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12.21 pm

The Lord Bishop of Liverpool: My Lords, I, too, am grateful to the noble and right reverend Lord, Lord Harries, for initiating this debate. It is good to know that although he has left these Benches, he has not left behind the passions and the concerns that distinguished his service.

I shall take the debate in a regional direction. Having lived in and experienced different parts of the United Kingdom over the past 30 years, I am of the view that there is a divide between the north and the south. That is not to say that there is not wealth in the north or poverty in the south—both are definitely there—but the division is one of scale; it is the scale of wealth in the south and of poverty in the north that mark the contrast. Although the gap in growth is narrowing, there has been a consistent gap in the growth rates between the north and the south. The regional development agencies have had a strategic role in narrowing the gap, but there are forces at work that still militate against financial equality across the United Kingdom.

The north has large swathes of population living in deprived areas. Fifty-three per cent of households in the most deprived areas in England are located in the north, with 26 per cent in the north-west alone. Housing waiting lists in the north-west are growing faster than anywhere else in the country, which has had a knock-on effect on homelessness. Despite all of this, the north-west regional funding for housing is falling—indeed, has fallen more than in any other region—while its housing waiting list and homelessness have grown more than in any other region. This is but one example of the persistent inequalities across the United Kingdom.

For a number of years I was chair of the North West Constitutional Convention. Although the debate about regional government has come and gone, what remains is the need to address the strategic development and governance of our regions. That is happening at a regional level, but most of us feel that it lacks coherence, accountability and transparency. As someone involved in the pastoral care of the region, committed to its welfare and aware of the inequalities, I recognise that too many decisions that are made about the region and its economic development are made nationally and centrally, and that the outcomes are sometimes hard to understand at a regional level. I know the Government are committed to making the regional development agencies more coherent, accountable and transparent, and I welcome the sub-national review and the £6.5 billion that the Government are investing in RDAs in the period 2008-11. But in giving more power to the RDAs, the question is begged of how accountable these bodies will be to their own regions.

Financial inequality impacts upon levels of poverty in our regions, especially in the north-west, which is the only region to have borders with both Scotland and Wales. There is a feeling of injustice. Investment per capita in both Scotland and Wales is of a much higher order than it is in the north-west of England. This was one of the factors that drove the debate on regional government. There is a widespread

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feeling that there is no one to champion the needs of those living in the north-west in the way that the Government and Assembly in Scotland and Wales do for their own people. It is galling for those in the north-west to discover that just a few miles away hospitals and schools are funded on a formula that discriminates against people this side of the borders. This formula for investment has an impact upon the regeneration of the regions.

For four years, I chaired the New Deal for Communities programme in Liverpool. Regeneration requires the creation of real jobs. There is a limit to the benefit that can be gained from the development of social businesses which has been, I am afraid, the weakness of NDC. There has to be real wealth creation, real jobs and real economic activity. But that economic growth can be justified only if it is sustainable. Unfortunately, to date people have looked for a successful economy and then asked to what extent it can accommodate sustainability. This will not do. We have to promote sustainability and show that this is the only economic way forward. In the regions, especially in the north-west, we are already thinking of new ways of developing the regional economy. We need a new approach so that we can turn water, wind and waste into energy, we can develop the rivers and the railways for more efficient and sustainable transport, and we can create cities where, within walking distance, people can live, labour and spend their leisure together.

Forty-five per cent of the diocese of Liverpool has areas of multiple deprivation. One of the greatest aspects of inequality in my diocese is the number of children born into poverty. This was touched on by the noble and right reverend Lord, Lord Harries. They are born into what I call consolidated poverty. There is much debate about relative poverty but what I am aware of day by day is consolidated poverty. By that I mean where there is generational unemployment, generational deprivation of parenting, vandalised public space, poor health and low educational achievement. It is this accumulated and consolidated poverty which deprives children of equality of opportunity and, ultimately, of financial equality.

The Government have rightly invested in education to break this cycle of deprivation. I pay tribute to the work on academies. I chair two academies and have seen their success. Within 18 months I have seen young people, whose record previously was just 27 per cent, achieve 44 per cent and five GCSE passes at grades A-C, and who are on target this year to achieve more than 50 per cent. I have seen how this can have an impact on our communities. I have also noticed the development of children’s centres and I pay tribute to this initiative, but we have to recognise that some of the neediest people and parents are not being drawn into the sphere of these excellent centres. We need radically new interventions in order to reach those people who are beyond their reach.

