Poverty and Inequality

– in Westminster Hall at 11:00 am on 6 April 2010.

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Photo of Lynne Jones Lynne Jones Labour, Birmingham, Selly Oak 11:00, 6 April 2010

I am pleased to have the opportunity to raise this important issue because it is very dear to my heart. I am sure that this will be my last speech as a Member of this House, so I am fortunate in having secured the debate. This subject is so complex that I could speak for a very long time.

During my speech, I shall draw on a number of important publications that I have recently read. The first is "An Anatomy of Economic Inequality in the UK" by the National Equality Panel-I congratulate the Government on setting up that panel because it demonstrates their determination to take inequality seriously. I shall also draw on "The Spirit Level: Why More Equal Societies Almost Always Do Better" by Professors Richard Wilkinson and Kate Pickett. Finally, let me draw Members' attention to an excellent publication by my hon. Friend Mr. Allen and Mr. Duncan Smith entitled "Early intervention: good parents, great kids, better citizens", which is an excellent example of cross-party working.

Before this debate, I also read the transcript of the February 1995 debate, "Poverty and Unemployment", which was initiated by the late Donald Dewar, who was then Labour's shadow spokesman for social security. The debate was interesting because it showed the attitudes that prevailed at the time. The then Conservative Government denied that poverty was a problem and derided the whole idea of having a minimum wage, because, as they said, it would mean going from "low pay to no pay". Wages at that time were extremely low. Members in the debate cited examples of people being offered £1.50 and £1.90 an hour.

I should like to provide a brief history of inequality. On Good Friday, I was hoping to watch my son racing his bike at Herne Hill cycle stadium, which was built for the 1948 Olympics. The stadium is somewhat run-down and will no doubt not be used for the 2012 Olympics. None the less, it served its purpose at the time. In those days we were probably more equal as a society than we had ever been. The belief was that we should have maximum working together and joint effort. It was felt that we were all in it together and that having a more equal society was very important.

Unfortunately, I did not see my son racing on Good Friday because the heavens opened and it poured with rain. As cycle tracks are dangerous in the rain, the whole meeting had to be abandoned, and I had paid £12 to no avail. As I was coming home somewhat bedraggled from the rain, I thought about the money; £12 meant nothing to me and its loss had no impact on me. Then I thought, "What would it mean for somebody who was on the minimum wage, unemployed or in a low income family?" They might have saved up £12 to see their son racing, and for them it would be an awful lot of money to lose. However, for someone such as myself, who is highly but by no means outrageously paid-I am on an income in the 10th decile of the upper incomes-it was not much at all. That got me thinking about when I was younger. Our household was quite poor because my father suffered from schizophrenia and was unable to work most of the time. Although my father had a high level of education, we were probably among the poorest people on our council estate because in those days-in the '50s and '60s-there was full employment. My mother worked hard for low pay. She scrimped and saved to give my sister and me a good start in life.

When I started secondary school, my mother had to pay out quite a lot of money for my school uniform. The one item that I remember in particular was a pair of hockey boots that cost 17s 11d. I had been at school for only a week when some smart Alec decided to pull out one of my hockey boots from my locker, leaving me with just one boot. I was mortified because I knew that my mother had had to work hard to buy me those hockey boots. I did not tell her about losing one of them; I just made do with my pumps when playing games. I lost sleep at night over the waste, especially as I thought about the effort that my mother had spent on getting me those boots. Today, there are many families who would feel the same way if they had spent money on their children to no avail.

Although it was a more equal society in those days, I clearly remember the stigma that we suffered because my father did not work. He was ill, but he had no obvious disability because he suffered from a mental illness. We were ashamed that our father did not work and, unfortunately, those attitudes live on today.

I was fortunate because I received a good education and I prospered. Looking back, I can see how I prospered and how other people did not do so well. Inequality fluctuated slightly in the '60s, and even improved a little in the mid-1970s before slightly increasing after the financial crisis. During the 1980s, it soared as unemployment reached 3 million in 1983. At the end of that period, inequality had gone up several fold, which is well documented in the report of the National Equality Panel, the figures from which were used by my colleagues in the 1995 debate. None the less, our concerns were ridiculed by the then Government.

Thank goodness we then had a Labour Government, who took poverty seriously. However, I am not so sure that I can say the same about inequality. For those groups of people who were seen as the more deserving poor, the Government have introduced changes that have benefited them greatly.

Photo of Bob Spink Bob Spink Independent, Castle Point

I congratulate the hon. Lady on bringing the subject before the House. Her story is compelling and I am listening carefully. I entered Parliament in 1992 and, to be honest, in my time here I have probably moved, on the issues of equality and the distribution of wealth in this nation, more towards the hon. Lady than she has towards me. I thank her for that.

Poverty is most felt by elderly people on small fixed incomes. While the hon. Lady is talking about special groups, will she urge the Government to bring forward for that special group the re-indexation of basic state pension to earnings? Will she also take the opportunity to urge the Tories not to break the link again, should they form a Government at any time in the future? That was a major cause of poverty for that elderly group.

Photo of Lynne Jones Lynne Jones Labour, Birmingham, Selly Oak

I thank the hon. Gentleman for that, but I think I got there long before him, when I was writing pensions articles calling for the restoration of the earnings link and expressing great concern about the means-testing of people who did a little bit better for themselves than they would have by relying completely on the state. I urge whoever is in government not only to restore the link but to do so as quickly as possible.

To go back to 1997, the poorest pensioners were expected to live on £69 a week. Thanks to the current Government, no single pensioner in this country need live on less than £132 a week. In 1997 we were very much aware of growing inequality. It will be recalled that there was consternation about the executives of newly privatised industries paying themselves huge amounts of money in salaries and share options. The name of Mr. Cedric Brown comes to mind. At about that time chief executive officers were paid about 40 times average pay, but today they are paid about 81 times average pay.

