”By Christmas 2000, I will deliver headline unemployment below one million for the first time in a quarter of a century. Furthermore I will use taxes and benefits to redistribute billions of pounds to families who remain out of work and to those in low-paid jobs. I will ensure that benefits cover the real cost of raising a child, rather than falling 33 per cent short as at present. For a family with a full-time worker, I will guarantee a minimum income of more than £10,000 a year, and pay 70 per cent of their childcare costs . . .”
Gordon Brown did not dream, at the 1996 Labour conference, of making this speech, and not just because he could not have forecast his economic luck. The order of the day then was downward management of expectations – in particular, making it clear to Labour supporters that they should not expect a social revolution. Yet both the language and the practice of social justice have grown with power, rather than reduced as under previous Labour governments. Should this make activists less grumpy? How far has first-term Labour managed to erode the huge legacy of poverty and inequality left by the Conservatives?
In crude terms, very little – at least in ways that will be measurable before next May. Brown’s most generous Budget handouts to the poor have been coming on stream only over the past year, and it will be nearly two more years before they show up in figures for income distribution. In the meantime, the annual Department of Social Security report on poverty and social exclusion states that the government has lifted more than a million children out of poverty. Yet it also says that the percentage of children who live in families with below half average income remained constant in Labour’s first two years in office.
How can both these seemingly contradictory statements be true? The answer is that the effect of the Brown Budgets in themselves is to reduce the numbers in relative poverty. Changes in direct taxes and benefits between 1997 and 2000 added an average of 7 per cent in real terms to the incomes of the poorest 10 per cent of households and only 0.7 per cent to the richest tenth.
But Chancellors of the Exchequer do not control income distribution. Two other influences are the state of the economy and the long-term trend in wage inequalities. Falling unemployment certainly reduces absolute poverty, but it does not always mean greater equality overall. In the late 1980s, for example, employment expanded rapidly, but so did the incomes of the middle classes, and so did the gap between high- and low-paid workers. As a result, the numbers living at below half average income actually rose steeply. One clever way for government to show a different picture in such good times is to measure poverty against the median income – the person halfway up the income scale, rather than an average of all incomes, which is inflated by enormous City bonuses and professional salaries. The government has been putting more emphasis on looking at the percentage below 60 per cent median income, which has indeed started to fall slightly.
While it will be some time before anyone can say that the long-term growth in inequality has been decisively reversed, the past three years have seen a growing commitment by government to help the poor. In the 1997 Labour manifesto, the only major plank was to “get the unemployed from welfare to work”. The emphasis on the New Deal and on incentives for the low-paid initially seemed to confirm that work was seen as the main answer, and Frank Field’s 1998 welfare reform green paper offered little of substance to people remaining outside employment.
Subsequently, however, a growing commitment to tackle poverty generally, and in particular the pledge to end children’s poverty, have contributed to a wider generosity to non-working households: especially by increasing means-tested benefits for families and pensioners. The most important demand of the poverty lobby has been to re-establish the link between benefit increases and rising living standards. The government has rejected this as too costly. But Professor John Hills of the London School of Economics has calculated that recent benefit increases have delivered as much to low-income groups as income indexation of benefits would have done – although at lower cost, given that some more widely available benefits, such as the basic pension, have remained frozen in real terms.
The social justice agenda goes well beyond the distribution of income. Since coming to power, Labour has put greater emphasis on tackling both “social exclusion” and “elitism”. How much do these commitments really mean?
The importance of the anti-exclusion agenda has been to look more carefully at what is happening to individuals, rather than just assuming that general measures to create jobs or improve benefits are enough. Most importantly, national trends often make little impact on the worst-off communities. If anything, their position is likely to deteriorate further because jobs growth is concentrated around clusters of vibrant service industries and, in good times, mobile professional classes find it easier to shun undesirable areas.
A new regeneration strategy, being finalised this year, will try more systematically to revive the worst-off communities. Compared with previous similar initiatives, it will work more directly with local providers of health and education – rather than just being an “add-on” to the billions being spent on these services. But will this make a decisive difference? In education, for example, local authorities that want to concentrate resources on deprived schools or pupils are highly constrained by rules on equal per-pupil funding.
The merits of anti-elitism are even harder to pin down. Set off by Brown’s outburst against Oxbridge entrance, it has not got much further than a bit of extra cash for poor students. Don’t assume that anti-elitism equals social reform. Margaret Thatcher undermined barristers, Oxbridge and the Royal Opera House. Middle England did not mind; but poor Britain did not benefit.
What, finally, of petrol taxes, which the Chancellor is now under pressure to cut? Indirect as opposed to income taxes are usually thought regressive; but fuel duty is more redistributive than most people think.
Every time petrol duties go up, the income group that suffers the greatest percentage rise in its cost of living comprises those with slightly higher than average incomes. The poorest 20 per cent suffer, on average, less than half as much as anyone else, because so few own cars. It is true that poor people who do own cars feel the greatest percentage increase. But this effect should not be exaggerated: the three increases imposed by Labour raised the cost of living for a car-owner in the poorest tenth of the population by a total of about 1 per cent. Remember that this is a member of the same group whose real incomes have risen by 7 per cent over the same period.
As the Joseph Rowntree Foundation’s recent survey of poverty and social exclusion made clear, there remain millions in Britain for whom deprivation means something more serious than having to cut down on petrol consumption. It found that only a minority of the general population, 36 per cent, think that a car is something that everybody needs. This is up from 22 per cent who thought so in 1983, since when the number who say they cannot afford to buy a car has fallen from 22 per cent to 11 per cent. On the other hand, the numbers who cannot afford such items as a damp-free home, considered essential by almost everyone, have not fallen over that period, and 24 per cent now lack at least three items considered necessary by the majority of the population, compared to 14 per cent in 1983.
Such findings illustrate the mountain that Labour still has to climb to tackle the worst social problems. The coming weeks will be an important test of its determination to bring the electorate behind this mission, rather than pandering to baser instincts.
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