For understandable reasons I have spent a great deal of time recently in Croxteth which has many public and voluntary sector projects and where extraordinary work is being done, as I saw yesterday. But time and again I heard the people involved in the

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projects say how worried they were about the short-term funding. Three-quarters of the time of the person leading the play scheme that I visited yesterday afternoon was spent in finding funds for next year. It seems such a waste that these extraordinary skills in enabling children and empowering parents should be diverted into trying to find more money to support these projects. When all is said and done, we have to find new ways of cutting the cake and making sure that it is shared, and when it is, that it is fed to our children.

12.30 pm

Lord Sawyer: My Lords, I, too, thank the noble and right reverend Lord, Lord Harries, for introducing the debate, which is on an important issue. We live in a worldwide free market economy where the pursuit of wealth is a prime goal. This wealth enables people to live in the way that they choose, pursue their dreams and desires and own the things that they think are important. In our country, that wealth has doubled over the past 25 years and will continue to increase. Politicians, faced with voters’ attachment to wealth and all that flows from it, find it difficult to question the desirability of its continuous growth. Given the scarcity of the world’s resources and the drive for more nations and people to participate in this growth and increase in wealth, the time is surely here for a serious debate about alternatives. It is not my intention to engage in that debate today, but that is the overriding issue in any debate about wealth in the future; the question of the degree to which the world can sustain wealth creation and the extent to which we can look at other alternatives.

I want to speak briefly about something more manageable; about wealth distribution and our attitude to growing disparities of earned wealth. There is a growing body of evidence and opinion in this country claiming unfairness in the distribution of wealth, particularly at the excessive pay of top business leaders. In 1979, the chief executive officers of the top firms were earning about 10 times the wage of the average worker, which for those top people was about £200,000 in today’s money. Today, wages for the average worker have risen slightly ahead of inflation since 1979, but we are told that the leaders of the FTSE top 100 can expect to earn about 75 times the wage of the average worker. Earlier today I read that it was just over 60 times, which is still a huge increase since 1979.

In America, the top business leaders can expect to make about 300 times the wage of an average worker. Is that the direction in which we are heading, and is there an alternative? It is my belief that those huge inequalities of wealth do not necessarily make for good, long-term sustainable companies, nor do they help to create fair and balanced societies. Do the disparities continue? Are we moving closer to the American model? Or is there something else that we can do? I sit on the remuneration committee of a substantial successful business, with 3 million customers and 5,000 employees, so I know something about the need properly and adequately to reward talent and to attract and maintain good business leaders. That does

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not stop me from feeling uncomfortable about some of the disparities of wealth that I see around me. Remuneration consultants offer continuous comparative data to show where shortfalls occur and, in effect, help to create a spiral of ongoing and increasing reward mechanisms in all the companies that they advise, to ensure that, as they would say, those businesses retain their competitive packages.

Perhaps I am slightly naive, because I think back to the communities in which I grew up, where the chief executive and the workers worked together, lived fairly closely together and shared the same kind of community facilities. They also shared the benefits of the good times and the sacrifices of the bad times. There are many people today in business, some at the highest levels, who share the values of fairness and more equality and who want to live in more balanced communities. They do not subscribe to the pursuit of personal wealth as the main goal in life, and they will say that excessive executive pay is often not justified by business performance. I say to my noble friends the Ministers in my Government and to some of my honourable friends in another place that those people, who have strong and good values that are not just about earning money, need encouragement and support. They need recognition from the Government, because they share what might be called similar values to centre-left, new Labour values.

I hear Ministers say that we should not question the morality of excessive wealth; but I disagree. We should question it, we should talk about it and we should challenge it. We should certainly be in favour of fair rewards. I agree that we should celebrate and encourage success. Millionaires are fine, and 300,000 millionaires in Ireland are even finer. We should promote and argue for balance, and we should say something about other values, not just wealth. There are business leaders who share the wealth of their companies not only with customers and shareholders but with their workforce, and we should talk about them. There are leaders who think that customer satisfaction and employee engagement are just as important as profit levels and personal reward, and we should talk about them, too. There are business schools which develop leaders who appreciate a wider, balanced approach to wealth creation, and we should talk about them, too. There are even pension funds which, while obviously having an obligation to maximise their investment returns, look at many more factors and do not always look kindly on excessive rewards at the top.

