---

If one wants to analyse inequality, one has to take an approach to it over time. You have to look at trends and you have to see how much policies have affected those trends. If one looks back at the period just after the Second World War, from about 1955 to 1975, inequality in all industrial countries was in decline. That was the so-called golden age of the welfare state. All countries followed a roughly similar pattern, and that is also true of the period after 1975 from the late 1970s through to the start of the 2000s. Inequalities started to increase in all industrial countries during that period. Those increases were not uniform. You will find very different levels of increase when you compare some countries with others. If you look at the statistics on the UK, economic inequalities increased more steeply during that period than in any other industrial country, including the US, apart from New Zealand—which also followed a similar kind of economic programme at that time. The polarisation of income here was greater than that in any other industrial country.

By 1997, the UK ranked poorly in terms of child poverty; by most measures it was 14th out of 15 among the EU nations. As Anthony Atkinson from Oxford University has shown, there has been an escape of income at the top. There was a steeply rising accrual of income to the top 1 per cent. For the top 0.5 per cent or 0.1 per cent, the rise was steeper than in most other industrial countries and certainly any other EU country.

Labour came to power in 1997 with the ambition of doing something about that. It was new Labour, which had a different orientation from previous Labour Governments. It placed an emphasis on job creation and work to root out poverty. That was right and proper. It introduced a minimum wage, which was shown not to damage the proportion of people in work. Some 74 per cent to 75 per cent of the UK labour force is in work—a much higher proportion than in most other industrial countries. In France, for example, the figure is about 64 per cent and in Germany it is about 65 per cent. Having a high proportion of people in work is the condition of doing something about the less privileged, because that means that you can spend money on welfare measures that would otherwise be consumed essentially by paying people to stay out of work.

Labour introduced a raft of policies to help people in poorer areas and neighbourhoods. Many policies were targeted to help the poor and, of course, Labour made the radical pledge to reduce child poverty by a half by 2010 and eradicate it—which to me means reducing it to about 5 per cent—by 2020. I completely disagree with what some noble Lords have said about poverty and child poverty. For me, the aim to

27 Mar 2008 : Column 652

substantially reduce child poverty is important precisely because it is a means of reducing overall inequality. Child poverty is measured in terms of inequality. If you help children, you help poorer adults and poorer families. The pledge was the single most important statement that the Labour Government made on their commitment to producing a more egalitarian society.

What has been achieved? Well, Labour has been a redistributive Government. According to the studies of David Piachaud at the LSE, about 2.5 million people have been lifted out of relative poverty since 1997. Most people accept that that figure includes some 600,000 children. A much higher proportion of children have been lifted out of poverty if that is measured against an absolute deadline of 1998, as some noble Lords have suggested.

Contrary to what some noble Lords have said, it is not the case that overall economic inequality is on the increase. Most studies show that the Gini coefficient, which is the main measure of overall inequality, has stabilised since 1997 and has not continued to increase. But that is not easy to measure and it is not necessarily the best measure of overall inequality. In terms of child poverty, the country ranks about ninth or 10th among EU countries. At least that is an improvement. Some people say that social mobility has decreased under Labour; that is completely ridiculous because social mobility takes some 20 or so years to unfold. We will not know the effects of Labour’s current policies—for example, the children’s programme—until many more years have unfolded, but there is a decent chance that they will be successful.

What has gone wrong? Why has there not been more change? Since I do not have much more time, I shall briefly mention three things. First, Labour has been too timorous at the top. I do not agree at all with my noble friend Lord Desai. Social exclusion at the top is as serious a problem for society as social exclusion at the bottom. Personally, I am in favour of a wealth tax on the top 0.5 per cent of income earners which would be hypothecated and spent on helping poorer children. I do not think that that will ever be accepted by the Government, but something like that should be done. Secondly, the Government have not managed to reach those at the very bottom. The noble and right reverend Lord, Lord Harries, mentioned the 10 per cent to 15 per cent who have not profited much from economic growth. I have figures that show that the bottom 4 per cent to 5 per cent has especially lost out. That is because tax credits do not really reach those groups and the problem of the in-work poor is significant.

Finally and thirdly, in contrast to the views of my noble friend Lord Desai, I do not believe that you can conquer poverty by concentrating on the poor alone. The problem is that more affluent people find strategies to outflank what you do. Labour came too late to thinking about policies such as lottery admission and the policies adopted by the Charity Commission and others to ensure that private schools have more social responsibilities. You have to do something about inequalities in the middle, as well as at the top, to help those at the bottom.

