§ Question again proposed.11.31 am
§ Mr. MacShane
Thank you, Madam Speaker, for allowing me to rejoin this important debate. We heard a fine speech from my hon. Friend the Member for Gateshead, East, who constructively set out the problems that worry many Labour Members and which have certainly concerned me since entering the House two months ago. If I had to sum up the root cause of the pain and distress that come to my attention at my surgeries or in correspondence from my constituents, it would be growing inequalities in our country.
Next Thursday, 14 July, the French will celebrate the 205th anniversary of their revolution, which inscribed in world history the concepts of liberty, fraternity and equality. These days, I yield to no one in my admiration for attacks on political correctness, but perhaps we should use the word "solidarity" instead of fraternity.
The Government have been taking our liberties, destroying our solidarity and increasing inequality. We are all born unequal, live unequal and die unequal—but some are more unequal than others. For 15 consecutive years, it has been the Government's project to increase inequality. Some people—including my hon. Friend the Member for Islington, North (Mr. Corbyn)—may passionately believe that a fully equal society can be created on Earth. I do not share that opinion.
§ Mr. Michael Stephen (Shoreham)
Does the hon. Gentleman agree that God has clearly not been reading the socialist manifesto, as He continues to create people unequal?
§ Mr. MacShane
If the hon. Gentleman returns as regularly as we all should to the Book of Genesis, he will find a paradise created on Earth, which for thousands of years has set the guidelines for socialism and equality.
I share the view expressed earlier that Britain is a far richer and more productive society than ever before. Why are those increased riches and productivity so unequally shared? Why have other countries that have become richer and more productive in the past 15 years been able to ensure a fairer and more equal sharing of their increased riches?
Before the statement, I referred to the OECD report, which was a forerunner to the Institute for Fiscal Studies report to which my hon. Friend the Member for Gateshead, East, referred. That report, published in "Employment Outlook" in June 1993, shows that whereas there has been a decrease in earnings dispersal—a technical term meaning who has the cake and the butter in our society—in Japan, Germany and the Netherlands in the 1980s, the sharpest increase ever in OECD history was recorded in Britain. It is interesting and important to note that societies that set a goal of equality in their policy framework turn out to be high-performing economies.
The earnings of Britain's top 10 per cent.—the deciles, to quote the new word that has crept into economic discourse—between 1980 and 1992 increased 51 per cent., while the bottom one tenth, or poorest, saw their earnings increase just 11 per cent. That shows a 4:1 ratio between the top one tenth and the bottom one tenth, which is a clear statistical indication of growing inequality in Britain. Also in the 1980s, although the years do not match exactly, in Italy and Germany the gap between the bottom 10 per cent. and top 10 per cent. of earnings stayed constant or even narrowed.
It is not simply a question of economics. We must move the debate beyond statistical exchanges on deciles, poverty, absolute poverty, and whether or not more households have central heating. I am delighted that there is more central heating in the homes of Britain, but I remain worried about the one third of the population who are without it. I would find it hard to believe that any hon. Member has not seen constituents at his or her surgery who cannot meet their fuel bills. To have central heating in one's home but to be unable to afford using it is an expression of the inequality that worries Opposition Members. There is inequality also in education and in the absence of adequate nursery provision. We have the same number of people going to university as our leading competitors, but in the Netherlands—which produced Mr. Ruud Lubbers, the would-be President of the European Commission, according to the Prime Minister—49 per cent. of the work force have technical or craft qualifications whereas the figure in Britain is only 27 per cent.
§ Mr. MacShane
I am sure that the hon. Lady will have a chance to make a speech. Given that the statement and questions lasted 40 minutes, I do not want to take up too much time. I may give way later, but it might be more 594 helpful if I were to finish, to give other hon. Members a proper chance to speak consecutively, in joined-up sentences.
Korea and Malaysia devote 22 per cent. and 18 per cent. respectively of public expenditure to education, while the UK spends only 12 per cent. UK Government spending on education as a percentage of gross domestic product declined from 5.4 per cent. in 1979 to 4.8 per cent. in 1991. At the same time, Government support for private school fees increased from £3 million in 1982 to £76 million in 1992. That is an example of the growth in inequality in education.
There is inequality in the way that we are governed. There are now more Tory placemen and women appointed to Government-established quangos than there are democratically elected local councillors.
There is inequality in our very political structure. Long gone are the days when Conservatives sat for northern or industrial seats—the Minister, the hon. Member for Bury, North (Mr. Burt) is an exception—or, indeed, had any real knowledge of poverty and inequality. Gone are the days when service in the armed forces at least facilitated some contact between the ruling classes and the ordinary people.
The hon. Member for Teignbridge (Mr. Nicholls) referred to the trade union movement as being confined to barracks. I am not sure whether he served in the armed forces, but that expression refers to a punishment—to a denial of rights because of some breach or dereliction of duty. Not a great deal of passion has been aroused in this debate, but I have to tell the hon. Gentleman that some of us find it deeply arrogant—and oh so typical—that the 7 million members of our trade union movement should be considered to be people on punishment parade, confined to barracks and not allowed to play a part as equal citizens in the labour market and the world of work.
The inequalities in our government, education and economic systems relentlessly feed upon themselves. We must deal with the important question of what produces inequality. Although I would argue—and my hon. Friend the Member for Gateshead, East correctly asserted—that, in part, it is a deliberate Government policy, some market, global and technological changes are also having an enormous impact. In 1992, 4,000 employees at the General Motors Vauxhall plant in Luton produced 170,000 cars. That is a doubling of output per worker since the 1980s, which I welcome. However, their wages have not risen by anything remotely like the increase in productivity.
In the United States—the figures are roughly comparable with those for the UK—productivity grew between 1980 and 1990 by about 4 per cent. per annum, but the real take-home pay of workers in the manufacturing sector decreased by 3.5 per cent. In theory, any decline in the wages of workers in industrialised countries should be offset by an increase in the wages—the purchasing power—of workers in the newly industrialised countries, especially in Asia. Investment and technology have poured into countries such as Mexico, but the purchasing power of Mexican workers has declined by up to 50 per cent. In Malaysia, a country which is rocketing up the productivity and output tables, the take-home pay of the industrial worker is stagnant or even declining.
