling. The only non-negligible sum raised will be from aviation tax, which will bring in £550m more by 2010-2011, equal to a third of the inheritance tax giveaway.

Compare that to the effect of abandoning the fuel escalator in 2000. By raising fuel duty 6 per cent faster than GDP, the government had been increasing tax revenues by a cumulative £1.5bn a year in 2000 prices. Had this continued (and in the unlikely event that the government then survived), it might by now be bringing well over £10bn extra a year, even with a significant reduction in car use. That would be about enough to meet child poverty targets, double funding for the 10 per cent most deprived schools to help them slash class sizes and employ brilliant teachers and still have enough change to pay for a much-needed improvement in funding long-term care for the elderly.

This article first appeared in the 17 March 2008 issue of the New Statesman, Iraq: the war that changed us

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What's to be done about racial inequality?

David Cameron's words on equal opportunities are to be welcomed - now for some action, says Sunder Katwala.

David Cameron made the strongest, clearest and most high profile statement about ethnic inequalities and the need to tackle discrimination ever yet offered by a British Prime Minister in his leader’s speech to the Conservative Party conference in Manchester.
“Picture this. You’ve graduated with a good degree. You send out your CV far and wide. But you get rejection after rejection. What’s wrong? It’s not the qualifications or the previous experience. It’s just two words at the top: first name, surname. Do you know that in our country today: even if they have exactly the same qualifications, people with white-sounding names are nearly twice as likely to get call backs for jobs than people with ethnic-sounding names? … That, in 21st century Britain, is disgraceful. We can talk all we want about opportunity, but it’s meaningless unless people are really judged equally”, said Cameron.
While the proof of the pudding will be in the eating, this was a powerfully argued Prime Ministerial intervention – and a particularly well-timed one, for three reasons.

Firstly, the Prime Minister was able to root his case in an all-but-universally accepted appeal for equal opportunities. It will always prove more difficult in practice to put political energy and resources behind efforts to remedy discrimination against a minority of the population unless a convincing fairness case is made that values cherished across our whole society are at stake. Cameron’s argument, that any party which tells itself that it is the party of the ‘fair chance’ and ‘the equal shot’ must have a response when there is such clear evidence of discrimination, should prove persuasive to a Conservative Party that has not seen race inequalities as its natural territory. Cameron argued that the same principles should animate responses to discrimination when it comes to race, gender and social class. Put like that, wanting job interviews to be fair – by eradicating conscious and unconscious patterns of bias wherever possible – would strike most Britons as offering as clear a case of the values of fair play as wanting the best baker to win the Great British Bake-Off on television.
Secondly, Cameron’s intervention comes at a potential "tipping point" moment for fair opportunities across ethnic groups. Traditionally, ethnic discrimination has been discussed primarily through the lens of its impact on the most marginalised. Certainly, persistent gaps in the criminal justice system, mental health provision and unemployment rates remain stark for some minority groups. What has been less noticed is the emergence of a much more complex pattern of opportunity and disadvantage – not least as a consequence of significant ethnic minority progress.

Most strikingly of all, in educational outcomes, historic attainment gaps between ethnic minorities and their white British peers have disappeared over the last decade. In the aggregate, ethnic minorities get better GCSE results on average. Ethnic minority Britons are more likely, not less likely, to be university graduates than their fellow citizens. 

As a result of that progress, Cameron’s intervention comes at a moment of significant potential – but significant risk too. Britain’s ethnic minorities are the youngest and fastest-growing sections of British society. If that educational progress translates into economic success, it will make a significant contribution to the "Great British Take-Off" that the Prime Minister envisions. But if that does not happen, with educational convergence combined with current ‘ethnic penalties’ in employment and income persisting, then that potential could well curdle into frustration that the British promise of equal opportunities is not being kept.  Cameron also mirrored his own language in committing himself to both a ‘fight against extremism’ and a ‘fight against discrimination’: while those are distinct challenges and causes, actively pursuing both tracks simultaneously has the potential, at least, depolarise some debates about responses to extremism  - and so to help deepen the broad social coalitions we need for a more cohesive society too.

Thirdly, Cameron’s challenge could mark an important deepening in the political competition between the major parties on race issues. Many have been struck by the increase in political attention on the centre-right to race issues over the last five to ten years. The focus has been on the politics of representation. By increasing the number of non-white Conservative MPs from two to seventeen since 2005, Cameron has sent a powerful signal that Labour’s traditional claim to be ‘the party of ethnic minorities’ would now be contested. Cameron was again able to celebrate in Manchester several ways in which his Cabinet and Parliamentary benches demonstrate many successful journeys of migrant and minority integration in British society. That might perhaps help to ease the fears, about integration being impossible in an era of higher immigration, which the Home Secretary had articulated the previous day.

So symbolism can matter. But facial diversity is not enough. The politics of ethnic minority opportunity needs to be about more than visits to gurdwaras, diversity nights at the party conference fringes and unveiling statues of Mahatma Gandhi in Parliament Square. Jeremy Corbyn’s first speech as Labour leader did include one brief celebratory reference to Britain’s ethnic diversity – “as I travelled the country during the leadership campaign it was wonderful to see the diversity of all the people in our country” – and to Labour bringing in more black, Asian and ethnic minority members - but it did not include any substantial content on discrimination. Tim Farron acknowledged during his leadership campaign that the Liberal Democrats have struggled to get to the starting-line on race and diversity at all. The opposition parties too will no doubt now be challenged to match not just the Prime Minister’s rhetorical commitment to challenging inequalities but also to propose how it could be done in practice.

Non-white Britons expect substance, not just symbolism from all of the parties on race inequalites.  Survation’s large survey of ethnic minority voters for British Future showed the Conservatives winning more ethnic minority support than ever before – but just 29 per cent of non-white respondents were confident that the Conservatives are committed to treating people of every ethnic background equally, while 54 per cent said this of Labour. Respondents were twice as likely to say that the Conservatives needto do more to reach out – and the Prime Minister would seem to be committed to showing that he has got that message.  Moreover, there is evidence that ethnic inclusion could be important in broadening a party’s appeal to other younger, urban and more liberal white voters too – which is why it made sense for this issue to form part of a broader attempt by David Cameron to colonise the broad centre of British politics in his Manchester speech.

But the case for caution is that there has been limited policy attention to ethnic inequalities under the last two governments. Restaurateur Iqbal Wahhab decided to give up his role chairing an ethnic minority taskforce for successive governments, unconvinced there was a political commitment to do much more than convene a talking shop. Lib Dem equalities minister Lynne Featherstone did push the CV discrimination issue – but many Conservatives were sceptical. Cameron’s new commitment may face similar challenges from those whose instinct is to worry that more attention to discrimination or bias in the jobs market will mean more red tape for business.

Labour had a separate race inequalities manifesto in 2015, outside of its main election manifesto, while the Conservative manifesto did not contain significant commitments to racial inequality. The mid-campaign launch in Croydon of a series of race equality pledges showed an increasing awareness of the growing importance of ethnic minority votes - though the fact that they all involved aiming for increases of 20 per cent by 2020 gave them a slightly back-of-the-envelope feel. 

Prime Ministerial commitments have an important agenda-setting function. A generation ago the Stephen Lawrence case opened the eyes of middle England to racist violence and police failures, particularly through the Daily Mail’s persistent challenging of those injustices. A Conservative Prime Minister’s words could similarly make a big difference in the mainstreaming of the issue of inequalities of opportunity. What action should follow words? Between now and next year’s party conference season, that must will now be the test for this Conservative government – and for their political opponents too. 

Sunder Katwala is director of British Future and former general secretary of the Fabian Society.