There have been huge changes: the poorest pensioners and people on disability benefits have been guaranteed a minimum income; and there are now working tax credits and the child care strategy for families with children, with large numbers of extra child care places available, and help in paying for them, as well as Sure Start and improved maternity pay; and there is now a carers strategy and rights for carers, who are some of the most neglected people. However, sadly, inequality has continued to widen because of the large increases at the very top of the scale, such as those I have mentioned. It is not just a question of the highest-paid executives or a small number of people: the highest-earning 1 per cent. of the population has a huge impact overall on the median income-the income level at which half the population has more and half has less.

We have a divided society. Disraeli wrote in "Sybil" of

"Two nations between whom there is no intercourse and no sympathy; who are ignorant of each other's habits, thoughts and feelings, as if they were dwellers in different zones or inhabitants of different planets".

Only last week, echoing those sentiments, Richard Lambert, the director general of the CBI, pointed out that chief executive officers are so differently remunerated that they are in a "different galaxy" from the rest of us. The recent Evening Standard pull-out special edition on London's forgotten poor, said:

"London is a shameful tale of two cities. In the richest capital in Europe almost half our children live below the poverty line."

Despite the best efforts of the Labour Government in lifting half a million children out of poverty we still face a huge, uphill task. I congratulate the Government on their commitment, in the Child Poverty Bill, to bring down those horrendous figures.

As to solutions, we must first recognise that inequality is not just about the difference between the average and the poorest. It is about the total inequality in society. We are now a much more unequal society than many other countries in the OECD, apart from the United States and Portugal. The huge salary increases at the top end, which put people out of touch with the reality of life for those at the poorest end of society, have not been replicated in other countries with more equal societies, where economic development is just as good as ours, if not better.

Richard Wilkinson and Kate Pickett have set up an organisation called the Equality Trust. In their book they comprehensively argue that in rich countries a smaller gap between the rich and poor means a happier, healthier and more successful population in terms of life expectancy, achievement in maths and literacy, infant mortality, homicide, imprisonment, teenage births, trusting one another, obesity, mental illness, drug and alcohol addiction and social mobility. They say convincingly, based on their evidence, that if we halved inequality in the UK murder rates would halve, mental illness would reduce by two thirds, obesity would halve, imprisonment rates would reduce by 80 per cent., and trust would increase by 85 per cent. More equal societies benefit everyone-those at the top as well as those at the bottom.

Inequality is pervasive in society. It wrecks lives. Wilkinson and Pickett cite a very interesting study from 2000. World Bank economists Karla Hoff and Priyanka Pandey reported the results of a remarkable experiment. They took 321 high-caste and 321 low-caste 11 and 12-year-old boys from scattered rural villages in India and set them the task of solving mazes. First the boys did the puzzles without being aware of each other's castes. In those conditions the low-caste boys did as well as-in fact, slightly better than-the high-caste boys. Then the experiment was repeated, but this time each boy was asked to confirm an announcement of his name, village, father's and grandfather's names, and caste. The boys did the mazes and this time there was a large caste difference. The performance of the low-caste boys dropped significantly. The same phenomenon has also been demonstrated in experiments with white and black high school students in America. Black students performed as well as white when they were told that the tests were not a test of their ability, but when they were told that the tests were about their ability they performed much worse than white students, who performed equally in both tests.

There is a stereotype, and people react to it. There is plenty of evidence of biological impacts on people who are of low status and feel threatened. When they are happy and well adjusted they release high levels of the hormone dopamine-the feel-good hormone. When they are threatened and under stress, they are ready to strike out and they have high levels of stress hormones, including cortisol. That has an impact on their behaviour, as is well documented in the "Early Intervention" booklet. The authors-our colleagues-argue strongly for early intervention, between the ages of nought and three, when young children are extremely damaged if they are not given the nurturing and love that they need. I commend the booklet for the action that it proposes for future Governments, but we must see that in the context of the need for a more equal society. The current Government have already been trying to intervene. There have been area programmes such as the new deal for communities. However, we still find that those societies are disadvantaged.

It is interesting that the right hon. Member for Chingford and Woodford Green cites statistics about council estates. I think that in 1980 more than 70 per cent. of people living on council estates were on above average incomes and those areas were mixed areas, where people worked. Now, they are wholly deprived areas, and that concentration of deprivation has been the result of Government policies over the past 30 years that have not recognised that good-quality rented housing is important and should not be regarded as only for the very poorest. We have seen the sale of the best council houses, which are lost to the stock altogether once the people who bought them move away. I am talking about the more affluent people moving out of council houses or people moving out of the area and out of council and social housing altogether. We have seen the ever greater concentration of deprivation in those areas. We must break that cycle and we must do that on the basis of tackling inequality.

There is a lot of stereotyping of lone parents, and many people in the areas that we are discussing are lone parents. However, the Wilkinson and Pickett evidence shows that more unequal societies have more lone parents and that in more equal societies, even families headed by a lone parent are not disadvantaged, because they are less unequal than they are in this country.

That brings me on to the point about the deserving and the undeserving poor. Rightly, hon. Members on both sides of the House have wanted to do their best for pensioners, for people who are obviously disabled, shall I say, rather than those who are less obviously disabled, and for children-so long as they conform to our stereotypes. Let us consider the case of children such as baby P and Khyra Ishaq. Society-both the authorities and the communities in which they lived-failed them. They are rightly seen as victims of our unequal society, but let us imagine what would have happened if they had not been killed and had been taken to a place of safety-taken into local authority care. What would their prospects have been?

Although children in local authority care represent only 0.6 per cent. of children, 25 per cent. of the prison population is made up of people who have at some time in their lives been in care. That is a disgrace. It does not happen in other societies. In this country, people in deprived areas who go into care do very poorly educationally, despite the best efforts of the Government and the fact that there have been improvements in educational attainment. Very few of those children go into higher education, whereas in Denmark, for example, 60 per cent. of youngsters who were brought up in care go into higher education. So it does not have to be like this. We do not have to have such a low regard for children. Our society does not have a high regard for children. Yes, when they are victims, it does, but when they are not well brought up and when they are damaged, they are seen as evil. They are described as yobboes and hoodies and in other pejorative ways.

