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Address in Reply to Her Majesty's Most Gracious Speech

Part of the debate – in the House of Lords at 11:35 am on 25th November 2004.

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Photo of Lord Giddens Lord Giddens Labour 11:35 am, 25th November 2004

My Lords, I would like to comment on the Government's economic record on inequality and what has been called the opportunity society. Among the industrial countries, at the moment the UK is doing very well; it has a good rate of economic growth—better than competitor countries; it has a low level of unemployment; it has a fairly good ecological record; and it also stands up well in terms of levels of expressed satisfaction. In a recent survey, the UK came fourth out of the 15 EU countries in terms of how much people like living here. However, there is one respect in which the UK stands out like a sore thumb: that is on inequality and poverty. In 1997, the UK was ranked fourteenth in levels of child poverty in the European Union. It is consistently ranked low in terms of embedded poverty and multiple deprivation.

Sometimes this Government are said to have acted with an attitude of some insouciance in the face of those problems. That assertion is wholly false. One cannot find an area of social policy where some initiative relative to inequality has not been introduced by the current Government. The list is very long. It includes the working tax credit, the child tax credit, the pensioners' tax credit, the minimum wage, Sure Start, New Deal and a plethora of area initiatives.

The Government have taken a different approach to inequality and poverty from previous Labour governments. They have insisted, first of all, on the primacy of economic policy over social policy. The issue is to create a dynamic, entrepreneurial economy and to promote job creation. These things are central to social justice, rather than social justice producing them in the first place. We must connect economic and social policy. I wholly approve of that emphasis.

Secondly, the Government have concentrated more on equality of opportunity than equality of outcome, although obviously the two are connected. That is important in a society in which we want to encourage people to develop their full potential.

Thirdly, the Government have decided—again I think rightly—to level up rather than to level down. We should not be seen to penalise success in a society that needs entrepreneurs and successful people. The approach has borne fruit. It is generally agreed that the best route out of poverty is to get a job and to stay in that job. The UK has an employment rate of 75 per cent—75 per cent of the active labour force is in work. That compares to an average of 64 per cent for the EU countries.

A prime criterion of social justice has to be full employment, and the UK has close to full employment. In the period from 1997 to 2002, using a relative measure of poverty—the EU measure of poverty—about 1.5 million people have been leveraged out of poverty; on an absolute measure, comparing, say, 2002 with 1997, something over 2 million people have been moved out of poverty.

Most experts in the field are agreed that the Government are on course to reach their target of reducing child poverty by a quarter by 2005. The UK has moved up the European league of child poverty from 14th to 11th. For some 30 or so years, economic inequality has been on the increase. According to the latest figures, this has now come to a halt. The Institute for Fiscal Studies attributes that to government policies. Economic inequality would have continued to increase without the policies which the Government have instituted.

Therefore, these are tangible and real achievements, and the Government deserve credit for them. However, we have to ask at this point whether existing policies are enough. Do we have a package of policies adequate to push us on to a new stage of tackling issues of inequality in this country? The level of inequality, the level of poverty in this country, which is an affluent country, is still scandalous. My answer to that question is that that is questionable. There are several areas where I think that we need further thought and reflection and probably have to look at existing policies. I shall list four of them.

First, our policies so far have probably allowed us to gather the low-hanging fruit. It is easier to get people into work who are on the verge of entering the labour market than it is to cope with people whose poverty is more deeply entrenched. I am not at all persuaded that the existing policies on the second phase of the child poverty programme, which is halving child poverty by 2010-11, are sufficient to get us there. We have gone a long way, but do we have adequate policies to get us further? I am not completely convinced that just an extension of existing policies—mainly based on tax credits, even when they are complemented by the investment that is now rightly going into child care—will get us far enough to a prime target which we must seek to achieve.

Secondly, I am in favour of the opportunity society. My father worked on the London Underground, and I know what it is like to have to make one's way in the world. But there are problems with it. There are problems to do with the level of social mobility in our society. My generation was able to move up the social ladder, largely because of economic change.

Over the past 30 or so years, we have essentially moved from a manufacturing economy to a knowledge-based and service economy. Thirty or so years ago, over 40 per cent of the working population in this country worked in manufacture. That proportion is down to 17 per cent. People of my generation had opportunities and were able to move on and up because of that structural change. There was not a lot of mobility where people moved up and down the social ladder; most social mobility was caused by the expansion of white-collar service and knowledge-based occupations. It does not look as though a comparable process of expansion can happen again, because over 80 per cent of the population already work in these new-style occupations. We might therefore have to work much harder to generate further opportunities for the new generation than we had to for the generation to which I belong.

Thirdly, we have to ask questions about the role of tax credits. Tax credits have been extremely effective. Most of the improvements in levels of poverty that I have referred to are the result of the introduction of the diversity of tax credit schemes to which I alluded. Tax credits have numerous advantages. They are not perceived as stigmatising by those who accept them. They do the important job that I mentioned earlier, which to me is part of what new Labour is all about—connecting programmes of social justice with economic dynamism. The working tax credit does precisely that. We should certainly not seek to abandon the use of tax credits.

How far can they go? There must be some limit to their usefulness. Tax credits have well known problems of complexity and targeting. In order to move further on a programme of testing inequality, which is where we should move, we have to look again at the nature of those limits.

Finally, the Government should articulate a more effective vision for what a more egalitarian society would look like than they have hitherto. The Government have instituted, as I said, a barrage of schemes to do with reducing poverty and alleviating inequality. Those schemes have been substantially successful, but they have introduced so many schemes that even experts in the field have trouble assessing what they all add up to.

I should like to see the schemes more integrated. I would like to see a vision of a more egalitarian society which goes along with a vision of public services. A good, solidary society needs a good public sphere. Investment in public services is therefore crucial to it, but why not have alongside that a commitment to a more egalitarian order, which is also part of producing a more inclusive and solidary society? I repeat: the level of inequality and poverty in our society is not acceptable in a civilised society. We must look to push on to a new stage of contesting the scars which poverty produces, because poverty scars our attempts to improve health, reduce crime and improve education.

I ask Ministers to take seriously the issues which they raise and that they give a commitment to your Lordships' House that these problems will be discussed and analysed with the intensity and depth which they demand.