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Mr. Dewar: Let me just complete my medical point. It will be quite short, and it involves issues in which I feel very involved. I have talked to many of the people involved, and medical opinion is united on the link with deprivation. It was first established by the Black report, and since then it has been established many times by research in many parts of the country.

I am talking not just about Drumchapel. In Glasgow, I find it deeply depressing that successive holders of the senior post in public health believe not only that a direct link exists between deprivation and poverty, but that that gap will continue to widen if present trends continue. That is not something that any hon. Member can be satisfied about.

The Minister for Health was no doubt doing his best on television last night. I make no criticism of him personally; I know that he is closely connected with the city of Glasgow, and that he knows a great deal about medicine in Glasgow. I may, of course, misquote him in detail, but I think that I have caught the spirit of his comments. The Minister was asked whether deprivation was a major part of the health problem that was being recorded. He answered that it was a matter of subjective judgment, but a diversion from the real debate about specific health problems and about how to treat them. I shall not overdo this, but, in my considered opinion, that does not show the necessary sense of urgency, or the overall view that gives hope that this distressing problem will be properly tackled.

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In considering high cancer rates in areas of depression, the Minister for Health said, again revealingly, that anyone can give up smoking. In Drumchapel, one is three times more likely to die of lung cancer than someone who lives in Bearsden. I went to university because of opportunity, expectation and family and peer group support. Would I have made it if I had had to struggle in the sort of circumstances in which we let many of my constituents live? As I sit in my surgery, I often feel that I have never been in the position where a small unexpected bill amounts to a financial crisis for my constituents because they have no edge or margin in which to live and to work. I would not be happy defending the record of recent years, or a system that is built on the basis that the outstandingly able will be able to beat that system, but that many others will inevitably and unfairly be left as casualties.

Let me now come to the question raised by the hon. Member for City of Chester (Mr. Brandreth) about what is to be done. I want to make it clear that I recognise that it would be dishonest and counter-productive to promise an instant transformation under any Government. Obviously, the situation has been running unchecked for some considerable time, but it must now be met with commitment and determination over a period to redress the balance.

Mr. Streeter: If the hon. Gentleman is genuine in his concern for the people whom he describes, and I accept that he is, why will he not commit a future Labour Government to spend more money on such people?

Mr. Dewar: I shall come to our programme in a moment. Of course, as I made clear, I want to redress the balance, but--as I am sure the hon. Gentleman would be the first to agree--we must get the system and the priorities right. It is not simply a matter of taking a system that is operating inefficiently and badly, and pouring more money into it.

If that were true, the Secretary of State for Social Security would have presided over one of the most effective attacks on inequality and poverty, as his budget has spiralled to £90 billion. Sadly, the money has been wasted, putting the taxpayer in the firing line, because recession and poverty must be funded by the taxpayer. It is working, tax-paying middle Britain that has been put into the firing line by these mistaken policies. One of the first things we must do is ensure that the money is used effectively, and that our priorities are right.

Mr. Alan Howarth (Stratford-on-Avon): I quite understand why the hon. Gentleman would do anything rather than put numbers on his policies and make specific spending commitments. He said that it was important to get the system and the priorities right, but will he tell us what principles will animate new Labour in its policy making?

We are given to understand that, in the new dawn, we shall not have our lives run for us by Fabian managerialists, or ruled by big corporate interests. Instead, under new Labour, the people will have choice and Labour will embrace markets. However, as the hon. Gentleman has, I think, been saying, markets do not necessarily induce fairness, so what principles will Labour apply to regulate and civilise the markets? [Hon.

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Members:-- "Come on."] What principles will it operate to determine the degree of regulation, planning, investment, intervention and redistributive taxation in order to achieve the greater fairness and equality that the hon. Gentleman seeks?

Mr. Dewar: I think that the merriment that greeted the hon. Gentleman's interjection--which was, as ever, well reasoned--tells its own tale.

Of course, we have to inject fairness into the tax system. [Hon. Members:-- "How?"] I did not want to go into that, because it is a narrow battle, but are Conservatives proud of the fact that, this afternoon, Sir Desmond Pitcher of North West Water is defending the share options and salary increases of the privatised utilities? Is that the symbol of Conservative Britain? As I understand it, share options in the pipeline at North West Water, which are worth very nearly £5 million, are to be shared among six board directors. [Interruption.]