When the Leader of the Opposition expressed sentiments about how we regarded young people in this country, which I agreed with, I was dismayed that he was condemned as wanting people to "hug a hoodie". I would have liked the Government to say that at last the Conservative party was coming round to our way of thinking with regard to not labelling young people when they perhaps go off the straight and narrow. We must look to ourselves as a society and what we are doing to those children, and recognise that in other, more equal societies, children who face disadvantage do not suffer in the long run, and then society does not suffer from the activities in which young people from disadvantaged backgrounds all too often engage.

There was a TV sitcom called "Keeping Up Appearances", and there is too much of that behaviour in this country. Why do people feel the need for such huge incomes? It is all about competition. If one executive is paid millions of pounds, another must be paid a bit more. In fact, there is a race not to millions, but to billions of pounds. When we were having the Cedric Brown arguments, that was all about millions; now it is about tens of millions in remuneration. We heard at the weekend about the president of Barclays.

Let us just think of someone on the national minimum wage of £5.80 an hour-£240 a week for a normal week. It would take them hundreds of years to earn-or to receive in income-what some executives receive in a year. That cannot be tolerated. The Labour Government set up the Low Pay Commission to introduce the minimum wage in a way that did not damage employment. There is still scope for improvements in the minimum wage, and I invite Andrew Selous to confirm the Conservative party's commitment to the minimum wage and to increasing it in line with recommendations from the Low Pay Commission. The Low Pay Commission has been enormously successful, although I regret the fact that young people under 21 are paid less for doing the same job. Is it not time that we had a high pay commission to consider disparities in earnings in society and in companies? I say that because such huge disparities are not conducive to a good economic outcome.

As Richard Lambert explained in the speech that I mentioned, no one denies the importance of companies making adequate profit for reinvestment and reasonable remuneration; indeed, some of the most successful companies-Richard Lambert cited Dave Packard, one of the founders of Hewlett-Packard-realise the importance of rewards, but rewards should be proportional and profits need to deliver wider goals than shareholder value. As the Member for Selly Oak, which includes Bourneville, I echo that entirely. Shareholder value was the only issue that was considered in Kraft's takeover of Cadbury.

Hewlett-Packard is not the only enormously successful company whose founders recognised that they must engage with their work force and that employees must feel part of the company. Other industrialists who have been extremely successful and recognised that excessive pay divides rather than unites companies include Ove Arup, founder of the Ove Arup Partnership. John Spedan Lewis founded the John Lewis Partnership, one of our most successful retail companies, and acted on the philosophy that differences in reward must be large enough to induce people to do their best, but in 1957 he declared that the differences were too great.

It is time for greater company publicity about people's earnings. A pay audit is an excellent idea. A high pay commission might not be able to impose on companies' remuneration, but could suggest reasonable benchmarks. Some years ago, Channel 4 produced a series of programmes about high pay, and a high pay commission was set up. I do not remember its membership, but it included someone who was a cook, although I cannot remember her name. It concluded that there should be maximums and minimums in company employment for fairness and good performance. We need fairer organisation in companies.

We have seen the demutualisation of the banking and financial services sector, and the squeezing out of trade unions. Countries such as Japan do not have a large welfare state and transfers, but they have much more equal societies in terms of remuneration. It is common in Japanese industry for people to come up through the trade union movement and to become company executives as a result of partnership working. We must encourage more worker participation, and it is appropriate to flag up the 1977 Bullock report on workers' rights and representation on company boards. We should reconsider some of those philosophies, which were not welcomed by many people in industry. Many trade unionists did not welcome involvement in decision making at the highest level, although I am pleased that one of my predecessors, Tom Litterick, who was the MP for Selly Oak in the 1974-79 Parliament, was the chief sponsor of an early-day motion welcoming the Bullock proposals, so it is appropriate for me to flag him up in my valedictory speech today. He was not my predecessor, but my predecessor but one.

The Government have proposed that football club members should have a share in their clubs, and perhaps we could extend that to other companies to provide more worker participation, more worker shareholders, more worker involvement and more co-operation in companies, as in the John Lewis Partnership, where performance is much better than in companies where workers are badly treated and their efforts are not sufficiently rewarded.

I turn to other things that Governments can do, including small measures. Post-Thatcherism, the present Government adopted too many of the stereotypes and attitudes to people, particularly unemployed people. Although the Government have done a lot for pensioners and families with children, unemployed people's incomes have not increased, but have merely been pegged to the retail prices index. At present, an unemployed person on jobseeker's allowance receives £65.45 a week-1.6 million people receive that allowance-and couples receive £102.75 a week. They receive help with housing costs, but those are the sums that they must manage on to meet all their needs-food, gas, electricity, clothes, social life and so on. I defy anyone in this Chamber to live on that level of income. The figure for young people under 25 is even more obscene at £51.85 a week. A small number-around 37 per cent.-have children and have benefited from the Government's measures to deal with child poverty, but the situation is a sad reflection on a Government led by a Prime Minister who in his maiden speech in 1987 castigated the then Government for their philosophy that unemployment benefits should be so low that people would be forced into even low-paid work. I do not expect that sort of attitude from the Government.

At a time when unemployment is high-it has not risen to levels seen in previous recessions thanks to the Government's measures, which were opposed by the Conservative party-we must remember those who have been affected. We are still dealing with the fallout from the 1980s. Although unemployment fell after the peak of 3 million before rising again in the early 1990s, at the end of that period we saw a doubling of the number of workless households in which no one was in work. That has further exacerbated division and deprivation in our society. I urge future Governments not only to consider measures to deliver public services and early intervention but to consider equality of incomes and the damaging effect that very unequal incomes have on our society.

There are measures that the Government could take, but the issue is not just redistribution of tax and benefits. I would like a much more progressive tax system. I am pleased that we now have a 50p income tax rate, but I am not pleased about the complexity resulting from withdrawal of the tax-free allowance. It is about time we started to talk about a truly fair and progressive tax system, so that people on low incomes of around £10,000 did not pay any tax. I realise that if that were to be introduced without making changes higher up the income scale, it would benefit higher earners as much as the low paid. We need a properly progressive income tax.