I encourage the Government to give more attention to a wider view of wealth, a wider view of how businesses can be led and different kinds of values that can be talked about, supported and championed. That would be good to hear, and it would ensure that the Government were on the side of the people and not of the ever-widening inequality and ever more extremes of wealth.

12.37 pm

The Lord Bishop of Ripon and Leeds: My Lords, I, too, thank the noble and right reverend Lord, Lord Harries, for his reflective passion in achieving, introducing and setting the tone of this debate.

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My wife and I are about to move from Ripon to Leeds, where the majority of the people of our diocese live, so the Church Commissioners are to sell our nine-bedroom 19th-century house. We thought that it might sell as a guesthouse or maybe as sheltered accommodation, but inquiries of estate agents locally produced quite different advice. We were told, “Sell it as a single home, because there are plenty of people who have £2 million to buy the house and then another £3 million to make it habitable”. I do not know to how many of your Lordships that applies. If it does, there is an attractive house outside Ripon coming on to the market; we will not benefit a penny from its sale.

This welcome debate takes place against that background of growing inequality in this country, which has been well demonstrated by the noble and right reverend Lord, Lord Harries, and others. Our own city of Leeds seeks to rid itself of the tag of a two-speed city with the strapline “narrowing the gap”, but its efforts in that area struggle against the growing inequality in our culture. Some of the narrowing of that gap needs to come from a mixture of tax and tax credit measures. I therefore regret the abolition of the lower rate of income tax. At the same time, I welcome the Government’s continued commitment to dealing with child poverty. There is much to be done fiscally to deal with truths such as that 1.5 million children in poverty belong to households that pay full council tax. Fiscal measures need to be brought together to tackle poverty and so to reduce inequality.

We also need to take account of the evidence that fewer people now believe that redistribution of wealth needs to be a priority. There is criticism of massive wealth, but there is also criticism of those who are in poverty. In this respect, I am grateful for the report When Ends Don’t Meet, which comes from Church Action on Poverty and Oxfam, based on interviews held in Thornaby-on-Tees. The report uses the concept of the sustainable livelihood approach and chimes with my experience in Leeds and elsewhere.

Those oppressed by inequality often have a resilience that puts most of us to shame: there is a determination to bring up children well, to survive in a hostile world and to keep going. Yet they often feel that no one is interested in them and that finance is given to them grudgingly, which means that self-esteem is hard to maintain. In this respect, I salute the social assets provided by the voluntary sector in some areas. I am particularly grateful for the concession on Gift Aid in the Budget, which has done something to allay the worst fears of churches and other community charities that yet again the support that they provide would be reduced. The presence of community groups in areas where inequality bites cannot possibly take the place of fiscal measures, but they are of immense value to those most affected by inequality.

The Thornaby research speaks of two crucial factors in inequality: debt and access to health services. Debt has become a crucial issue for vast numbers of people in our society. The Church of England recently published some helps—mostly very straightforward ones—on household budgeting and avoiding debt. We were astonished at the positive

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interest—not least from the press—in the assertion that debt was an emotional and, indeed, a spiritual issue, as well as a financial one. This goes for many who see the inequalities in our country, who fall into debt and experience nightmares as they struggle with fear. For those most affected, there needs to be from government a wider restraint on loan sharks—including maximum interest rates—and more positive support for credit unions as one highly effective way of coping with debt.

Access to health services is a further key issue in coping with inequality. The majority of households in the Thornaby study have mental health problems—that is particularly true of women. Yet mental health provision remains too often a Cinderella service that is not available to many, especially to children. I hope that the Care Quality Commission that we were discussing the other day will see this as a continuing priority for its own work. This is a matter not just of poverty but of major health provision for many who cannot afford to buy themselves out of health inequality. Disability and mental health are a crucial and increasing element in inequality in our culture.