Madam Speaker: Order. I have heard enough barracking from sedentary positions. We should be able to hear the debate.

Dr. Norman A. Godman (Greenock and Port Glasgow): It is the hon. Member for South Dorset, (Mr. Bruce).

Madam Speaker: I know who it is.

Mr. Dewar: Perhaps we should take that as a symbol of the priorities. Of course there has to be a fair tax system. We have to get away from a situation in which people can make offensively large sums of money and capital gains, not by virtue of being themselves but simply because a situation has been created by the Government which looks unpleasantly like a private monopoly. What is happening upstairs is perhaps a symbol of that.

Of course, the best way to help people is to get them back to work if we can, and I want to say a word or two about that. I have made it clear that I am not asking for massive new spending commitments at this stage. I want to do what Sir Robin Butler attempted to do, as we understand it, with his working party, which was to ensure that Government policies are examined, no doubt from many points of view. However, one point of view that should be given particular priority is the impact of those policies on the life chances and position in society of the disadvantaged and underprivileged. The working party highlighted many examples where that has not happened.

We need an effective policy to take people off welfare and into work. Of course, there was some gesture politics, especially during the Budget. For example, insurance holidays were announced for employers who took people off the long-term unemployment register. We calculated that it was worth £6 a week, and I take no particular pleasure in predicting that it will have no impact whatsoever. In addition, there is the back-to-work bonus, which means no help now, jam tomorrow or perhaps jam never. If one is lucky and advantaged enough to find a job, one gets a divvy on top. That is not the answer to the problem.

I understand that, today, in the Committee debating the Jobseekers Bill, an announcement is being made on the 21-hour rule. I believe that the 21-hour rule should be re-examined. There is a case for a more flexible approach, because it is a pretty mad world in which someone who wants to enhance his skills by following a course of more

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than 21 hours a week is not entitled to any support in the form of benefits and therefore cannot do the course. He ends up drawing the benefit anyway, but does without the skill enhancement.

Perhaps the Secretary of State can tell me whether, as I understand, the 21 -hour rule is to be cut to 16 hours, which makes the whole system even more inflexible and makes it harder for people to move into education or skill training while retaining at least a marginal life support within the benefit system. I want to see--

Mr. John Sykes (Scarborough) rose --

Mr. Dewar: I am trying to answer some of the questions that have been asked. If the hon. Gentleman contains himself, I would like to draw to a conclusion quite soon, because I am conscious of the new rulings.

Obviously, we ought to be looking at child care. We ought to be putting the emphasis on training, not cutting the budget. We ought, obviously, to be considering not the kind of national insurance holiday that the Chancellor proposed, but a tax concession or allowance for employers who take people off the register of those unemployed for two years, which would give real impetus to getting people back to work.

Those are important factors, which would, over a period, begin to make a difference and begin to work. We need, as I say, to make better use of the resources that have been allocated. We must recognise that deprivation, as I tried to say during earlier exchanges, is expensive for us all. Inequality unchecked puts stability and social cohesion at risk, at hazard.

The Government are confused and divided on such matters. Evidence of that can be heard in the various conflicting briefings which no doubt lie at the root of the points of information that have been made during my speech. The Conservatives have a divided party and a divided Cabinet, presiding over a divided country.

On the other side of the argument, some, as we have heard, simply deny the facts about events happening around us. Some argue that the market should have its head, that Adam Smith's invisible hand still rules, and that inequality is built into a system that rewards initiative and ability. Predictably, the hon. Member for Surrey, East, who made that point, has gone. No doubt he did not want to stay for any sustained argument.

Such people argue that inequality is built into a system that rewards initiative and ability, and that it is a price worth paying. I do not think that it is a price worth paying. It is especially morally offensive to ask other people to pay that price when we are not prepared to pay anything ourselves.

The Prime Minister was right last Thursday when he said that it was the duty of Government to try to reduce inequality. He is disastrously wrong when he argues that his Government have got it right and that they are creating opportunity and hope in the areas which are hard hit.