We also need to consider other ways of making taxation fair. The Conservative party is castigating the Government for the increase in national insurance. I am unhappy about that change because it will affect everyone, but I am not at all happy about the alternative of meeting the £6 million gap that will result from the Tory promise on national insurance. Meeting it by increasing VAT would be even more regressive. Why do we have an upper threshold as well as a lower threshold for national insurance? Rather than having an across-the-board increase of 1 per cent., why should we not extend the upper limit? The 1 per cent. rate goes higher up the threshold; perhaps we could recoup some of the money lost through not levying the national insurance increases by raising the threshold.

We should also consider property taxes. They are easy to collect and difficult to evade, but the only property tax that we have is the council tax. That is unfair because people with lower-value properties pay proportionately more than those with mansions. There should be a small taxation on increases in the value of land resulting from public investment, as it would be difficult for rich people to evade.

Photo of Bob Spink Bob Spink Independent, Castle Point

Before the hon. Lady moves too far from VAT and the Tories, does she share my concern about the refusal of the Tory shadow Chancellor to rule out future tax rises if the Tories get into Government? Whatever other Tory Front-Bench spokesmen say about VAT, the shadow Chancellor flatly refuses to rule it out.

Photo of Lynne Jones Lynne Jones Labour, Birmingham, Selly Oak

I am sorry, but I did not hear what the hon. Gentleman said. Did he mention class sizes?

Photo of Bob Spink Bob Spink Independent, Castle Point

No; I said that the shadow Chancellor refuses to rule out future tax rises.

Photo of Lynne Jones Lynne Jones Labour, Birmingham, Selly Oak

I am sorry, but I am a little deaf. I do not see how the shadow Chancellor can rule out future tax rises. In some ways, I would prefer progressive tax rises to cuts in services that would affect the vulnerable.

It is time that I began to wind up. I wish to mention a couple of other areas where Government intervention has been extremely successful. It may seem rather bizarre, but I start with the national forest. I am a member of the Select Committee for Environment, Food and Rural Affairs, which recently reported on the national forest. The project has been tremendously successful in improving areas of Leicestershire and Nottinghamshire.

A range of indicators have demonstrated the improved economic health of the national forest, including a significant decline in the proportion of the forest population who live in the 25 per cent. most deprived areas in England. The area outperformed the regional average for economic growth between 1998 and 2006, with high levels of new business development. The area's tourism industry is now worth more than £270 million a year, with more than 4,000 people engaged in it. Since 1995, more than 250 jobs have been created or safeguarded through forestry, and through farm diversification to forest uses and woodland business. What has been achieved over those 15 years was done for the princely sum of £44.3 million in Government grant in aid. I commend such projects to future Governments.

Another organisation based in my constituency is the national industrial symbiosis programme. It has been extremely successful in bringing businesses together to treat waste as a resource. As a result, a small amount of Government money has yielded a return to the Treasury of 30 times or more in net receipts.

Those are examples of Government spending that has helped business and society to reduce inequality. It is not about the private sector versus the public sector. Public spending is crucial to a thriving private sector. Surely, after the recent crash, we should have learned that the public and private sectors need each other.

We are about to embark on a general election. Candidates are being asked to make the equality pledge drawn up by the equality organisation set up by Professors Wilkinson and Pickett to promulgate the arguments that they put forward in their excellent book. Having seen the website, I know that a number of hon. Members from all parties have signed up. I hope that they will not sign up blithely to a commitment to work to reduce inequality, but that they will take it seriously and that those who are successful in the election will consider how to implement measures to reduce inequality in our society.

Four wards in my constituency will be going their separate ways in the election. The Kings Norton ward, which is probably the most deprived part of my constituency, will become part of the new Northfield constituency. I shall certainly support the Labour candidate, who will be my hon. Friend Richard Burden. It will generally be a straight fight between Labour and Conservative, as it will be in the new Selly Oak constituency. Bournville and Selly Oak will be joining two wards from the Hall Green constituency.

I hope that Labour candidates will be elected, because I do not trust the Tories to take up the equality agenda. Although I am disappointed in some of the outcomes achieved under the present Government, things have become better for many people. Public services have improved, and that would not have happened if we had continued with a Conservative Government in 1997.

We have a more interesting situation in the Moseley and Kings Heath ward of the Hall Green constituency. The Conservatives are nowhere in the election, and it will be interesting to see what happens because it is a three-horse race. I was not happy with the endorsement of the Labour candidate in that constituency. Because there is no risk of the Tories winning that seat, I may allow myself a little tactical voting by supporting the candidate who most shares my values.

Photo of Michael Weir Michael Weir Shadow Spokesperson (Trade and Industry), Shadow Spokesperson (Environment, Food and Rural Affairs)

Order. The hon. Lady is straying a little. I ask her to return the subject.

Photo of Lynne Jones Lynne Jones Labour, Birmingham, Selly Oak

Thank you, Mr. Weir. The candidate who most shares my values and whom I respect the most will be the one who I think will put up the greatest fight for a more equal society. That candidate will make a much better job of it than I have managed.

During my time here I have fought hard for disadvantaged groups, starting in the 1992 to 1997 Parliament when I fought the dreadful discrimination against transgendered people. When I wrote to the Employment Minister at the time, Miss Widdecombe, she seemed to think that it was perfectly acceptable for a transgendered person who was outed in the workplace to be sacked simply because her work colleagues did not like working with her. Thank goodness that attitudes to transgendered people have changed over time, but they still suffer a great deal of discrimination, which is highlighted in the National Equality Panel's report.

I have fought for gay rights. I worked for a gay couple in my constituency, one of whom was an American who was going to be deported, as the then Tory Government were unwilling to recognise that couple's commitment to each other. That has changed, and generally there is now a much more progressive attitude across the House on both areas, although the recent comments of the shadow Home Secretary, Chris Grayling, were very unfortunate.