27 Mar 2008 : Column 653

In conclusion, I believe that we can have a more equal society. It is completely compatible with economic competitiveness and, as the noble and right reverend Lord, Lord Harries, said, the Scandinavian countries have shown that this is so.

12.58 pm

Lord Roberts of Llandudno: My Lords, I appreciate the opportunity provided by the noble and right reverend Lord, Lord Harries, for me to take part in this debate on inequality. I looked first at the extent of child poverty in various constituencies in the UK. I took as the criterion the percentage of families in receipt of income support, jobseeker’s allowance, incapacity benefit, severe disablement benefit or pension credit. Manchester Central was the constituency with the largest percentage, where 52 per cent of children were in poverty. Buckingham had the smallest percentage of children in poverty— 5 per cent. That is a big division. It indicates that children in that part of Manchester are 10 times more likely to suffer poverty and its effects than those in Buckingham. Other areas I looked at, such as Islington, north-east Glasgow and Tottenham, were all on 47 per cent. I was surprised that Islington, for instance, was there, but it was according to this measurement.

In Wales, as my noble friend Lord Livsey indicated, we also have severe problems. These are not new. I originally come from the quarrying areas of north Wales and we know that in the time of the lockout in Penrhyn quarry, say 100 years ago, poverty was far worse than anything we can imagine today, as it also was in the coalfields of south Wales. However, within Cardiff—not between area and area, but within cities—the Cardiff North constituency registers 13 per cent of children in poverty while Cardiff South and Penarth, just a stone’s throw away, registers 34 per cent. Therefore, we get this difference within cities themselves.

You can compare that with areas outside. The Rhondda has 38 per cent and Merthyr Tydfil has 37 per cent. This contrasts with Brecon and Radnor at 14 per cent, and both Montgomeryshire and Monmouth at 13 per cent. Therefore, parts of Wales have three times greater a number of people in poverty than others. The older industrial areas are faring the worst. Merthyr Tydfil was once the greatest ironworks in the world, but of course declined over the years. The coalfields have gone so the industrial areas have fared very badly.

We can also see rural poverty, but in a different way. I do not know why but there is a different sort of culture. For instance, a year or two ago, the average income in farming communities was about £7,000 per person. It is better now; I am told it is on the level of the national minimum wage. However, there was poverty there. Why? Rural depopulation—we come again to the closure of quarries, mines and steelworks. I come from a tourist area and, even there, we have seen change as people decide they are going to spend their money to get a little sunshine. In Llandudno we offer them a great deal of sunshine, but sometimes they want a bit more than we can offer, so they go overseas and spend their income there. We see a change—where hotels were, flats are being built.

27 Mar 2008 : Column 654

Things are different. Some former seaside resorts are now places of real problems, concern and poverty. So many of our young people—the ones who could really take the lead in their local communities—go elsewhere and build careers, often very successful ones, in different areas.

Therefore, regeneration is of course necessary. However, I suggest—and someone has hinted at this today—that even money from Europe is not put to work in the best possible way. It must not be a one-off solution but a rolling programme of solution. One-offs often do not succeed; we need something continuous. People who can look ahead and plan with vision can tackle some of these problems that we are facing. It needs all-round planning.

Not every rural school can be maintained. Not every rural church or chapel can be safeguarded. We may have to take tough decisions about communities on which we can concentrate our efforts, and look at a holistic approach—schools, libraries, post offices, shops, community facilities and churches. Too often, we see these in gradual decline. They disappear one after the other. Jobs go after the quarry closes. Families with children have to go to earn a living elsewhere. With fewer people to buy at shops, they close. With fewer children to make school viable, the school is down and possibly has to be closed. The post office closes. Pubs and churches go. Houses that once housed local families are now on the open market and that is the end of that community.

Communities are vital these days. If you have community, a feeling of a neighbourhood and of people belonging to and helping each other, you can see that this affects not only social things but crime and so on. Recently the lowest crime area was Ceredigion, perhaps the most rural of our communities. If people are neighbours, then changes can happen.

Just looking at the inequalities, we can see not only that there are ways of tackling poverty, but that by tackling it we can improve neighbourhoods, social cohesion and many of the crime scenes that trouble us so much today. Therefore, we can see financial and social but also moral rewards when we try to tackle the inequalities within our communities.

1.05 pm

Lord Lea of Crondall: My Lords, I very much welcome this debate, introduced by the distinguished noble and right reverend Lord, Lord Harries. I also welcome the contribution of the right reverend Prelate the Bishop of Liverpool—whenever I hear him speak, I am reminded of the role played by David Sheppard, with the Cardinal, all those years ago in Liverpool—and of the right reverend Prelate the Bishop of Ripon and Leeds. They all demonstrate the very valuable and ongoing contribution that those on the Bishops’ Bench make in this House.