I have a long memory. I remember that on 23 November 1990, the Prime Minister proclaimed his belief that

"in the next 10 years we will have to make changes that will genuinely produce across the whole country a genuinely classless society in which people can rise to whatever level that their own abilities and their own good fortune may take them, from wherever they started."

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If we look at the statistics, at the picture that emerges, at the individual experience of Members of Parliament who worry and cope as best they can with the damage on the ground, and at the shape of Britain of the future if those trends run unchecked, we see what a failure that aspiration has been.

The Prime Minister is almost half way through that 10-year period and he is --sadly--marching backwards. It is time to think again. It is time to make a new start.

4.17 pm

The Secretary of State for Social Security (Mr. Peter Lilley): I beg to move, to leave out from "House" to the end of the Question and to add instead thereof:

"welcomes the fact that the vast majority of people are significantly better off today than in 1979, and notes, in particular, that the average pensioner is now more than 50 per cent. better off; approves the Government's policy of ensuring that social security spending does not outstrip the nation's ability to pay while focussing resources on those who need it most; applauds the fact that the Government has channelled an extra £1 billion a year to low income families, and an even greater sum to poorer pensioners, since 1988; welcomes the high priority accorded by the Government to education and training; recognises that employment is the best route to higher incomes, and commends the package of work incentives, including the child care disregard and the Back to Work Bonus, which the Government has introduced; applauds the Government's achievement in reducing unemployment by over half a million since 1992 and notes the fact that a national minimum wage would increase unemployment; and deplores the Opposition's failure to reveal the level of their national minimum wage, how they would deal with differentials, their social security policies and their costs."

I welcome the debate for two reasons. The first is that it enables me to pursue in the House the serious issues that I raised in my Ulster Conservative Political Centre lecture, which the Chairman of the Select Committee on Social Security was kind enough to describe as the most important speech made by any Cabinet Minister for a long time.

The second is that it gives me a chance to rebut the attempts of the Opposition to revive the politics of envy on the back of the recent Rowntree report.

By contrast, we Conservatives believe in helping the least well-off, which is why we have devoted huge resources to doing so. We believe, where possible, in helping people out of dependency by giving them opportunity, choice and incentives. Our policies are succeeding better than those pursued by any of our European Community partners, as we reduce our unemployment further and faster, we raise our once dismal education standards and we enable people to accumulate savings to ensure a more prosperous retirement.

The Opposition believe in levelling down, promoting envy and encouraging dependency on the state. If they were genuinely concerned about the least well-off, they too would propose today a concrete, costed and coherent policy. Instead, they brandish statistics and glory in the gini coefficients on which the Rowntree report is based.

Mr. Ian Bruce (South Dorset): Was my right hon. Friend a little surprised to be called to the Dispatch Box by the Labour party to speak in a social security debate supposedly on poverty, when the motion deals simply with employment, education and how to get people out of

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poverty? Is it not typical of the Labour party that it believes that the way out of poverty has something to do with the Department of Social Security?

Mr. Lilley: Absolutely. The most amazing thing is that Labour called the debate in Labour party time, but it has not told us what its policies are. I will come to that point in a moment.

It is quite clear that, to the Opposition, the poor are not people to be helped, but simply statistics with which to beat the Government and attack the free enterprise system. It is not surprising that the hon. Member for Glasgow, Garscadden (Mr. Dewar) should seize on the Rowntree report. As The Economist , which these days is no right-wing journal, said:

"Unfortunately the politics of envy, though never clearly stated, lies behind (and weakens) much of the analysis in the Rowntree Report like a similar report by the Labour sponsored Commission on Social Justice . . . it is unconvincing as a whole."

As it is Valentine's day, I will give the hon. Member for Garscadden a friendly warning. Before he and his party swallow everything in the Rowntree report hook, line and sinker, they should be careful. They must remember who wrote it--the distinguished left-wing academic, John Hills, the same John Hills who, according to The Guardian , was the principal author and inspirer of Labour's tax bombshell, which we found so helpful at the last election. It was the same John Hills who, last year, published a benefits bombshell when he suggested that there would be nothing wrong with increasing spending on social security by a further 5 per cent. of gross domestic product.

Mr. Dewar: Will the right hon. Gentleman give way?

