asked Her Majesty’s Government:

What response they have to the OECD report Growing Unequal? and, in particular, the report’s findings on changes to the United Kingdom’s income inequality.

My Lords, the Government welcome the report. Government reforms to promote employment opportunity for all, to make work pay, and to support vulnerable groups have helped all sections of society to share in rising national prosperity in the last 10 years. Since 1997, living standards have risen strongly across the income distribution. The previously sharp rise in income inequality has been arrested, and relative poverty has fallen significantly among children and pensioners.

My Lords, I thank my noble friend for that reply. Is he aware that what he has described has been achieved not by squeezing the rich, but by helping the less well off, and that this help has been a crusade for the Labour Party for many years? Can he confirm that the Government will continue with it?

My Lords, the Government’s broad objectives of creating a competitive and successful economy and a fairer society will continue.

My Lords, can my noble friend tell the House whether the OECD report takes account of the fact that the national minimum wage, tax credits, family benefits and pension credits were all introduced by the Government and opposed by those opposite? If the Opposition had been successful, would we have been able to enjoy the statistics produced by the OECD?

My Lords, the OECD report identified that income inequality was increasing markedly during the 1980s and early 1990s and that this process has been arrested. This is as a result of government policies—of which the most important is the employment policy—and the increase in the number of jobs available in our society, together with the other points which my noble friend has identified.

My Lords, the Minister referred to the children and pensioners in poverty numbers decreasing since 1997. However, he will know that since 2005 those numbers have been increasing, and the OECD report only ran to 2005. Do the Government have any policies to turn that negative trend around, especially in the light of the current economic circumstances?

My Lords, we all recognise that the current economic circumstances are difficult indeed and that there is a difficult year ahead. That is why my noble friend, in response to an earlier Question, indicated that the Treasury and the Chancellor will be making clear their strategy in the Pre-Budget Report, which we expect shortly. The answer to the noble Baroness’s question is clear: in these difficult circumstances we will seek to protect those most disadvantaged in our society.

My Lords, does not the Minister agree that it is bad enough for most of us in this House to pay a marginal rate of tax of 40 per cent, but that what is far worse is that at the bottom of the stack people are paying rates of more than 80 per cent when you take into account both tax and loss of benefits? Is it not a scandal that the effective tax rate for people on very low earnings is so much higher than for those on high earnings?

My Lords, the noble Lord has highlighted an important point. I am not sure that it was addressed more than a decade ago but he is right to address it to a Government who feel keenly about this issue. I emphasise that through tax credits more families are getting resources greater than the tax they pay, but certainly the Government need to address the issue identified by the noble Lord.

My Lords, does the Minister recognise that over the past 10 years the Government have presided over a sharp rise in the price of houses and home ownership, despite the recent fallback? Do the Government regard that as a benefit to the citizens of this country?

My Lords, the extension of home ownership is certainly a benefit, as is the security that people derive from what has been invested in their homes. However, a significant percentage of the population need homes, are not in a position to purchase and need social housing. That is why the Government have emphasised that we intend to develop social housing as soon as we are able to do so.

My Lords, does the Minister agree with the OECD that the single biggest reason that income inequality has fallen is that unemployment has fallen significantly? Does he further agree that if there were a reduction in GDP next year of only half a per cent, unemployment is likely to rise by 1 million? Will he therefore consider ending tax perks for the rich so that taxes can be reduced for those at the bottom end of the scale, to benefit those families and communities that are likely to be most affected by the rapidly rising levels of unemployment that we now expect?

My Lords, the noble Lord will know that I agree with his first point because I said earlier that employment policies are by far the most effective way of effecting income redistribution. On the more general point, of course we need to address what will be some increases in unemployment. We can see that taking place at present and it is bound to occur over the coming year. As I have indicated, the Government will outline our plans to cope with that issue in the Pre-Budget Report in the near future.

My Lords, how can the Government continue to support flexibility in the workplace, which has been particularly important in increasing women’s participation, given the current economic circumstances?

My Lords, we take pride in the increased flexibility in our economy, and that is a reflection of flexibility at the place of work. It is of particular significance to women, who frequently require flexible hours. We all recognise that over the past decade or so that has been one of the more significant developments in the workplace, and we will seek to sustain that development.

My Lords, does the Minister recognise the importance to this improvement of the Government’s investment in childcare? Will he pay tribute to the work of childminders and early-years workers in achieving this improved employment rate?

My Lords, I am grateful to the noble Earl, who takes a keen interest in these matters and therefore speaks with authority when he indicates how crucial the issue of childcare is, particularly the role of childminders, relating both to the question I was asked earlier about flexibility with regard to women at work and to the benefit of children.

My Lords, the Government have been keen to improve the status of women in terms of their employment and salaries. In the current circumstances, what is happening to the equality, or lack of it, of wages between men and women?

My Lords, we all know what a challenge that represents, and of the disparities throughout our economic history between the earning power of women and that of men. We are concerned that there should be fair pay for all according to the work that they do and the noble Baroness will recognise the extent to which we have been able to do that in certain areas, overwhelmingly in the public sector. It is more difficult in the private sector, as she will appreciate.