I have even fought with my Government for single parents and disabled people to try to reduce proposed cuts in benefits that had actually been put forward by the previous Conservative Government. I was most disheartened when the incoming Labour Government decided to carry through some of those changes, such as changes to housing benefits for young people. Some of those bad decisions have been reversed by changes to tax credits, help for children and, to some extent, help for disabled people, but the fight must go on for disadvantaged groups, including people from ethnic minorities, women who still face disadvantages and people from different classes who face disadvantages. That work will have to be carried on largely by my successors, although I hope to play an active role in that, particularly in the field of mental health, which is perhaps the last great stigma we have to tackle. Things are now much better for those with mental illness than they were when my father was alive, but we still have a long way to go.

I will conclude with a quote from Robert Kennedy:

"The gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country. It measures everything, in short, except that which makes life worthwhile."

I leave the future Parliament to ponder those thoughts.

Photo of Michael Weir Michael Weir Shadow Spokesperson (Trade and Industry), Shadow Spokesperson (Environment, Food and Rural Affairs)

Before I call the next speaker, I remind Members that the debate must finish at 12.30 pm and ask them to tailor their remarks accordingly.

Photo of Paul Keetch Paul Keetch Liberal Democrat, Hereford 11:54, 6 April 2010

I will tailor my remarks appropriately as I am anxious to hear the Minister's response. It is a pleasure to follow Lynne Jones. I agreed with much of what she said, including the quote from Bobby Kennedy and her remarks on Hall Green. I have found myself with her in the Division Lobby many times during the past three Parliaments. It seems that she has often followed the Liberal Democrat view of things, perhaps more astutely on occasion than her Labour Government would have liked.

Photo of Lynne Jones Lynne Jones Labour, Birmingham, Selly Oak

The hon. Gentleman should not take great comfort from my remarks on Hall Green.

Photo of Paul Keetch Paul Keetch Liberal Democrat, Hereford

I have no doubt that the electorate will hear that point. The hon. Lady has certainly been a great parliamentarian, and the House of Commons will be the worse for her not being in it after the election. She said that the debate would be topical literally as the Prime Minister returned from the palace and the general election was called. The debate is important because there is a feeling, certainly among the charities with which I have spoken, that if we are not careful the election might see a new Government come in who will not give the same priority to poverty and inequality that Labour has done in the past 13 years. I congratulate the Labour party on what it has done in many areas in those years. It has poured billions into tackling child poverty, but there is a real fear that the recession will undo some of that work or at least set it back.

Although child poverty has decreased under the Government, pensioner poverty has not fallen to the same extent. Poverty among working, childless adults has increased to its highest level for 40 years. In addition, the Government's third term has seen a rise in income inequality, with the poorest fifth of the population experiencing a fall in income. The Institute for Fiscal Studies has stated, for example, that the gap between the income of the rich and the poor is now the highest it has been since its comparable time series began in 1961, the year I was born, and inequalities in wealth are even greater than those in income.

The hon. Lady mentioned the Child Poverty Act 2010, which we of course supported. However, we are concerned that the Government have watered down the goal of "eradicating" child poverty by 2020. Instead, the Act now states that no more than 10 per cent. of children should be in poverty. By our maths, that means that the Government are resigned to accepting that around 1 million children will still live in some form of poverty in future. The recession has seen inequality and poverty continue to rise in certain groups, as they did in the past few years when the UK was booming, so what will be the effects when we tackle the problems ahead?

The targets of halving child poverty by 2010 and eradicating it by 2020 were set out by Tony Blair in 1999, but the interim target was missed in 2005-06 and, unsurprisingly, it looks as though the 2010 target will be missed as well. When times were good it was easy to pick off the low-hanging fruit, meaning those who were only a few percentage points below the poverty line or who were perhaps on a low income temporarily and would quickly find another job, or who were poor simply for one reason, rather than for complex, multiple reasons. However, now that times are harder, we are concerned that the good work that has been done so far will stall and perhaps start to go backwards, particularly if there is a new Administration after 6 May who will place less emphasis on tackling child poverty than the current Government have done.

We have seen some recent changes on pensioner poverty, one of which has been to the state earnings-related pension scheme. The second state pension scheme has effectively been frozen for 2009-10, meaning that around 9 million pensioners will have a real-terms cut in their pension payments this year, amounting to around £515 million.

Photo of William McCrea William McCrea Shadow DUP Leader of the House of Commons, Shadow Spokesperson (Communities and Local Government), Shadow Spokesperson (Environment, Food and Rural Affairs)

With the breaking of the earnings link, the gap whereby our pensioners have fallen behind basic pay is certainly significant. Therefore, surely we need a substantial rise in the basic state pension, and then the link with earnings.

Photo of Paul Keetch Paul Keetch Liberal Democrat, Hereford

The hon. Gentleman is absolutely right and makes a good point, and I will mention in a few moments some specific things my party would like to see done. We certainly oppose the recent freeze, as we do not believe that pensioners should be the first to feel the pain of the recession. Freezing parts of the state pension would be a blow to those pensioners who already live on or near the poverty line. The woeful inadequacy of the basic state pension is a legacy of successive Governments. Since the link to which he referred was broken 30 years ago, the pension has simply withered away, and the Government have done nothing to reverse that trend. The whole pensions edifice is built on a totally inadequate foundation, and until that problem is addressed all other pension reform will be merely tinkering at the edges.

Four million pensioners are poor enough to be entitled to means-tested pension credit, and that number will rise to encompass half of all pensioners by 2050. Is that something we ought to be proud of? About one third of those who are entitled to claim pension credit do not do so, partly because of the complexity of the system and partly because they do not want to spend their lives asking for handouts.

The Liberal Democrat party is the only party that has pledged to restore the earnings link immediately rather than by the end of the next Parliament or beyond, and we would like a target to be enshrined in legislation to eradicate pensioner poverty in the same way that this Government set a target on child poverty in the 2010 Act. We believe that a decent state pension is the key to a solid foundation for retirement, and our goal is to introduce a citizens pension that would give people a full pension regardless of their contributions. It would gradually be raised high enough to lift people out of means-testing.