Mr. Lilley: The hon. Gentleman should heed my warning. In the document to which I have referred, Mr. Hills effectively proposes a tax, benefit and incomes policy bombshell all in one. He has learnt not to put a price tag on it, but we of course may do so. The hon. Member for Garscadden should beware of that before it blows up Labour's electoral hopes.

Mr. Dewar: The right hon. Gentleman will be aware that we make our own policies and do not lift them from anyone's reports. Before we continue that argument, perhaps the right hon. Gentleman will establish one important thing: he does not like John Hills or where he comes from, but does he accept the accuracy of the analysis in terms of the statistics and the picture they paint? That is clearly not acceptable to many of the right hon. Gentleman's colleagues, but the Secretary of State's opinion is important. Is he rubbishing the author or the analysis in the report?

Mr. Lilley: I am not rubbishing either. I do not dislike Mr. Hills; indeed, I invited him to the Nottingham seminar which was attended by the hon. Member for Garscadden. I am simply pointing out that Mr. Hills has his political agenda, to which he is perfectly entitled but which has misled the Labour party in the past-- [Interruption.] I will come to the figures in a moment. The important point is how one interprets the figures. The Opposition use

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statistics like a drunk uses a lamp post-- more for support than for illumination. We believe that statistics should be used to establish what we get from them.

Mr. Thomas Graham (Renfrew, West and Inverclyde): I hope to make a speech later and give the facts about the people I see people living in poverty. Is the Secretary of State aware that I received a telephone call today from a local newspaper to tell me about the town of Linwood? I hope that hon. Members remember Linwood, where 5,000 people lost their jobs 10 years ago. The Government are now telling our people that they are living in poverty. In numerous areas people are living in poverty. That is a fact under this Government. After 10 years, the Government have done nothing and the people of Linwood are living in poverty.

Mr. Lilley: I am not sure whether it is possible to sustain that argument. We have done a great deal for the people of Linwood and for people elsewhere.

The overall picture is easily obscured by concentrating on measures of inequality.

Mr. Heald: Does my right hon. Friend agree that, for the Opposition to use the analysis of the Joseph Rowntree Foundation, accepting it all as received fact without following it through to its conclusion--that there should be much more public spending--is gutless and cowardly?

Mr. Lilley: My hon. Friend is absolutely right. It is extraordinary that the Opposition cannot see the inconsistency of endorsing a document and then failing to accept responsibility for the policies that it contains and to which they say it inevitably leads.

Mr. Dewar: Does the right hon. Gentleman accept that there is a distinction between endorsing the analysis and necessarily accepting all the conclusions, although many of them are sound? Surely that is a simple concept for the right hon. Gentleman to grasp. I should have thought that the thrust of the Rowntree report was that resources are being squandered and spent on the wrong aims and objectives. That is the real message of the report.

Mr. Lilley: If the hon. Gentleman thinks that the policies proposed in the document are not merited by the analysis in the document, it would be only reasonable to tell the House why. The Opposition are so concerned with relative incomes and extremes of wealth that they ignore what is happening to the vast majority. The simple fact is that, since 1979, the vast majority of people in this country have become significantly better off. Average incomes have increased by more than a third.

Ms Jean Corston (Bristol, East): Will the right hon. Gentleman give way?

Mr. Lilley: I will make a little progress, if I may. So far, I have given way far more than the hon. Member for Garscadden did throughout his speech.

The report prepared for the Rowntree inquiry by the Institute of Fiscal Studies shows just how dramatic the growth of incomes in recent years has been. In the 10 years from 1961 to 1971, average non-pensioner household incomes increased by just 18 per cent. In the next decade to 1981, they increased by a further 13 per cent., but in the 10 years from 1981 to 1991 they soared by 39 per cent.--more than in the previous 20 years put together.

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During a time of such a dramatic rise in overall incomes, it should come as no surprise that the income of different groups grew differently, and we have never tried to pretend otherwise. Moreover, far from falling behind other countries, the living standards of ordinary British people have been catching up. The latest OECD figures reported in this month's Employment Gazette are well worth reading. It states:

"Taking into account the cost of living, estimated average take-home pay for an unmarried UK production worker as defined by the OECD is . . . higher than in all other EU countries, except Luxembourg.

