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Poverty Gap

Volume 718: debated on Tuesday 6 April 2010


Tabled by

To ask Her Majesty’s Government what progress they have made in reducing the gap between the richest and the poorest.

My Lords, on behalf of my noble friend Lord Glentoran, and with his permission, I beg leave to ask the Question standing in his name on the Order Paper.

Since 1997, the Government have pursued a comprehensive strategy to support those on the lowest incomes, introducing the national minimum wage and a new tax credit system to support working families. The basic state pension has increased by 12 per cent in real terms. This means that low-income households have shared fully in rising national prosperity, with the Institute for Fiscal Studies’ analysis showing that this Government’s reforms have been clearly progressive, benefiting the least well off relative to the better off.

My Lords, I am grateful to the noble Lord for that reply, but despite his slightly obscure Answer—if I may say so—to the Question that my noble friend has tabled, is it not the case that the gap between rich and poor has not closed during the course of this Administration? Is this not another example of one of their core beliefs falling between the cracks?

My Lords, far from being an obscure Answer, it was a factual Answer which sought to address the noble Lord’s Question. Let me have another go at giving him a factual answer addressing the concern that he raises. Across the two most recent periods considered by the OECD report, Growing Unequal?, income inequality fell faster in the UK than in any other OECD country.

Does my noble friend welcome this new-found interest in the poor from the Members opposite? Will he tell the House how many of the signatories to the letter in the Daily Telegraph are millionaires and how many are billionaires? Will he remind them that when national insurance was last increased there was no effect on employment, just as there was no effect when we introduced the national minimum wage?

My Lords, the national minimum wage has increased by 22 per cent in real terms since it was introduced—a considerable achievement by this Government. The Gini coefficient, which is the measure used by economists to capture inequality, has been stable since 1997. However, it increased by a whole 10 points in the last 10 years of the previous Conservative Government—a true example of government for the few at the expense of the many.

My Lords, did the Minister see the chart in the Guardian recently which showed that inequality in terms of the gap between rich and poor was at its lowest between 1976 and 1978? The Minister may recall that those were years when the noble Lord, Lord Steel, and I had a considerable influence on such policies. Does it therefore come as no surprise to him that the party that will be offering the most redistributive tax proposals in the forthcoming general election will be the Liberal Democrats?

My Lords, the noble Lord, Lord McNally, asked that question almost with a straight face. I remind the House that the national minimum wage has increased by 22 per cent in real terms since 1999. Child benefits and child tax credits have increased by £790 since 2003. Four in every 10 families with children will pay no tax as a result of policies pursued by this Government. The differential between the upper and bottom quintile in earnings in this country is 16-fold before tax credits and benefits, and four-fold after them: true evidence of the redistributive force of Government policy to aid those in poverty.

My Lords, is the real noble Lord, Lord Mandelson, the one who last week told us that Bob Diamond of Barclays Capital was the unacceptable face of capitalism or the one who told us that the Labour Party was relaxed about people getting filthy rich?

My Lords, we are committed to the eradication of poverty. We do that by pursuing policies that help and support those who are most vulnerable in society. Inequality is an aspect of that but we do not help the poorest in society by making the richer poorer. There is entire consistency between my noble friend Lord Mandelson’s observations. He did not mind people being rich as long as they paid their taxes. He is concerned about the complete failure by the shareholders of Barclays bank to put a reasonable check and balance into remuneration within that bank.

My Lords, I was involved in some discussions with the Liberals between 1976 and 1978 and am bound to tell the noble Lord, Lord McNally, that I have no recollection of their help in any way. Has my noble friend had any serious proposition from any Member of the Opposition as to what further action could be taken to help?

My Lords, one thinks about Conservative proposals to abolish child trust funds or the proposal—as a priority—to address inheritance tax to give an income advantage to the 3,000 wealthiest families in the country with no regard at all for those who are poorest in society. People will remember that as they vote in the election on 6 May and return a Labour Government to power.

My Lords, is the Minister proud of the fact that his Government have spent 13 years creating a situation where people on incomes between £100 and £200 a week are effectively paying marginal rates of tax as a result of tax and loss of benefits of 95 per cent? How can he describe that as progressive reform?

My Lords, I would simply not describe it as progressive reform. That is an exception. As the noble Lord, Lord Forsyth of Drumlean, knows, we have clearly lifted most of the poorest people in society out of any taxation at all. Of that I am proud. I will fight to ensure that that remains the case and is not removed by a Tory Administration.

My Lords, does my noble friend agree that under a Labour Government pensioners have seen their incomes double? Lone parents, who did not even have the benefit of a minimum wage, now go to work with a minimum wage of some £6 an hour and, as a result of tax credits, take home £11 an hour. As a result, for the first time ever, they and their children—as well as pensioners—have been sprung out of poverty by the achievements of a Labour Government.

I fully concur with the observations made by my noble friend. We have taken action to ensure that the weakest and most vulnerable in society are protected. That is at the core of Labour Party values.

My Lords, the Government have comprehensively failed to achieve their target of halving child poverty by 2010. We agree with the Government that work is the best way out of child poverty. Will the Minister therefore explain why they are imposing a huge tax on jobs at this time?

We are taking resolute action to address the need for fiscal consolidation, and in so doing we are putting forward proposals that are rooted in reality rather than in myths and figments of imagination clutched out of the air to justify a policy that does not withstand any close examination.

My Lords, is it not a fact that people in the bottom 20 per cent of income distribution are paying a higher proportion of income in tax, taking all taxes into account, than the top 20 per cent?

My Lords, since there are 2 million more people employed today than there were 10 years ago, has that helped to close the gap between the richest and the poorest?