That is an important point in the debate on inequality, because, throughout most of the 20th century, whether under Conservative or Labour Governments, there was a narrowing of the gap in equality because increases in productivity were matched by increases in pay. To put it 595 crudely, workers have been able to buy what they make or use the services that they provide. Now, the productivity-pay link has been broken, partly because of globalisation factors and partly because of technological change. As yet, we have not found a method to pay everyone in employment sufficient to sustain a decent standard of living.
I accept that this country has a lower level of unemployment than some of our competitors, but all the new jobs are part-time. [Interruption.] The majority of those jobs are part-time and at pay rates insufficient to sustain a full and normal family life. Indeed, I seem to recall that either the Secretary of State or the Minister made just that point in an important speech recently and said that the absence of a male breadwinner was having a serious impact on the quality of family life. We have to find the mechanisms to deal with that. It will be as great a problem for the next Labour Government as it has been for this Government, or should have been had they ever sought seriously to deal with it.
It appears to me that we tackle the problem of inequality through a mixture of policy, precept and example. The steel industry is of great concern to my constituents, who read with some shock this week that the chairman of British Steel has been awarded a 54 per cent. pay rise. That takes his pay this year to 33 times the average earnings of a steel worker. Of course, a steel worker gets reasonably good money—about £15,000 a year or £310 a week—but the Latin American ratio of 33:1, which is increasingly evident in pay rates, will corrupt and corrode the sense of community and relationship needed to make our work forces perform competitively and with team spirit and co-operation.
§ Mr. Alan Duncan (Rutland and Melton)
Does the hon. Gentleman accept that such pay rises give young people entering the industry the ambition to become the chairman of British Steel? Does he further accept that in his ideal economy such a large industry would be nationalised, whereas it is in fact in private hands and contributing to taxation and revenue to help the very poor people whom he says he wishes to help? Those nationalised industries that used to be a drain on the nation's resources are now contributors—the blood suckers have become the blood donors.
§ Mr. MacShane
I could enter into a debate about how to make a great deal of money in a very short time through contacts, knowledge—
§ Mr. MacShane
I leave it to my hon. Friend to deal with the unpleasant remarks of the hon. Member for Rutland and Melton (Mr. Duncan).
The hon. Gentleman was quite wrong in his assertions. In 1960, Italy's gross domestic product was half that of Britain. Since then, there has been wide public ownership in Italy while Britain has privatised its great industries. Italian GDP has now moved ahead of Britain, which is slipping down every international comparative league table for the rich, the middling rich, the-not-so rich and the poor alike.
As I said, the chairman of British Steel has had a 54 per cent. pay increase—bringing his earnings over the steel workers to the Latin American ratio of 33:1—while his employees have had to be content with 3 per cent. That 596 may encourage the one man or woman in a million who aspires to be the chairman of a great company, but it will do absolutely nothing for the thousands of people in Rotherham who would rather work in a small, middling or large company, have a good job, apply their skills and talents and have a wage sufficient unto their needs.
The figures for Rotherham are extremely stark. We are told that Britain is back in the middle of an economic boom and is out of recession, that Britain is leading the way and Europe is in the doldrums. Yet between May 1992 and May 1993 the number of income support claimants in Rotherham rose from 33,000 to 37,000. Children receiving free school meals—that necessary but unpleasant aspect of charity, as some boys and girls line up to be identified as the new victims of Tory policies—has risen from 7,000 in 1991 to 9,000 this year. No parent likes to mark their child out by claiming free school meals, but that is the record of growing inequality in just one constituency.
Rotherham has adopted an anti-poverty strategy and it has proved to be one of the most impressive in Europe.[Laughter.] Conservative Members may laugh and scorn, but their natural supporters in the chamber of commerce and business community of Rotherham—there were only 2,000 Tory voters in Rotherham at the last election, but that was an aberration; they will come back—support the anti-poverty strategy.
On a tiny budget of less than £250,000, the anti-poverty unit has been able to undertake a wide range of initiatives. It has set up a credit union, encouraging local savings and loans clubs in the poorer areas, and the Rothercard, a discount scheme which allows low-income households to benefit from high street shopping, low-cost sport and recreation. It has initiated community projects such as a newspaper in Canklow, a community advice centre in Ferham and a "community chest" fund in Dinnington in the constituency of my good and hon. Friend the Member for Rother Valley (Mr. Barron). It has taken redundancy action and other concrete, small-scale initiatives to help to combat inequalities in my constituency. I commend this approach quite seriously to the Minister.
Such problems will continue for many years, so I invite the Minister to organise a European conference to examine other and similar initiatives. I know that my friends in Rotherham would give the Minister a warm welcome if he would care to cross the Pennines to see an example of South Yorkshire initiatives in action.
It is a Rotherham problem and a national problem, but the debate must be set in a world context. The hon. Member for Teignbridge referred movingly to a man from the third world who had to bring his child to Britain for an operation, but his country might be able to afford its own national health service if its debts were cancelled and the banks took their fangs out of the third world and allowed it to develop properly.
If the third world were given fair terms of trade and encouraged to develop, more doctors and professionals would stay in their own countries, rather than many of them having to come to the north to find a good job and adequate income. Growing inequality will continue in our country while we have growing inequality in the world.
We need a social clause for the new World Trade Organisation so that world trade contributes to a win:win situation, enriching all those who participate, rather than, as world trade has for the past 15 years, increasing wealth 597 for the north with some increasing wealth for take-off countries, but worse inequality and poverty for many countries in the rest of the world.
We may not make the poor rich by making the rich poorer—I see smiles on the faces of the rich on the Conservative Benches—and the failure of communist countries proves that quite conclusively, but we can make the poor a lot less poor by making the rich accept that they are part of a community with equal responsibilities and equal duties even if they have unequal privileges.