Estimated take-home pay for a married couple [with two children] on an average production worker's earnings is higher in the UK than in all other EC countries except Luxembourg, Belgium and the former West Germany"

which were 1 per cent. ahead. The report continues:

"The relatively high level of UK take-home pay reflects in part the low cost of living in the UK compared with other North European countries and the relatively low level of taxes on employment." To most people, that rise in the living standards of ordinary people in Britain is pretty obvious and self-evident, but, to Labour and Mr. Hills, ordinary people must have become poorer because their incomes have not risen as fast as those of the likes of Mr. Cedric Brown.

Ms Corston: Will the Secretary of State confirm that virtually every one of the figures on which the Rowntree report is based, reflecting the growth in inequality, was released and, indeed, confirmed by his Department to me on 31 August last year, and published in Hansard on 26 October 1994?

Mr. Lilley: The figure on which the hon. Lady puts most weight is bracketed, which signifies that it is particularly unreliable. There are small samples and difficult issues, but I will refer to the figures and try to put them in perspective.

Let me rebut just a few points that were made by the hon. Member for Garscadden and his colleagues on the back of the Rowntree report. It is simply not sensible to claim that because the rich are getting richer the poor must be getting poorer. It is arithmetically true, of course, that, if the incomes of some better-off groups outstrip the average, there will be more people below the average, but to define poverty purely as a fraction of average income is to distort the very meaning of the word. To define it in terms of the income support level is even more perverse, because it would mean that whenever the income support safety net were raised the number of people classified as poor would increase. The Social Security Select Committee concluded that the increase in the level of income support relative to the old supplementary benefit level accounted for most of the reported rise in the number of potential claimants.

The claim that the poor have been getting poorer in absolute terms does not hold much water either. The report of the Labour-chaired Select Committee shows that the income support safety net is about 15 per cent. higher than the supplementary benefit level that we inherited in 1979. We know that benefits for an unemployed couple with two young children are 24 per cent. higher in real

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terms now than they were in 1979, and that pensioners as a group have higher incomes now than in 1979; in fact their incomes have increased by 50 per cent.

Dr. Godman rose --

Mr. Lilley: The hon. Gentleman might care to listen to what I am about to say; he may find it especially persuasive, because I shall quote the hon. Member for Garscadden, who recently said:

"There is . . . evidence, which I welcome, that retired people are on average now enjoying many more resources and a higher quality of life. That is largely because of the maturing of state earnings-related pension schemes and occupational schemes and . . . approved personal pensions."-- [ Official Report , 8 July 1994; Vol. 246, c. 606.]

On top of that, the Government have focused an extra £1.2 billion a year to boost the incomes of poorer pensioners.

From April, all pensioner couples without other means will be entitled to more than £100 per week.

Dr. Godman rose --

Mr. Lilley: I give way to the hon. Gentleman, who no doubt wishes to welcome that fact.

Dr. Godman: I am grateful to the Secretary of State for giving way with his usual courtesy. Will he confirm that the test case involving his Department's non-payment of invalidity benefit to women aged between 60 and 65 is to be heard by the European Court of Justice on 16 April? If it goes against the Government, as I sincerely hope it will, will the women who have been denied payments for more than three years receive arrears of payment beyond April 1992?

Mr. Lilley: The hon. Gentleman always asks intelligent detailed questions, usually about matters relating to the European Court. Despite my obsession with such matters I am not always as familiar with the cases as he is, but I shall certainly investigate the question and write to him after the debate.

As well as the extra resources that we have focused on benefits for least well-off pensioners, we have focused an extra £1 billion on poorer families. It is hard to pretend that the most significant groups that we normally think of as the poor have got worse off, when their benefits have been increased.

Mr. Mike O'Brien (Warwickshire, North) rose --

Mr. Lilley: I must make some progress.

The Opposition largely base their claim on figures for the bottom tenth of incomes after housing costs, as set out in the document, "Households Below Average Income", which we published at the behest of the Select Committee.

It is harder still to say that such people's living standards have declined since 1979 when the proportion of people in the bottom tenth having, for example, a fridge-freezer has risen from 32 per cent. in 1979 to 81 per cent. in 1991-92. Furthermore, the proportion with a telephone has risen from 47 per cent. in 1979 to 73 per cent. in 1991-92; the proportion with a washing machine has risen from 69 per cent. in 1979 to 86 per cent. in 1991 -92; the proportion with a video has risen from a negligible figure in 1979 to 65 per cent. in 1991-92; and the proportion with a car has risen from 40 per cent. in 1979 to 53 per cent. in 1991-92.