Several other policies would be particularly beneficial to pensioners. For example, we propose that the personal tax allowance be raised to £10,000 for everyone-the hon. Member for Birmingham, Selly Oak referred to this-so that no pensioner with total income below that amount would pay any income tax. That would benefit most tax-paying pensioners to the tune of some £100. We also propose to abolish council tax and replace it with a local income tax that is based on the ability to pay, which would be of huge benefit to most pensioners. They would pay less under a local income tax than they do under council tax.

My party welcomes the Government's plan to auto-enrol workers in personal accounts under the new National Employment Savings Trust scheme, as only one half of today's work force is currently paying into a private pension. However, that will work only if the Government are prepared to ensure that employer contributions are at a much higher level. The proposed contribution levels for personal accounts do not go far enough to ensure decent provision.

Poverty among working-age adults without dependent children is now at its highest since data were first collected in 1961. That is because the Government have focused their policies overwhelmingly on families with children. We understand that, but we should not disadvantage families who do not have children.

Of course, some of the biggest casualties of the recession have been young people. More than 700,000 18 to 24-year-olds are out of work, and that can be a real disadvantage for them as they start their working lives. We need to intervene and offer help far earlier than we do. My party has pledged to offer young people access to further education, internships and train-to-work programmes after 90 days out of work. We do not think it is right to abandon young people, often in the midst of their first attempts to find work and start a career, for up to six months without a chance to do something to improve their employability. We would offer all those young people the £55 a week jobseeker's allowance rate as a training allowance while they complete a three-month internship with an employer.

We believe that the next Government must continue to invest to stimulate the economy and create jobs. We want to rebalance the British economy and build it again on solid, sustainable and green foundations. We have identified £3.5 billion of current Government expenditure that could fund an economic stimulus and job creation plan. Together with our banking reforms, which will end the dependence of the British economy on the City of London, that plan will kick-start economic growth on stronger foundations than before, and ensure that growth and jobs last as they should.

As we face the election, which is being called today, there are several steps that can be taken in an attempt to stop a further rise in poverty and inequality. The question at this election is whether the next Government will aspire to such aims. A Liberal Democrat Administration certainly would.

Photo of Andrew Selous Andrew Selous Shadow Minister (Work and Pensions) 12:03, 6 April 2010

I pay tribute to Lynne Jones for her speech. This is an important subject, and I am glad that she secured this debate. It is a pity that there are not more Members here to participate in it, but we understand why, in the circumstances of the general election being called today.

I welcome Mr. Keetch, who I believe is also standing down at this election. He does not usually speak for his party on these matters, but he is welcome here today. I am not sure where the members of his shadow Work and Pensions team are, but we wish them well in their absence.

I was particularly struck by the quote from Robert Kennedy that the hon. Member for Birmingham, Selly Oak ended with. I have not heard it before, but I shall acquaint myself better with it when Hansard comes out tomorrow. It struck me that there was a certain similarity in what he said and some of the issues around gross well-being, to which my party leader, my right hon. Friend Mr. Cameron, has drawn attention.

We need to look at the facts in this important area of poverty and inequality and try to understand why things have become worse under this Government since 2004. According to the Joseph Rowntree Foundation and, indeed, the Government's own figures on child poverty and other statistics, it was at that point that poverty, unemployment and repossessions started rising in the UK. That was well before the recession began.

Poverty is now back at the same level it was in 2000, having risen every year since 2004-05, and an additional 400,000 children now live in poverty. There has been an increase, not a decrease, during that time. We are indebted to the work of Save the Children and others who pointed out a particularly worrying trend as far as severe poverty among children is concerned. They said that it, too, has risen since 2004-05.

This debate has rightly dealt with the position of pensioners living in poverty. There are 2.5 million pensioners living in poverty in the UK, which is some 100,000 more than in 1996-97. My party is also committed to restoring the earnings link.

Photo of Andrew Selous Andrew Selous Shadow Minister (Work and Pensions)

No, I will not. I want to make some progress.

We welcome the auto-enrolment proposals embodied in the National Employment Savings Trust initiative, which my party supported. It is important to get more people on low incomes saving in pensions.

Photo of Helen Goodman Helen Goodman Parliamentary Under-Secretary (Department for Work and Pensions)

The hon. Gentleman just made the incredible claim that child poverty had increased since 2000.

Photo of Helen Goodman Helen Goodman Parliamentary Under-Secretary (Department for Work and Pensions)

I would like to give him the actual figures. In 2000, there were 3.1 million before housing costs; now there are 2.9 million. After housing costs, the measure was 4.1 million, and it is now 4 million. The hon. Gentleman simply must be accurate in what he is saying.

Photo of Andrew Selous Andrew Selous Shadow Minister (Work and Pensions)

When the Minister reads the record tomorrow, she will see that I said that poverty, not child poverty, is back at the same level as in 2000. Those are the Joseph Rowntree figures. If she wants to dispute them, she is welcome to. She knows very well that my figures on child poverty referred to the increase since 2004-05, which is extremely well documented, and on which, sadly, we have not had much fresh thinking from this Government.

Another group that I am glad was mentioned today is the disabled. Several Members mentioned them in their speech, which was right and proper, because we know that there is a much higher rate of poverty among disabled people. Some 16 per cent. of non-disabled people live in poverty, but the figure is around 30 per cent. for disabled people. I shall shortly discuss what my party would like to do about that. We must never lose sight of that group when we discuss these important issues.

We now have the highest levels of inequality since the comparable time series was started in 1961. That should concern us all, as it has a number of serious negative effects. The Gini coefficient, which is a commonly used measure of inequality, is now above the level that this Government inherited and, as I said, at the highest level since the start of a consistent time series in 1961. The National Equality Panel, which the hon. Member for Birmingham, Selly Oak rightly quoted, said that we have the highest level of inequality since the second world war, and the UK is placed seventh worst for income inequality in the list of OECD nations-so considerably worse than many of our European neighbours.

My party is committed to building a society that is not only richer but also fairer and safer, where opportunity is more equal and poverty is abolished. We will focus our efforts on looking at strengthening families and communities and at incentives into work, which, although it has not been raised so far in this debate, is important.