§ Mr. Nicholls
We have already heard, and it is a well-known fact, that when tax rates are reduced, the amount that the rich contribute to the tax take increases. Surely what is important is the amount of money available, not the size of the gap. That is the case that the hon. Gentleman must answer.
§ Mr. MacShane
If the hon. Gentleman had listened to my speech he would know that that is precisely the point that I am seeking to make. Every economy that seeks to keep the ratio between what the top and bottom earners as narrow as possible, such as Japan—
§ Mr. MacShane
I shall answer that. The top executives of Sony, Nissan and other great Japanese companies earn between seven, 12 or perhaps up to 15 times as much as their workers.
§ Mr. Roger Evans
Is the hon. Gentleman aware of recent economic papers on the effect of the Laffer curve on Japan and how it is believed in Japan that those penal rates of higher taxation are depriving the Japanese economy of a chance to keep ahead in the longer term of South Korea and Hong Kong, where tax rates are much more equal?
§ Mr. MacShane
What is worrying Japan is that, by the year 2020, about 40 per cent. of the population will be 60 or over. It is facing the problems of a maturing economy and demand for social provision. Less than one in five houses is connected to a mains sewer. Hon. Members who have visited Japan will know how crowded and inhospitable much of ordinary life is in Japan. That is what is concerning policy makers in Japan. I study Japan quite closely, but I have yet to see any strong evidence that anybody seriously involved in Japanese policy making is concerned about tax rates, which are lower than most of those in west Europe.
Perhaps the most dominant feature of Japan, Singapore, Korea and the successful economies of the past 50 years has been their much narrower ratio between the earnings of the broad mass of employees and the top bosses. It is a culture of fair pay and investment rather than the rentier culture which increasingly dominates our unequal society.
§ Mr. Duncan
As someone who lived in Singapore for two years, I can bear witness to how successful its economy is. We should watch it as we consider how to structure our own. The hon. Gentleman has already admitted that one does not necessarily make the poor richer by making the rich poorer, yet everything else that he has said today conflicts with that admission. Should not he be mindful of the fact that if the spontaneous order of a society 598 is interrupted and if equality is forced on that society, it inevitably reduces that country to poverty, as history shows? Perhaps he should remember that Shakespeare saiduntune that string,And hark! what discord follows".
§ Mr. MacShane
I am also an admirer of much that has been achieved in Singapore—it is strong on discipline, clear about chewing gum, utterly opposed to smoking and very keen on short hair. They are all values which Singaporeans enforce with some vigour. Of course, Singapore is a society shaped by the great secretary of the Fabian society at Cambridge, Lee Kuan Yew. For some of us who know that country, we see it as a Fabian society on earth with slightly better food, but, alas, with a cultural and moral order with which I am not sure that Conservatives could live. I am surprised that the hon. Member for Rutland and Melton managed to live there for two years, and I congratulate him on giving up his Toryism, his Englishness and his sense of spirit and fun. However, I know that Conservatives will go to any corner of the earth to earn money.
You asked me for concrete policies and pledges—
Madam Deputy Speaker
Order. I was not being asked. I think that the hon. Gentleman has perhaps forgotten the rule.
§ Mr. MacShane
Forgive me, Madam Deputy Speaker. I believe that I heard such calls from the Conservative Benches, and I refer them to my ten-minute Bill on page 4049 of the Order Paper. However, I suggest the following general remedies. Yes, let us copy countries that are currently more successful—
§ Mr. MacShane
For God's sake, the hon. Gentleman is driving Britain to Cuba. There are parts of my constituency where I suspect that the quality of life is worse than in Cuba and certainly a lot less warm. As Conservatives create an unequal Britain, they may find that they are met by a revolt such as that which swept Mr. Castro, a friend of my hon. Friend the Member for Islington, North, into power 30 years ago. Let us copy and learn the lessons of the most successful countries such as Germany, Japan and the dynamic Asian countries. In each of those countries, one finds that the notion of preventing inequality where possible is built into public policy.
Let us link the future of work and the time spent at work to the technology necessary to produce what our country wants. If we want to ensure that earned income provides the economic wherewithal for the majority of citizens, we need a new concept of pay, productivity and output. We should use the market as a servant, not a master. Taxation should be based on the ability to pay, but let us set a target for equality.
I was delighted to hear that, in a speech to the Trades Union Congress on Tuesday, the Secretary of State for Employment, in what was otherwise a rather vacuous speech, referred to full employment as something which the Government should support. I invite the Under-Secretary of State for Social Security to join the Secretary of State and add equality to full employment.
Above all, we must avoid the Latin American road down which we are going, and even the north American road. In the cities of north America, as in Latin America, no one can walk the streets at night. Drug taking, 599 prostitution and criminality are the norm. We must also avoid the creation of a handful of super-rich and a middle class that often lives in anxiety and insecurity.
The hon. Member for Rutland and Melton quoted Shakespeare. In response, I shall quote Francis Bacon who some say may even have written the quotation used by the hon. Gentleman. Bacon said:Of great riches there is no real use, except it be in their distribution; the rest is but conceit.Conservatives are arguing for inequality, presiding over a country growing more unequal; in inequality matched only by their conceit.
I conclude by joining in the hope expressed by my hon. Friend the Member for Gateshead, East that there will soon sit on the Government Benches people who have learned the lessons of successful economies, and will put the building of equality back into public policy and make Britain a fairer, better and wealthier place for us to live in.
§ 12.5 pm
§ Mr. Gary Streeter (Plymouth, Sutton)
It is a pleasure to participate in this important debate. Having listened to the speech of the hon. Member for Rotherham (Mr. MacShane), it is refreshing for us to learn that even the gilt-edged face of the new Labour party speaks just as much nonsense and waffle as the old, unreconstructed face of the Labour party sitting directly behind him.
