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Inequality

Oral Answers to Questions — Treasury – in the House of Commons at 10:30 am on 10th May 2007.

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Photo of Paul Rowen Paul Rowen Shadow Minister, Transport 10:30 am, 10th May 2007

What steps he has taken to reduce levels of inequality since 1997.

Photo of Stephen Timms Stephen Timms The Chief Secretary to the Treasury

Stability in the economy, together with the new deal, the national minimum wage and tax credits, has led to a strong growth in living standards across the whole range of income levels. Employment is up by 2.5 million; the number of children below the poverty line has been reduced by 600,000, and the number of pensioners in that position by 1 million.

Photo of Paul Rowen Paul Rowen Shadow Minister, Transport

Could the Minister explain why the number of pensioners in poverty remains at 1.8 million? What steps can he take to try to eradicate or reduce those numbers?

Photo of Stephen Timms Stephen Timms The Chief Secretary to the Treasury

The figure that the hon. Gentleman gave is 1 million less than it was 10 years ago, thanks to the success of the policies that we have introduced, particularly the success of the pension credit, which has relegated abject pensioner poverty, which was far too widespread in 1997, to the history books. It has had a dramatic impact, and the level of pension credit was subject to its biggest increase ever last month. We will maintain that policy. The consequence is that whereas in the past pensioners were more likely to be poor than other population groups, today they are less likely to be so.

Photo of Eric Illsley Eric Illsley Labour, Barnsley Central

How can the Minister reconcile himself to the notion of reducing inequality when his own Department has pioneered regional pay rates throughout the civil service, which means that people in different areas are paid different rates for doing exactly the same job? What message does that send out on the future of the national minimum wage? Will we have a regional minimum wage in future?

Photo of Stephen Timms Stephen Timms The Chief Secretary to the Treasury

I think that it is right to ensure maximum opportunities for employment around the country, because it is the case that wage levels vary. On inequality, may I tell my hon. Friend that a good measure of income inequality is the ratio between incomes at the 90th and 10th percentiles of distribution, and that that ratio has fallen under the Government's policies?

Photo of Gregory Barker Gregory Barker Shadow Spokesperson (Environment, Food and Rural Affairs)

A commitment to reduce inequality is totally at odds with the slashing of grants for domestic microgeneration announced yesterday, depriving the less well-off of access to new green technology. Is that not just further evidence of the fact that the Chancellor's sudden interest in the environment and climate change is about as credible and genuine as his professed love of the Arctic Monkeys?

Photo of Stephen Timms Stephen Timms The Chief Secretary to the Treasury

The hon. Gentleman's question is inventive, given the topic for the original question. He should be speaking to his own Front-Bench team, who have failed to match our projections on public spending. If he wants more grants, he will need to persuade them to spend more money.

Photo of Angela Eagle Angela Eagle Member, Labour Party National Executive Committee

Does my right hon. Friend share my pride that this Labour Government are the first Government ever to break the link between poverty and old age?

Photo of Stephen Timms Stephen Timms The Chief Secretary to the Treasury

I do share that pride, and I am grateful to my hon. Friend for underlining that. It has been an historic breakthrough, thanks to the introduction of winter fuel payments and all the other steps that we have taken, and in particular the success of the pension credit.

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury

The Minister did not mention equality in his original answer, so may I ask him this about the Chancellor's legacy: has the ratio of incomes of the top 20 per cent. compared with the bottom 20 per cent. risen or fallen since the Chancellor took office in 1997?

Photo of Stephen Timms Stephen Timms The Chief Secretary to the Treasury

Let me underline what I said a few moments ago. The ratio of income at the 90th percentile of the distribution, which is what the hon. Gentleman is asking about, and the 10th percentile rocketed under the policies of the Conservatives when they were in government, but it has now fallen. Under the Tories, the richer one was, the faster one's income grew. Under the policies that my right hon. Friend the Chancellor has been promoting, income growth for the least well-off 40 per cent. of households has been faster than for the better-off.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

I salute what the Government have done for today's poorest pensioners. However, we are building up a problem for the future in relation to equality for tomorrow's pensioners. We have tax relief that costs the Exchequer £18 billion a year. It is incredibly regressive—50 per cent. is claimed by the top 10 per cent. of earners, and 25 per cent. is claimed by the top 2.5 per cent. of earners, yet the Department for Work and Pensions has no evidence that tax relief on pension contributions encourages pension savings. Will my right hon. Friend re-examine that £18 billion giveaway, mostly to the rich?

Photo of Stephen Timms Stephen Timms The Chief Secretary to the Treasury

We have considered all those issues in the recent review of policy on pensions, and the decisions that we set out in the White Paper have been taken forward in legislation. It is right that we continue to encourage pension saving, including through the tax relief arrangements that we have in place.