One theme that emerged is that there is no equality of respect between people in the top 1 per cent, who now receive, as my noble friend Lord Sawyer pointed out, 100 times more than those in the bottom 1 per cent. There is just no equality of respect. I certainly part company with those who put what I call a panglossian gloss on the current position.

27 Mar 2008 : Column 655

Before turning to the main theme, I note that the most reverend Primate the Archbishop of Canterbury will follow the Bishops in a month’s time, leading a debate on exactly the same subject. I hope that he is not going to have the same problem as I believe he had on the General Synod. It was remarked that he noted a very strong current of disagreement with something that he never said. I hope he will not have that experience here.

The extremity of the ratios we have been hearing about takes us back to pre-war distribution, perhaps not in the general Gini coefficient—I will come back to that—but certainly the top to bottom ratio goes back to before the war. I was on the Royal Commission on the Distribution of Income and Wealth in the 1970s, and one could chart the gradual growth of equality. Some industries, including the Post Office, had data going back 150 years. Between the chief executive and the postman, for example, the ratio went from 75:1 before the First World War, to something like 50:1. By the time the Second World War broke out, it rapidly went from 25:1 down to 15:1. By the 1970s, it was down to about 10:1 and now, of course, it is shooting back up. It has leapt back to how it was in the 1930s and, goodness knows, if it goes on like this, it will be back to how it was in Victorian times. I believe that this phenomenon will have consequences, which we are beginning to see with people pulling away from the political process. If they do not think that they are part of society, it is a case of “to hell with them”.

That leads to a political point, with a capital “P”, to some extent. For most of my life, when Labour politicians have been out of kilter with a substantial consensus of public opinion, it has been argued that that has been because they have been in some sense too socialist. You can argue about that, but we now have the extraordinary phenomenon that a majority of people, according to the Joseph Rowntree Foundation research, consider the income gap to be too large. This perception is specifically based on those on higher incomes being overpaid rather than those on lower incomes being underpaid. We now have a perception—not mine, of course—that the Labour leadership is to the right of the consensus. I do not expect this phenomenon to last.

I strongly agree with some things in new Labour and strongly disagree with others. One thing I disagree with is the green light that people thought that it was giving to the pay explosion in industry. It is not just in financial services. My noble friend Lord Desai, talking about the future of capitalism—he will forgive me if I misrepresent him—implied something along the lines of a spike in financial services; my noble friend Lord Sawyer said that there is not. On the differentials in the remuneration committees, when I was on the royal commission I learnt that, if you raise the top of the pyramid, you will increase its step sizes. That has been the experience of the past 150 years. It is changing now, but somehow equality has not been on the new Labour agenda.

Just look at the argument that this is a question of equality of opportunity, a good thing, next to equality being not such a good thing. I shall call a spade a

27 Mar 2008 : Column 656

spade; I come from Lancashire, so I might as well. The parents of children who went to public schools are actually paying for and seeking a rise in inequality. That is what the public schools are there for, to an extent. I cannot forgo the opportunity to mention the old chestnut about the master at Eton who told a boy who was a bit reluctant to write an essay on poverty to write down one sentence to get the essay going. The boy wrote that, in a family, the Daddy was poor, the Mummy was poor and the butler was poor. This is a question of people’s lifetime experiences. I want the Charity Commission to say that public schools must have 50 per cent of pupils on scholarships to change the culture, not 5 per cent. In Parliament—let us cite facts—60 per cent of the Conservative Party in the House of Commons went to public school; for the Liberal Democrats, the figure is 39 per cent and for the Labour Party it is 18 per cent.

We cannot cover everything, and I am up to my seventh minute. I ask the Minister to take on board the fact that more work must be done to look at the relationship between what I call the vertical inequality agenda, which I have been talking about, and all these horizontal inequality agendas. You cannot solve the problems of the horizontal equality agenda—gender, race, region and so on—without bringing them within the totality of the vertical inequality agenda.

1.13 pm

Lord Patten: My Lords, it is interesting to follow that paean of praise for the 1970s. “Bring back the 1970s” seemed to be what the noble Lord, Lord Lea of Crondall, was saying.

Lord Lea of Crondall: Hear, hear!