The hon. Member for Rotherham spoke of a target for equality. I look forward to that thought being developed by the Labour party in the next two years, but I stand before you, Madam Deputy Speaker, as a disappointed person this morning. Having read the motion tabled by the hon. Member for Gateshead, East (Ms Quin), which refers to a range of measures and policies that are needed and a change of direction in existing Government policy, I thought that we would hear from her a list of well thought-out, constructive proposals as to how we might deal with the problems facing some people in the country.
I place on record the fact that I accept that some people require help and that we should give that help with compassion and understanding. However, the important thing is not simply to stand up in forums such as this and utter fancy words; the important thing is to suggest proposals, policies and measures that can help.
I noted down carefully the five solutions that the hon. Lady suggested to help the people whom she described as living in deprivation and suffering inequality. She said that recognising the extent of the problem was the first step. I agree that the first step is always to recognise the problem, so let us give her that one for the purposes of a quiet life.
The hon. Lady's second solution was a job creation package, but what does that mean? What are her specific proposals? How much would they cost? Is she suggesting a programme to be funded by national Government out of taxpayers' income? What is a job creation package? She gave us no idea.
Thirdly, the hon. Lady talked about creating a new environmental task force, but she did not say who would fund it, how much it would cost, what it would do or how it would create jobs or help people on lower incomes. It was a fancy phrase with nothing behind it.
The fourth solution was to help south American countries more. She called for some kind of Marshall plan, but did not say how it would help the people of Britain. As one of my colleagues rightly said, such a programme 600 would surely cost us money and be a greater burden on our taxpayers, thus enabling us to do less for our people. It did not make sense.
The piece de resistance was the call by the hon. Member for Gateshead, East for fairness in our social security policies. She gave no specifics and she did not explain what she meant. She did not say how we could better target help or resources. I am afraid that it was the same old meaningless platitudes. We have not heard a single solution this morning.
Much of the speech by the hon. Member for Gateshead, East was a discussion of the whole issue of what she called "wage inequality". In other words, some jobs pay more than others. She did not tell us this morning who should decide how much each job should pay. What should we do about wage inequality? The market says that a certain job should pay a certain rate. What should we do to equalise that with other jobs which the market says should be paid at a lower rate? The hon. Lady gave us no answer.
Was the hon. Lady talking about direct Government intervention? Does she believe that we should say to an employer, "No, that is not the right rate for the job. You must pay more or less. You must be in line with other professions and other trades"? What was the hon. Lady talking about in terms of the solution to wage inequality? I am afraid that she did not say.
§ Mr. MacShane
The hon. Gentleman spoke of the Government setting wage limits. How can Railtrack and the unions come to any agreement when the Government have interfered quite crudely in setting the wages that railway signal workers will earn?
§ Mr. Streeter
The hon. Gentleman knows very well that that point is a world apart from what I have just described—the suggestion that the Government should intervene to decide what every job or sector of job should be paid. We are talking about the Government being prudent with taxpayers' money in insisting that public sector employees should not be paid more than they can earn in increased productivity.
§ Ms Quin
Does the hon. Gentleman consider that the Government are prudent with taxpayers' money when they give so much of that money to people who are on such low incomes from their employers that they are forced to claim state benefits? Does he think that it is fair to subsidise employers who pay Scrooge wages?
§ Mr. Streeter
It was important that family credit and other forms of social security payments were put in place by this sensitive and caring Government to ensure that every person and every family who can at present attract only a low-paid job have their income made up to a reasonable level by the taxpayer. I consider that to be a reasonable and right response, which is far better than the response at which the hon. Lady hinted, although she did not describe it clearly, of a national minimum wage. Opposition Members must begin to live in the real world. A national minimum wage would undoubtedly cause unemployment for thousands of people because employers could not afford to increase their wages to that extent.
I place on record my strong support for the outstanding speech by my hon. Friend the Member for Teignbridge (Mr. Nicholls). In many respects, it was the speech that I had thought about making myself. He spoke about the great inequality being perpetrated on the majority of people 601 by tiny minority interest groups. The tail has been wagging the dog for far too long. We are now entering a time when the dog wants to respond. Over the past 30 years, the pendulum has swung in favour of those minority groups, who are a tiny fraction of the nation. The pendulum has swung too far and will return with interest.
Let us have no more empty rhetoric such as the motion. Let us have firm and constructive policies which seek to deal with some of the remaining issues. Over the past 15 years, our Government have a record of which we can be proud. Ordinary families on average earnings are now £83 per week better off than they were in 1978–79, after tax and inflation are taken into account. Real incomes are up sharply for vulnerable groups, including 40 per cent. real income increases for pensioners. As has already been said—this is important—the top 10 per cent. of taxpayers now account for 45 per cent. of the income tax take, compared with 35 per cent. in 1979. That is a record of which we can be proud.
The issues of inequality need to be addressed. I believe that the philosophical approach to the subject is as follows. We must put in place opportunities for people. We must remove barriers which might prevent access to that opportunity. We must encourage people to seize that opportunity, but then each one must decide for him or herself. We cannot live people's lives for them. What does this mean in practice?
First, in practice, we are talking about access to decent education. The Government reforms of the past few years have been striving to create an improved education service and there are now many signs that this important policy reform is beginning to bear fruit. The national curriculum is now widely accepted as improving standards. We have stressed the importance of assessing pupils at regular stages and the importance of parental choice. We have pursued the popular policy of allowing good schools to expand. We have delegated to schools the way in which they spend their budgets through LMS—local management of schools. We have pursued the important policy of grant-maintained schools which allow parents, teachers, governors and headmasters far greater choice and a far greater say in how schools are run. Access to education is improving under this Government.
Secondly, our reforms of health care are designed to improve access to health care free at the point of need. They are beginning to work. Some 1 million more patients are being treated than ever before. We all know that there is no bottomless pit of resources, yet demand for increasing health care is infinite. The Government are responsible in seeking to bring to the surface the costs of various types of treatment and in seeking to improve efficiency in the health service. Those are very necessary reforms which guarantee the survival of the health service free at the point of need. To go blindly on pouring in more and more taxpayers' money without reforms of efficiency and careful costing would lead to the service's ultimate demise.
