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Wealth/Income Inequality

Volume 458: debated on Thursday 29 March 2007

6. What the levels of (a) wealth and (b) income inequality were in the UK in (i) 1997 and (ii) 2006; and if he will make a statement. (130444)

The gap between the incomes of the richest 10 per cent. of our population and the poorest 10 per cent. has narrowed since 1997 from a ratio of 4.1 to 4—a measure of overall inequality that rose sharply between 1979 and 1997 from a ratio of 3 to 4.1. The measure of wealth inequality has also declined modestly.

I am grateful to the Minister for his answer, but he will know that the households below average income survey, which was published on Tuesday, shows that on the internationally recognised measure of income inequality—the Gini coefficient—Britain is now more unequal than it was 10 years ago. Rising taxes for the lowest earners announced in the Budget will make matters worse. Is he proud that Britain has become a more unequal society under his Government—in fact, one of the most unequal in the developed world—and what hope for greater fairness can he offer in future?

I am proud that the latest figures this week show that the gap between the richest 10 per cent. and the poorest 10 per cent. has narrowed. Indeed, the Budget took 200,000 more families out of poverty because of investment in tax credits, which the hon. Gentleman and his hon. Friends opposed.

Does the Minister accept that the introduction of the minimum wage, which some Opposition Members opposed, has made a huge contribution to improving the position of the worst paid in our society?

My hon. Friend is right. The campaigning by him and other Labour Members was responsible for the introduction of the minimum wage, which has addressed poverty pay and created 2.5 million jobs. It is a pity that my hon. Friend’s compatriots from the Welsh nationalist party are not present to hear his proud record of campaigning.

The Chancellor just now flatly refused to answer a simple question from my hon. Friend the Member for Tatton (Mr. Osborne). Will the Economic Secretary say whether Mr. Mark Neale, a senior civil servant who gave evidence to the Treasury Committee yesterday, was right or wrong when he said that 5.3 million people will be worse off as a result of the Budget—yes or no?

Mr. Neale is right to point out that there are more than 20 million winners from the Budget and 200,000 more children taken out of poverty—

Order. Mr. Paterson, you must behave. It is a habit of yours to shout down the Minister answering the question. You should not do that.

As I was saying, since 1997 we have taken 200 children out of poverty every day. Under the Tories 200 more children went into poverty every day. That is the difference between the parties.

Will my hon. Friend accept my thanks and take credit for being a member of the first Government to break the link between old age and poverty, and for taking 2 million pensioners out of poverty? Will he consider what can be done to redouble the battle against child poverty, as we have taken 2 million children out of poverty and need to do more to reach our target of halving child poverty by 2010?

My hon. Friend is right. When we came into government, we had unacceptably high levels of pensioner poverty, which we have addressed through the winter allowance, pension credit and rises in the basic pension. We also had the highest level of child poverty of any European country. Because of the measures that we have taken, which Opposition Members opposed consistently, we have had the fastest fall in child poverty of any European country since 1997. We on the Labour Benches are proud of that record.

Such adults are substantially better off as a result of the changes that we have introduced since 1997 on tax and the working tax credit and measures to get people into work. People with and without children were much worse off under the Conservatives because there were 3 million unemployed and interest rates that were high and crippling. We have addressed that through the new deal and the working tax credit, which Conservative Members have consistently opposed. If they want to match our record, they must match our policies on tax credits, the minimum wage and public spending. Until we get an answer from the hon. Member for Tatton (Mr. Osborne), he has no credibility at all as a shadow Chancellor.

Does my hon. Friend believe that a nurse and a fireman living together are rich and can pay the estimated £550 extra a year that would result from the introduction of local income tax?

The family that my hon. Friend describes will be substantially better off as a result of the Budget and the 2p cut in income tax. If the Scottish National party came to power in Scotland, the family would be substantially worse off because of a 3p rise in income tax. It is a great disappointment that no Member from the SNP is in the House to take part in this discussion, which shows their contempt for democracy and for these matters.

In my constituency inequality is being worsened by the fact that, as South West Water customers, my constituents are paying the highest water bills in the country. Because regulatory change is needed to tackle the issue, and because the Government will not hit their own child poverty targets unless it is tackled, will the Minister agree to meet to discuss constructively how to deal with this very difficult issue for my constituents?

The hon. Lady’s constituents are better off because of the Budget and the measures that we have introduced for families. In a revealing comment, the Institute for Fiscal Studies makes it clear that—[Interruption.]

“the tax and benefit reforms introduced by the Labour government”—

since 1997

“have been strongly redistributive, favouring lower-income families”

in the hon. Lady’s constituency—again, reforms that she has—[Interruption.]

I was pointing out that on income the hon. Lady opposes tax credits, and on wealth she opposes the child trust fund. If she would support me and this Government in our efforts to reduce child poverty, she would have more credibility on such matters.