Lord Patten: He agrees, my Lords. It has also been an enjoyable debate for other reasons, not least seeing those two great Labour economists and scholars, the noble Lords, Lord Giddens and Lord Desai, disagreeing so vigorously with each other. We believe in transparency these days; I declare myself as much more a Desai man than a Giddens man. I do not at all seek to harm the noble Lord, Lord Desai, in saying so.

Working as I do now, and declaring my registered interests, both in the City of London and the boardroom, I was particularly interested to hear the references of the noble and right reverend Lord, Lord Harries, to Chesterton and Yeats in his introduction. It made me pause for thought on the fact that the greatest leveller of inequality is mortality itself, and reminded me of some lines in TS Eliot’s “East Coker” summing it all up. I have for some reason never heard these lines read out at any of the memorial services for the great and the good that I have attended:

“O dark dark dark. They all go into the dark ...

The captains, merchant bankers ...

The generous patrons of art”.

Having reflected on that, I was more than comforted in reading the article of the right reverend Prelate the Bishop of Rochester in this Easter’s Sunday Times, where he wrote:

“The creation of wealth is certainly part of our stewardship but so is the use of it”.

27 Mar 2008 : Column 657

The right reverend Prelate, who is not in his place today, went on to reflect:

“There were a number of wealthy people around Jesus ... What was required of them is also required of us and that is to share our wealth generously”.

Just so. I have caught a hint in one or two of the speeches I have heard so far from the Labour Benches, and perhaps also from the Liberal Democrat Benches, of disapproval of wealth creation. It is all too easy to condemn wealth creators whose activities have genuine benefits when they are spread and multiplied through income groups. I see this in the City of London, where I work with people who give up a lot of their own income and time on charitable and voluntary work. As one example, I have no relationship, and never have had, with HSBC—one of the great British banks, a global superpower. Its chairman, Stephen Green, who was the chief executive, doubles up on Sundays, high days and holidays as an Anglican lay preacher. It is important that these things are recognised. It was because I saw some hint of recognition of this in the speech of the noble Lord, Lord Desai, that I lined myself up behind him.

All of that said, I have only two points to make. First, financial inequalities are sometimes relative and a matter of perception. There are lots of people working in the public services, for the public good, who perceive an inequality between what they get and what the private sector gets: the difference between that and their own public-sector wage settlements. Yet these presently rather grumpy public sector workers have great leverage and influence because there are lots of them. They also have excellent conditions, often better than are enjoyed in the private sector, in the matters of holidays, leave, index-linked pensions and all the rest of it. They are in a powerful position, as they were back in the golden age of the 1970s that the noble Lord, Lord Lea of Crondall, was lauding so much.

Public sector workers can make a fuss, but lots of people cannot. I think of those who are perhaps elderly and do not have much of an organisation, like the not very well off who have saved a little bit—a few thousand or tens of thousands over the years—as they are always enjoined to do, so that they do not become a burden on the state. Yet when they reach the age of 75, they must have an annuity. That can tip them over, bizarrely enough, into a situation which is much closer to poverty. Particularly in the present state of the markets, it is bad luck to anyone who has had to buy an annuity in the past six months; they may have seen a 20 per cent drop in the income they will get. This seems to be the result of a slightly unholy collaboration between the Treasury, HM Revenue and Customs and, I have to say, some of my friends in the pension fund industry who earn substantial fees from these annuities. People should not be forced to put their hard-earned, often very small, savings at risk through being forced to have annuities in this way.

Secondly, the position of married couples, unmarried couples and those—often women, sometimes men—who live alone with children is a financial inequality that does not get enough attention. When I went into the

27 Mar 2008 : Column 658

matter with your Lordships’ ever-helpful Library, I got a letter, expressed with proper restraint, dated 18 March. I had asked what facts there were about income differences between married and unmarried couples and single parents. The kind and excellent Librarian said that Government statistics frequently conflate marriage and cohabitation and, as such, income data, broken down by marital status of couples, appear not to be widely available. I would put it rather more colourfully. I think that there is a conspiracy of statistical silence in government circles to conceal what may exist and what some people assert exist: that some lower-income married couples, who may be in receipt of benefits, are getting less than those who are unmarried. I do not know whether it is true or not. I cannot make a clear judgment because we do not have the facts. We get screaming headlines in the tabloids which say they are the facts. Sometimes those headlines are right; sometimes they are not.

I seek some transparency from the Government on this issue. There seems to be a clear and unusually absolute consensus from scholars of all views—left, right and centre—that family breakdown is bad for children, and is consistently associated with poorer outcomes, increased risk of poverty, crime and health problems, leading to the inequalities raised by the noble and right reverend Lord, Lord Harries, in his introductory speech.

---