The third point is access to a reasonable job. It is important for any Government to get the economic framework of the country right. How we rejoice, therefore, in the fact that, since December 1992, 300,000 people are now back in work. How important it is that the Government proceed with the reforms in industry and in business to deregulate, to improve competitiveness and to 602 continue the revolution with our supply side reforms. Those factors are important in creating jobs. Today, we can congratulate ourselves on our low interest rates, our low inflation and our competitive pound. We have in place an economic framework that is likely to produce the sustained economic growth which will be so important to people over the next few years.
Fourthly, there must be access to decent and affordable homes. Over the past three years, 170,000 new social homes have been created by housing associations. Housing associations are now the major provider of social housing and we are revitalising the private sector at the same time. For all those reasons, we have a record of which we can be proud in terms of offering opportunities to people. We have given them access to the things that they really care about—a job, a home, education for their children and health care in times of need.
There is a whiff of hypocrisy in the air this morning. The motion, which calls for greater equality, simply does not ring true. There is not much equality in Monklands district council. There was not much equality for pensioners in the late 1970s when roaring inflation at 26 per cent. ate into their life savings, forcing many of them to live in abject poverty. There was not much equality of opportunity for council tenants when the Labour party fiercely opposed the right for them to buy their own council houses, which was a great success. There was not much equality of opportunity in access to health care when the previous Labour Government had to cut their hospital-building programme when they ran out of money.
Fine words are simply not enough. What is important is that any Government run their economy efficiently and competently, creating access for their people to opportunities of housing, jobs, education and health care. In all those areas, the Government can be proud of their record. We, at least, have practical policies to enable our citizens to gain access to opportunity. How much more they respond to that than to the empty, meaningless platitudes which drift across the Chamber from Labour Members.
§ Mr. Donald Dewar (Glasgow, Garscadden)
I congratulate my hon. Friend the Member for Gateshead, East (Ms Quin) on moving the motion. There is no doubt that it raises issues of genuine importance which are, to be fair, although one would not guess it from some of the speeches, of concern to the whole House and, indeed, to the country. My hon. Friend the Member for Gateshead, East put her points with clarity, ability and sound sense.
The distinguishing feature of some of the speeches is their sense of unreality. There has been a lot of charging at windmills; setting up targets which are purely imaginary. I ought to make it clear that very few Labour Members—I shall not be dramatic and say none, but few individuals, certainly not the party as a whole—believe, as Conservative Members seem to think that we do, that we should have equality of income. Of course, there is no question that the Government should regulate everyone's wages so that everyone was paid the same or that that should even be the theoretical, desirable end to our economic life. There is no question of that at all.
Similarly, it is sometimes suggested that we do not believe in the importance of individual initiative or the duty of individuals to better themselves and, in doing so, 603 to help better society as a whole. Of course that is important, but we argue—it is closely related to poverty—that, if one looks round our community, one sees that we have created circumstances, and the situation has worsened greatly in recent years, whereby people cannot exercise individual responsibility because they are trapped, either financially or, very often, socially, in situations which literally destroy life chances. That means that people of genuine ability and aspiration cannot make progress in society. It is not an abstract argument about salary levels or resources in that narrow sense; it is an argument about opportunity in society and what happens when that opportunity is left to the unregulated market, when people cannot better themselves. I want people to better themselves. I am consciously struck almost every time that I am in my constituency by the number of people who do not have that opportunity, and it is against that lack of opportunity that myself and my hon. Friends are protesting.
§ Mr. Duncan
One of the concerns among Conservative Members is that the well-meaning beginnings of the hon. Gentleman's thinking convert into a practice which ends up malign. A fine example of that is in Labour-controlled local authorities, where one sees his kind of dogma put into practice. Would he therefore comment on today's Evening Standard, which cites an example of that dogma put into practice, about which the social services inspectorate has said:Children in care"—the sort of people that the hon. Gentleman most cares about—were prey to paedophiles, pimps, pornographers and drug-pushers because of the political dogmain the local authority of Islington?
§ Mr. Dewar
No, I would not care to comment in any way on a caried story in the Evening Standard, which is a synopsis of a report I have not read. Of course, if there is abuse in any part of the public service, it is a serious matter and ought to be eradicated.
On the statement on the health service and the complaints procedure yesterday from the ombudsman, the Prime Minister fairly said that if there are problems and there are feelings, we ought to address them. The same applies in any other part of the service. In my local authority—it is typical of many—the struggle is not to create inequality, but to try to overcome it. It is a matter of trying to provide participation, mixture of tenure and opportunity for people who live not only in houses in the public sector, but often in poor housing conditions in the private sector.
I turn briefly to some of arguments that have been adduced. As the hon. Member for Rutland and Melton (Mr. Duncan) has intervened, may I say to him—no, it was not him; I apologise. He will be terribly insulted and I fear that I shall him hurt him terribly because I have confused him with the hon. Member for Teignbridge (Mr. Nicholls).
§ Mr. Dewar
Well, that is another disagreement that we shall pursue on another occasion.
It seems to be important to make the point that the fact that the present Prime Minister came from modest financial circumstances or that exceptional people in exceptional circumstances can move to the top is not a complete answer to the problems that I have been outlining and, 604 therefore, it is irrelevant to the main thrust of the argument. I do not want the debate to sink in a welter of statistics. To the credit of some Conservative Members—the hon. Member for Teignbridge is an example—who have spoken, may I say that there has been no real attempt to say that the gap between rich and poor has not been widening in recent years. That gap is self-evident to anyone who looks at the facts—and, strangely enough, there are people who still try to do so.