With our major focus on welfare to work, we will replace this Government's complicated, bureaucratic employment programmes with our work programme, which will be a single programme of back-to-work support for everyone on out-of-work benefits, including the 2.6 million on incapacity benefits who have not had the attention that they should have had under this Government to try to help them back into work. We will also create 400,000 new apprenticeships and training opportunities over two years to tackle youth unemployment and prevent a generation from being written off by the recession.

We are passionate about education.

Photo of Lynne Jones Lynne Jones Labour, Birmingham, Selly Oak

The hon. Gentleman mentioned the slight increase in inequality, but that is largely due to the huge increases in the highest rates of pay. What would the next Conservative Government do, were they to be elected? Hopefully, they will not be elected. Would they support a high pay commission, for example?

Photo of Andrew Selous Andrew Selous Shadow Minister (Work and Pensions)

I will mention specifics in a moment, if the hon. Lady will allow me to develop my remarks a little bit further. I assure her that I will touch on that area.

Schools are the motor of social mobility. They provide children from low-income backgrounds the chance not to replicate low income among their own children and to increase their life chances. We will weight school funding towards children from the poorest backgrounds through a pupil premium, ensuring that extra funds follow those pupils into the schools that educate them. The hon. Lady was right to draw attention to that. She mentioned the woeful underperformance of children on free school meals compared with other school children. That is a passion of the shadow Secretary of State for Children, Schools and Families, who has raised this matter on a number of occasions.

We want to see a universal health-visiting service for all parents and we want Sure Start to go back to its original purpose. We share the Government's aspiration to halve child poverty by 2010-although sadly, from what we have seen in the documents in the Budget, that seems not to have been achieved-and eliminate it by 2020. We supported the Child Poverty Bill during its progress through the House.

We want to make greater efforts to try to break the link between disability and poverty. We will focus on trying to find jobs for people who are disabled and trying to enable them to progress in their careers. One area that will be particularly important in that regard is flexible work. Again, there has not been leadership from the Government on promoting and creating flexible work. Five Departments have numbers of part-time employees only in single figures. The Government could and should lead by example.

The hon. Member for Birmingham, Selly Oak is right to say that levels of inequality matter in society. They matter for a number of reasons that are important to Conservatives. We know, from Professor Richard Wilkinson's book, which the hon. Lady mentioned-I have a copy in my office, which I have been reading-that in more unequal societies there is less volunteering and more crime. I was looking at some evidence over the weekend showing that the level of crime in London's most unequal boroughs, compared with five more equal boroughs, is significantly higher. We also know that levels of mental illness are higher in areas where there is greatest inequality. We can say that more unequal societies lead to additional costs to the public purse and prevent us from being a more cohesive society.

I am pleased that the hon. Lady has the book on early intervention by Mr. Allen and my right hon. Friend Mr. Duncan Smith. That is a good example of important cross-party collaboration on early intervention. She mentioned the importance of brain development. If I remember rightly, she said that if time in the 0 to threes, particularly, is lost it is much more difficult to make progress with a child. Politicians need to take notice of this important epidemiological insight. I believe that this cross-party work has been significant in doing that. Early intervention is important, but I agree with Professor John Hills that children need a series of what he describes as in-flight boosts to correct inequality later on.

I say to the Minister and to the hon. Member for Birmingham, Selly Oak that it took a Conservative Mayor of London to bring in a living wage for local authority staff. The cleaners who cleaned the Minister's office early this morning are not paid the London living wage by her Department: I found that out from answers to parliamentary questions. I wonder whether that is as it should be.

The Government seem to have turned their back on inequality in the public sector. That is surprising. The Government can do something about that. The hon. Member for Birmingham, Selly Oak rightly spoke about the private sector, but should not the Government take a lead in respect of the area about which they can do something? For example, the maximum sum payable for the chief executive of a strategic health authority is £204,048 a year, whereas the pay for an NHS employee at pay band 1 is £13,233 per year-by the way, that is £600 below the minimum living standard-which is a ratio of 15.1:1.

The hon. Lady spoke about chief executives, but only in the private sector, not the public sector. Let us look at local authorities. In the local authority in Slough, which is the example that I have to hand, the lowest salary of a full-time employee is £12,994, whereas the chief executive is on a salary of £157,479, which is a ratio of 11:1.

Interestingly, in the Army-the hon. Member for Hereford, who knows about these things will agree-the ratio between a brigadier and a private soldier is only 6:1. I think that most hon. Members in this Chamber would agree that the Army is an effective, cohesive public sector organisation. If there can be an effective organisation-

Photo of Andrew Selous Andrew Selous Shadow Minister (Work and Pensions)

No, I will not give way to the Minister. She will have her turn to speak in a moment, when she will perhaps respond to my point about the cleaners in her own office and say whether she is happy for them to be paid below the London living wage-perhaps she is.

It is interesting that there is a much lower difference in the ratio between the lowest and the highest paid in an effective organisation.

The shadow Chancellor has said that any public sector wage higher than the Prime Minister's will have to be put to the Chancellor for agreement. Some 323 public sector employees are paid more than the Prime Minister. Over the weekend I learned that the Scottish First Minister is paid more than the Prime Minister, which is somewhat strange. The director-general of the BBC is on around £850,000 per year.

I believe in Government leading by example. If these things matter and we are going to say to private industry, "Get your house in order", private industry can rightly say to Members of Parliament, "What's going on in those institutions over which you have some say?" We have not seen much action from this Government in that area.

In answer to the hon. Member for Birmingham, Selly Oak, I say that we Conservatives are committed to the minimum wage.

Photo of Andrew Selous Andrew Selous Shadow Minister (Work and Pensions)

No. The Minister will have a chance to speak in a second.

The Minister is responsible for the Child Support Agency. As shadow Minister, I find it unacceptable that, according to table 15.1 of the 2007 families and children study produced by the Department, 61 per cent. of all parents with care were not receiving child maintenance. Those are not figures for which the CSA is responsible-where there is a valid maintenance contract-but it is shocking and unacceptable that 61 per cent. of fathers, largely, have got off without taking care of their responsibilities. How are we really going to do something about inequality and poverty among the lone parents whom the hon. Member for Birmingham, Selly Oak spoke about when 61 per cent. of lone parents are not in receipt of child support?