This is a crucial debate. Inequality has many causes and elements and we need a coherent, vigorous and imaginative response if there is to be a real narrowing of the gap in our society.

12.44 pm

Lord Sheikh: My Lords, the issue of financial inequality is an important challenge confronting the country today and I pay tribute to the noble and right reverend Lord, Lord Harries of Pentregarth, for securing today’s debate. Indeed, given the dangers that confront our economy, the focus should be shifted strongly towards those who are the most vulnerable.

One of the biggest concerns in this area should be debt, about which I shall talk initially. The problem of debt divides people into those who have and those who have not. It is another dimension in our discussion today. In response to a recent Parliamentary Question in another place, total personal debt was estimated at £1.4 trillion in January 2008. Further, it was revealed that the average personal debt had increased from £16,000 in 2002 to £23,000 in 2006. That is a large increase and for many it is a serious issue. Total household financial liabilities have increased every year since 1997, rising from approximately £586 billion in 1997 to £1,370 billion in 2006. When one allows for loans secured on dwellings as a percentage of households’ gross disposable income, the figure has increased from 28 per cent in 1997 to 39 per cent in 2006.

Citizens Advice has seen increasing numbers of mortgage and secured loan arrears problems in the past two years. Home owners in arrears receive little help from benefits, insurance or their lenders. Poor lending and arrears collection practices have made problems much worse for many borrowers. In the past year, Citizens Advice reports having to deal with 57,000 problems of mortgage and secured loan arrears—an 11 per cent increase on the previous year.

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Safety nets are failing. The take-up of mortgage payment protection insurance has declined and the Government’s own income support for mortgage interest payments scheme is failing to keep people out of serious arrears problems because of the limited help that the scheme provides. Sustainable home ownership is a challenge for many low-income households. Better co-ordination of government policy and proactive regulation of bad businesses are needed to prevent these borrowers from being set up to fail.

Earlier this month, the final report of the Thoresen Review of Generic Financial Advice was published. It sets out a blueprint for a national money guidance service to help people to make better decisions about money issues. The conclusions include the provision of money guidance focused on giving people information on budgeting, saving and borrowing protection, retirement planning, tax and welfare benefits, and jargon busting. The report recommends a United Kingdom-wide approach to money guidance to be delivered using a multichannel approach—telephone, face-to-face and web-based provision. Those improvements would be paid for by splitting the costs equally between the Government and the financial services industry. I am sure that noble Lords would be most grateful if the Minister would provide some indication of the Government’s response to these proposals.

I believe that we need to do more to tackle the problems of financial difficulties and debt issues. There is a role for the Government, civil society, financial institutions and businesses to take responsibility jointly and to work together to find and implement the solutions. I would like the Financial Services Authority to exercise greater scrutiny and control over financial institutions where moral hazard or signs of bad practices are indicated. Financial institutions should follow responsible lending practices.

The Government should take steps to improve the financial education that is delivered in our secondary schools. There should be a clampdown on store cards. Perhaps we should consider a seven-day cooling-off period, so that if a customer signs up for a store card or other revolving credit facilities at the point of sale, this credit cannot be used for seven days. Equally, much clearer information for credit card users should be provided. For example, credit card adverts, application forms and statements should include illustrative scenarios that explain exactly how much credit will cost if only minimum repayments are made every month.

Finally, I should like to add that one of the key causes of financial inequality is that many people are trapped into poverty by the very welfare system that was designed to help them. There is reliance on a welfare culture. It is imperative that we support initiatives and polices that give encouragement and incentives to people to look for work or to go on training schemes. There should be a focused welfare-to-work programme. In addition to earning a wage, people will get satisfaction and self-esteem from working. Unemployment and poverty are contributory factors in the breakdown of families. My party is taking this matter seriously and we have set out our proposals on it. In view of the constraint of time, I am not able to discuss these fully.

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12.50 pm

Lord Giddens: My Lords, I join other noble Lords in congratulating the noble and right reverend Lord, Lord Harries, on initiating this debate. I am pleased to have struggled out of my sick-bed to take part in it. It has been a fun and instructive debate so far. I am happy to say that I disagree with something in what all noble Lords have said and I disagree with everything in what some noble Lords have said.

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