I remember a report of an interview in the Glasgow Herald on 4 March 1992 given by the Prime Minister. It lives in my memory and I have used the example on a number of occasions. He was asked specifically about poverty in Scotland, although no doubt his reply would have been the same about every part of the country. His reply was "Poverty, what poverty?" He went on to say—I hope that I am not presenting the argument unfairly—that, of course, poverty was relative, that the definition of poverty was shifting and that, as the Government increased income support and benefit rates, they increased the number of the poor. Therefore, the Prime Minister said that it was unfair to charge them with growing poverty levels because they were, in that sense, the victims of their own generosity. I do not accept that argument.
I heard the Prime Minister repeat that argument on "Channel 4 News" on—I think—8 June. It was put to him by the interviewer that, under his Government, the rich had got richer and the poor poorer and it was suggested that that was an inescapable conclusion from the facts. The Prime Minister showed every wish to try to escape from that conclusion and, indeed, described the evidence for such an assertion as very suspect. I have a little passing sympathy with that because, of course, most of the evidence comes from Government statistics. However, on the whole, I am prepared to accept them.
The Under-Secretary of State will be familiar with, for example, the annual survey of households with below average income, which his Department produces, which suggested that, if one took the bottom 10 per cent. of households—I am sure that he will deal with it and put his gloss on it—there was some evidence to suggest that there has been an income fall in real terms for the bottom 10 per cent. of households since 1979 after housing costs. It was a much more modest fall, but still a fall, if one takes the income figures before housing costs.
My hon. Friend the Member for Gateshead, East properly referred to the evidence produced by the Institute for Fiscal Studies. It suggested that there had been—the word is fairly used—a "dramatic" increase in the number of families whose income is less than half the national average. Even if we move away from the dramatic edge of poverty to mainstream Britain, that suggests that there are many people who have fallen back and are in a much less comfortable position than before.
If Conservative Members were defending a situation in which the gap between rich and poor had opened because of a genuine free market—for example, if individuals had shown exceptional ability and had capitalised on it without any artificial aid or assistance and had pulled away from the ruck—that would be one state of affairs, although we might wonder about the desirability of it. That, however, is not the state of affairs. The reason for many inequalities is the Government's deliberate fiscal policy.
We are talking about something that has been created as an act of policy and not as the natural order of events. Fiscal traffic has been moving in the wrong direction. That 605 suggests an indifference to the distribution of income at best, or possibly a malevolent interest in it. That is unfortunate. I shall not engage in a volley of statistics, but if we consider the direct and indirect tax take from the wealthiest 10 per cent. of people since 1979 as a percentage of gross income, it is clear that it has fallen. As for the bottom 10 per cent., the take has risen quite sharply.
It is right that income tax as a percentage of income has fallen, but that is not true in terms of total tax, even before the big hike of recent times—the dramatic reversal of election promises. Even before that hike, the tax burden as a whole had increased under the Government. It has increased disproportionately for those who were already at the bottom of the heap. That is unfortunate. That is not the natural order of Adam Smith economics; it is the result of a social policy that has had unfortunate consequences. That is why Opposition Members are entitled to protest.
§ Mr. Roger Evans
As the hon. Gentleman agrees that the top 10 per cent. of income tax payers are now paying more as a proportion—
§ Mr. Evans
No. As I understand it, as a matter of income tax revenue, the top 10 per cent. of income tax payers are now contributing more revenue as a proportion of income tax to the public purse. Does the hon. Gentleman agree that it would be self-defeating for any Government of any political persuasion to increase the 40 per cent. tax band? If he does not agree, will he explain why?
§ Mr. Dewar
I am much more interested in what we do about the bottom than about the top. The gap is an important factor, and I am interested in the social consequences of it. We should be worried about the additional burdens which have had to be faced by those at the bottom of the heap.
I have not heard the hon. Member for Monmouth (Mr. Evans) speak before, except for his interventions this morning. I suspect that he is interested in marginal tax rates. He will know that in 1993-–94, according to the Department of Social Security, there were 230,000 lone parents in work and 270,000 married couples who were paying 75p in the pound or more as a marginal rate in tax deduction and benefit loss. If I were to suggest that we should introduce a top marginal rate of 75p in the pound, I suspect that the hon. Gentleman would be burning the pews in the Chamber and declaring the proposal to be one of the greatest political outrages committed by doctrinaire socialists that there has ever been. He is happy, apparently, to live with a system that imposes such a rate of taxation on some of the poorest in society as a disincentive to bettering themselves, which we all want them to have the chance to do. Perhaps the hon. Gentleman should worry slightly more about that.
It is not the Labour party alone which is worried about these matters. I do not know the reading habits of the hon. Member for Monmouth, but I would guess—this is to his credit—that he reads the Financial Times fairly regularly. If so, I recommend to him Tuesday's leader—he may have read it—which was headed, "The wages of inequality". It refers to an excellent piece of research work that was undertaken by the Institute for Fiscal Studies. I apologise for the technical talk, but the institute took the 90th 606 percentile of the distribution of income and compared it with that of the 10th. It was found that the gap between the two had widened significantly.
Conservative Members may say that that does not matter, but the Financial Times believes that it does. I suspect that the Government are beginning to have some conscience about it. If so, that is to be welcomed. The Financial Times is suggesting that steps must be taken to do something about that problem. No doubt the hon. Member for Monmouth enjoyed the point made in the Financial Times that, in those circumstances, the Labour party's minimum wage proposals might become defensible. Perhaps we had better do something about the problem before the hon. Member for Monmouth has to embrace the minimum wage as a means of dealing with the issue. I know that the hon. Gentleman would find that ideologically uncomfortable, to say the least.
§ Mr. Duncan
The hon. Gentleman made an appeal to the House as though the Financial Times was some great Tory capitalist paper. He may recall that, at the last general election, the Financial Times called on people to vote Labour. It is not only pink in colour; it is often pink in its views.
§ Mr. Dewar
I am glad to know that the hon. Gentleman, who I am sure reads the Financial Times, does that only to know what the enemy is saying. His was an interesting theory. Whatever else the Financial Times is, it is a sensible and sophisticated commentator on such issues. I merely pray it in aid to suggest that the problem of the growing gap, and possibly even the growing absolute poverty, in this economy is not something which sensible people want to sweep away in the way suggested today.