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Indeed, to most people the idea that more than half the people alleged to be sinking into ever-deepening poverty have none the less managed to acquire a car at least gives pause for thought-- Ms Harriet Harman (Peckham) rose --

Mr. Lilley: --perhaps even to the hon. Member for Peckham (Ms Harman).

Ms Harman: Does the Secretary of State still believe what he said in his speech in Northern Ireland:

"over the past couple of decades, although average earnings have grown strongly, the differentials have widened, and it is this widening of earnings differentials which lies behind many of our social problems--the break up of families, lone parenthood, welfare dependency, delinquency and crime"?

Opposition Members are having difficulty in reconciling what the right hon. Gentleman said in that speech with what he is saying to the House in front of his Back Benchers today.

Mr. Lilley: Not at all. I was going to quote almost those very words when I encountered the distinct problem of the widening dispersion of earning power across the western world, which is a matter to which I tried to draw the House's attention.

[Interruption.] We are a part of the western world, although the hon. Member for Peckham may not realise it. She has spent probably half her career trying to make us a part of the other world. The fact is that the figures drawn from "Households Below Average Income" do not measure what has happened to a given group of low-income people over time. In fact, they reflect a category that is constantly changing in composition. Unemployed people accounted for only 15 per cent. of the bottom tenth of incomes in 1979, but the figure had increased to almost a third in 1991-92 at the trough of the recession. Since then, unemployment has fallen by more than 500, 000 and will come down further.

Self-employment, on the other hand, increased massively during the 1980s. That is a welcome sign of enterprise and regeneration, but self-employed people have fluctuating incomes, particularly in the early stages of business formation. What is more, they can control the reporting of their incomes. They are over-represented in the bottom tenth. Indeed, if the sample is representative of the country, in 1991-92--as the hon. Member for Garscadden has reminded us--the bottom 10 per cent. of incomes included 90,000 farmers, 145,000 builders, about 40,000 taxi drivers and 10,000 accountants. Some of those people may be struggling to keep afloat. That is why self-employed people are entitled to claim family credit and some 85, 000 of them are so helped. The heavy presence of self-employed people in the bottom decile is a poor guide to the living standards of this group. That doubt is reinforced by the fact that 750,000 people report zero or negative incomes. The Rowntree report recognised that point, although it was tucked away in an appendix to the second volume.

The report stated:

"households reporting zero or negative incomes in 1990-91 also reported expenditure above the average for all households . . . the suspicion is that some may habitually misreport income to the authorities, disguising comfortable life styles. If so the HBAI picture will suggest too much inequality."

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The Opposition may not accept my assertion that the figures do not justify the conclusions that they base on them. They may not even accept Mr. Hills' qualification, but they will surely accept the views of a member of the Commission on Social Justice, Steve Webb, who works for the Institute of Fiscal Studies. He gave a seminar on this very issue, and specifically addressed my analyses of the figures. His conclusion was quite unequivocal, and it was summed up in the title of his lecture:

"Why Peter Lilley was right about the poverty figures." The Opposition will have a little difficulty disagreeing with a member of their own commission on that point.

When one looks more closely at the figures, one finds that there is considerable change and movement. Again, I am grateful to the Rowntree report for pointing out that some 29 per cent. of people in the bottom tenth of incomes in 1990 had moved two or more deciles two years later. If one looks at people's incomes over their lifetime rather than just at a point in time, one finds that the level of inequality between people falls dramatically by more than a half.

Mr. Dafydd Wigley (Caernarfon): The Secretary of State has referred several times to unemployment causing poverty, but he has not placed much emphasis on the low-activity rates in many areas. Is he aware that the Rowntree report drew heavily on a study, "The Geography of Poverty and Wealth", by Anne Green, which was published last summer? That study showed that 10 of the 12 worst areas in Britain in terms of the activity figures were in the industrial valleys of Glamorgan and Gwent. That was causing an enormously low level of income--so much so that in Mid Glamorgan gross domestic product per head of population is lower than the Irish Republic average.

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