Photo of Helen Goodman Helen Goodman Parliamentary Under-Secretary (Department for Work and Pensions) 12:19, 6 April 2010

It is a pleasure to serve under your chairmanship this morning, Mr. Weir. I begin by congratulating my hon. Friend Lynne Jones. I am not sure what the opposite of a maiden speech is-perhaps we had better not go there, as they say. However, I wish to pay tribute to her for her speech this morning, and for the huge commitment that she has shown on these issues, both during her parliamentary career and before that in her work on housing in Birmingham.

She raised several important points to which I hope to respond. First, she talked about the importance of early intervention. Last week, I was in the constituency of my hon. Friend Mr. Allen, to see the work supported by the Labour Government on early intervention. I saw three particularly good examples of that. One was work with teenagers who were pregnant or new mothers, and excellent work was being done to increase the life chances and opportunities of their babies. Another example was a family intervention project that dealt with families that suffered from a huge, complex interaction of problems. The third initiative was Sure Start and I feel proud-as does my hon. Friend the Member for Birmingham, Selly Oak, I am sure-that there are now 3,500 Sure Start centres. I am deeply alarmed by the proposal repeated by Andrew Selous to reduce the number of Sure Start centres in this country.

My hon. Friend talked about the level of equality and how it has varied over the past 60 years. That was interesting and, like her, I assumed that equality in the country was highest immediately after the second world war. In fact, that is not borne out by the data because high levels of inequality were a spillover from the problems of the interwar years. It was not until between 1975 and 1979-after four Labour Governments-that the lowest inequality ever to have existed in this country was achieved.

I know that we are not allowed to use visual aids, but I must refer to a document on the distributional impact of the Labour Government from 1997 to 2010, produced by the independent and highly respected Institute for Fiscal Studies. It shows that over that period, the effect of changes in tax and benefits led to an increase in wealth of about 12 per cent. for the poorest 10 per cent. of people. The effect on the richest 10 per cent. has been a reduction in wealth of about 8 per cent. Looking beyond the richest 10 per cent. of people to those earning more than £100,000, the impact of the tax and benefit changes has been minus 15 per cent.

In part, that is the result of measures taken by my right hon. Friend the Chancellor of the Exchequer, who this month introduced a 50p rate of income tax for those earning above £150,000, a withdrawal of personal allowances for those earning over £100,000, and a restriction on tax relief for pension contributions. In two years' time, there will be a freeze on the higher-rate tax threshold. Meanwhile, at the other end of the income scale, there have been one-off real increases in benefits and increases in child tax credits. From 2012, a new child tax credit for one and two-year-olds is designed to benefit all parents of small children whether they are married, unmarried, separated or widowed. It will not stereotype or ghettoise anyone, or try to make choices between the deserving and the undeserving poor.

The hon. Member for South-West Bedfordshire made several remarks and I do not have time to make a thorough critique of them all. At the end of his speech he claimed to be concerned about people on low wages-that from the party which steadfastly opposed the introduction of the minimum wage. He now says that his party is committed to the minimum wage, but he has not said whether it is committed to maintaining it in real terms. The minimum wage benefits 1 million people, two-thirds of whom are women. Since its introduction in 1999, it has increased in real terms by 23 per cent. If the hon. Gentleman wishes to intervene to say that his party is committed to maintaining the minimum wage in real terms, I would be happy to give way.

Photo of Andrew Selous Andrew Selous Shadow Minister (Work and Pensions)

My understanding is that the minimum wage is set by the Low Pay Commission. I think that the trick is to set it as high as possible so as not to harm the prospects of people going into low-paid work. There is a conversation to be had about the level of tax credits and the minimum wage.

Photo of Helen Goodman Helen Goodman Parliamentary Under-Secretary (Department for Work and Pensions)

That was as clear a commitment as one could expect under the circumstances. My hon. Friend the Member for Birmingham, Selly Oak also-reasonably enough-mentioned the problems at the high end of the spectrum. It will not have escaped her notice that the Chancellor has imposed a special tax on the pools that banks have set aside for bank bonuses. As she will know, that was expected to raise £500 million, but in the event it raised £2 billion-a significant sum of money by any standards.

The Government's commitment to tackling poverty cannot be gainsaid; we have achieved some significant improvements. Bob Spink, who is no longer in his seat, was the first to mention pensioners, and 900,000 pensioners have been lifted out of poverty. The poorest third of pensioners are now £2,100 a year better off, and we have made moves to re-establish the link between pensions and earnings, which was so needlessly destroyed by the previous Administration.

The Government's policies on families mean that the poorest fifth of families are, on average, £3,000 a year better off. Half a million children had been lifted out of poverty by 2007, and measures taken since then will lift a further 550,000 children out of poverty by the end of the year. We have halved absolute poverty. Mr. Keetch asked whether we have a continuing commitment to that policy. We took the Child Poverty Bill through Parliament-and we are grateful for cross-party support-because we are absolutely committed to making continued progress on that matter over the next 10 years.

Photo of Paul Keetch Paul Keetch Liberal Democrat, Hereford

Will the Minister give a commitment that a future Labour Government would introduce a pensioner poverty Bill along the lines of the Child Poverty Bill, and legislate to ensure that pensioners do not fall into poverty?

Photo of Helen Goodman Helen Goodman Parliamentary Under-Secretary (Department for Work and Pensions)

Much as I would like to, I cannot anticipate the manifesto or the next Queen's Speech.

My hon. Friend the Member for Birmingham, Selly Oak asked about the significance of property taxes. She was right to mention that, and it is another reason why the Conservative party's proposal to cut inheritance tax for the wealthiest 3,000 millionaires is so bizarre when coming from a party that claims to be concerned about inequality. Any party interested in inequality must address poverty, and look across society at the whole complex of policies and how they impact on people. At this time while we struggle to emerge from a recession, I cannot see that the British people-