The gaps are not just appearing in work. There is undoubtedly evidence, which I welcome, that retired people are on average now enjoying many more resources and a higher quality of life. That is largely because of the maturing of state earnings-related pension schemes and occupational schemes and because of such things as approved private pensions. It is not happening because of direct help from the Government.
As the Minister is aware, the basic state pension, as a percentage of average male earnings in November 1979, was 20.4 per cent. It was 15.9 per cent. in April 1993 and it is probably below that now. Even if there has been a general increase, sadly a large number of pensioners, probably about 1.6 million, are having to depend on income support, a means-tested benefit which is often resented, as a means of keeping body and soul together.
I sometimes think—and this may be a comment on me—that I have never had to do what so many of my constituents whom I meet have to do, and that is hope that I do not have an unexpected bill of £30, £40 or £50. My constituents just cannot find such sums. That is an inhibition and a cause for worry, the like of which I have been fortunate enough never to experience. However, I am aware of the fact that things that I would take in my stride as a minor inconvenience or irritant become towering problems for a large number of my constituents who are living, in that practical sense and applying that practical test, in the very shadow of poverty.
§ Lady Olga Maitland
Would the hon. Gentleman be kind enough to give us a benchmark to show what he means by poverty, bearing in mind that, up and down the country, people living on income support and benefits still 607 have microwaves, televisions, freezers and so on in their homes? Does he agree that it is a problem not so much of people living on a set income, but of how they manage their budgets? A person in one flat may manage perfectly adequately while someone else may not. Surely we need to teach people the art of household management.
§ Mr. Dewar
The hon. Lady cannot rely on the fact that some people are feckless and do not manage a low income skilfully or that they are not graduates of the Micawber school of economics in the way that the hon. Lady would like.
I accept the point made by the hon. Member for Sutton and Cheam (Lady Olga Maitland) that one could refer to a range of benchmarks, some of which are open to counter attack. We could refer to income support level and then say that we could raise income support which would bring more people into poverty. We could refer to half national average income, but national income changes and shifts and may be too generous. The hon. Member for Sutton and Cheam may think that this is odd, but I like to consider the drift. We must consider the problem in social terms.
With regard to income support levels, for a husband and wife with two children under 11, if we consider income support levels as a percentage of average earnings m this country, that family would be living on one percentage point above one third of average earnings. I believe that the figure is 34.2 or 34.3 per cent., according to the latest parliamentary answer that I have seen. The figure has been declining because, of course, it has been tied to the retail prices index and not to average earnings, which, on the whole, have been out-pacing it.
More than 15 per cent. do not reach income support level because they are repaying social fund loans or for a variety of other reasons. In my experience, that is a very tough level at which to live; it leaves very little room for comfort.
One worry—I am sure that the hon. Lady will worry about this matter when she thinks about the figures—is that several things that the Government are doing will make the situation worse for people who are living on benefit. One simple headline figure is incapacity benefit. Of course, some savings will come from excluding from benefit people would have received invalidity benefit under the old system. Even those who climb through the hoops and jump the hurdles and receive the new benefit will find that they have a much lower income level than they would have had in the old days.
We are not talking about pennies, as the hon. Member for Sutton and Cheam will know. There will be savings of £415 million in 1995–96, £1.2 billion in 1996–97 and £1.7 billion in 199–98. Those substantial sums are being taken out of the limited pool of resources for helping those who are not in work and who are certainly living in poverty. That is of considerable concern for me as a constituency Member.
§ Mr. Dewar
I shall press on because I must stop very soon.
My concern is not about playing the numbers game—many ingenious people play it better than I would and with considerably more staying power—but about the social fallout that I see around me. I pray in aid as evidence a speech that was made by someone whom I do not normally 608 call to my help on such occasions, the right hon. Member for St. Albans (Mr. Lilley), the Secretary of State for Social Security.
§ Mr. Dewar
I hear loyal noises from the Conservative Front Bench about the right hon. Gentleman's excellence and worth. The hon. Member for Bury, North (Mr. Burt) might have been present when the Secretary of State spoke at the Birmingham diocesan conference on 20 June. He talked about social instability, in particular the breakdown of marriages, a subject in which he is particularly interested and about which he is particularly concerned. He picked out as the main economic cause of the problem the low wages that are now being earned by unskilled workers. Even people in work are now being forced on to a wage which I would regard as a very good definition of poverty if one of the consequences of it was that it produces such stresses and strains that it threatens the stability of marriage and of the family unit.
I cannot think of a better definition of damaging poverty than that if one is in full-time work and earning so little that it is reasonable to think that one will find it difficult to sustain one's family and the personal connections that are such an important part of a family unit. That is what the right hon. Member for St. Albans said at the diocesan conference in Birmingham the other day. It is remarkable testimony to the difficulties that we are in. They are not people on income support or benefit; they are above that, but are still in that position. Conservative Members have said what a wealthy society we have. That we have people in that situation tells us something about the social damage that has resulted from our fiscal and social policies.
I have with me a newspaper cutting—it is perhaps a little out of date—which I came across by chance when I was cleaning out some papers, and, knowing that I would speak in this debate, I kept it. It is a report in The Guardian of 6 January 1993. I do not necessarily endorse it, but again I remind the House of what others think. The article stated that Professor Brian RobsonThe Government's leading adviser on urban policy warned yesterday of a 'nightmare scenario' in which inner cities became ghettos of poor and disadvantaged people guarded by armed police while better-off neighbourhoods hired their own armed guards.I do not endorse the language. If hon. Members say that when people like me draw attention to social dangers we are exaggerating, they should think of statements such as those made by impartial figures who are considered worthy of being placed in positions of importance and being made consultants by the Government.
§ Mr. Clifton-Brown
When the hon. Gentleman is devising his future benefits policy, will he target what will inevitably be limited resources specifically at groups in society who need those resources or spread them thinly among every conceivable group?
§ Mr. Dewar
I have made it clear in the past that I recognise that targeting is bound to be part of social policy. We cannot implement the policy in any other way. There are certain sectors where one does not target, except in a narrow sense—clearly, child benefit is targeted because people have to have children before they can receive it, but that is playing with words. I defend the principle of child benefit. I defend the principle of a universal state pension 609 as the foundation on which we should all build for security in retirement. If the hon. Gentleman is asking me whether I would target for other special interest groups, of course I would. It would be silly not to do so. It is attractive to talk about a basic income for every citizen, but the arithmetic is harsh, and I do not think that many hon. Members would see that as a practical proposition.
Exciting changes are on their way, we understand. I suppose that it would be too optimistic of me to think that the Under-Secretary of State might give us a glimpse into the future. A barrage of briefings is taking place among the heavy press. The Secretary of State for Employment is committing the Government to full employment—a plank of policy that has been derided over the past few months when it has appeared on Labour party platforms. Last Sunday, The Sunday Times said that the policy was purely in response to the Labour leadership contest. If so, it shows that democracy in the Labour party has desirable spin-offs in other places.
We are also told—perhaps the Under-Secretary knows about this more directly—that, at a cost of about £1 million, family credit is to be extended to childless couples and single people. We are told that there will be wage top ups and wage subsidies. We are told that there will be changes in the national insurance contribution system that will do something about the weighting in favour of those who are better off currently built into the banding of the system. Those changes are designed to help those at the bottom of the scale.
Judging from what I have heard this morning, I know that such changes will come as a deep shock and will be anathema to Conservative Members. I hope that what we have heard is true, not because I endorse the proposals in principle and detail now—I do not know exactly what will be produced—but if the proposed changes constitute moves to tackle the sort of problems that my hon. Friend the Member for Gateshead, East has properly drawn to our attention, I welcome them. I look forward to receiving further details, and perhaps a few more tasters and trailers, from the Under-Secretary over the next few minutes. The subject is of great interest to us.
I am not concerned with deciding whether Mr. X, Mr. Y or Mrs. Z gets so much money. I want to get away from a definition of poverty that destroys life chances and leaves people with self-fulfilling prophecies of failure in terms of education and employment and which, on occasions, literally shorten life expectancy. It is no exaggeration to say that.
The hon. Member for Sutton and Cheam may be interested to know that a year ago—the picture has not changed—a report from the Greater Glasgow health board, in whose area my constituency falls, stated that the mortality rate for males between 16 and 64 years of age in Glasgow was 20 per cent. worse than the Scottish average. The Scottish average is considerably worse than the British average. That is an historic fact, but we still have to live with it.
I found it startling that the chief medical officer was predicting that those differentials would continue to increase for the foreseeable future. We now have figures that we used to imagine would exist only in the old eastern Europe. The chief medical officer said that the figures were caused by deprivation, poverty and the financial climate in 610 which families had to live. I am tired of seeing such effects in my constituency. I am tired of kids—who I know are as able as kids who live two or three miles away down the road who, due to their economic circumstances and the encouragement that they receive, will go to university—leaving school at the first opportunity, never entering university and perhaps never even entering the job market. If there are signs that the Government are beginning to catch up with some of those problems, I shall be delighted. I hope that the debate will encourage the Government in doing that. However, I am cautious in my expectations because I have looked at the record and seen just how disappointing and perverse it has been over the past 15 years.
§ The Parliamentary Under-Secretary of State for Social Security (Mr. Alistair Burt)
I have enjoyed the debate so far because the subject was well raised by the hon. Member for Gateshead, East (Ms Quin), whom I congratulate on her choice of motion. Inequality genuinely concerns all of us. I am grateful for the speech made by my hon. Friend the Member for Teignbridge (Mr. Nicholls), the sensitive contribution of my hon. Friend the Member for Plymouth, Sutton (Mr. Streeter) and for regular interventions from other hon. Friends. I am also grateful for the speeches that we have heard so far from Opposition Members. Some I had slightly more sympathy with than others.
I shall deal with some of the comments made by the hon. Member for Glasgow, Garscadden (Mr. Dewar). He rightly identified the dilemma not only for us in Britain but, I suspect, for many countries around the western developed world. In the midst of industrial progress, which has been remarkable in the 20th century, there are still in many countries which count themselves as wealthy, the leaders of which are meeting today in Naples, pockets of deprivation which are almost the same as 100 years ago, certainly in location if not in intensity. I listened with sensitivity to what the hon. Gentleman had to say.
The hon. Member for Rotherham (Mr. MacShane) raised his banner for the industrial north. I am glad to support him in that. Rotherham and Bury have many connections, mainly through tremendous battles in the 1960s between our respective football clubs. Trips to Millmoor or Gigg Lane regularly resulted in scores of 4–5, 5–4 or 4-all draws. Tremendous stuff. My father and I and many people in Bury remember those matches well.
The hon. Member for Rotherham called for me to set up a conference in Rotherham. I am ahead of him. Part of my remit in the Department has been to look after matters related to low income and poverty. I have been as connected as I could be to Poverty 3, the European anti-poverty programme, and with anti-poverty groups working in the United Kingdom. My Department sponsored a seminar held in Manchester in March this year to consider the effectiveness of those strategies. I attended a similar conference in Bath two or three weeks ago at which we discussed with the statisticians how we might draw some better conclusions and targets for that work in the future.
The problem with Poverty 3 and probably the reason why it has not yet been extended into Poverty 4 is ensuring that it does a worthwhile job. The aims and aspirations are entirely well meaning, but, as several of my colleagues 611 have said, we need to do more than that. The conference was designed to do that. I have no doubt that, in due course, I will be back in Rotherham at some stage. It was kind of the hon. Gentleman to make the offer.
I enjoyed the speech of the hon. Member for Gateshead, East. Her concern is plainly honest and sincere. Her rage at inequality arouses passion, but, ultimately, like my hon. Friend the Member for Sutton, I was left dissatisfied. You know me, Mr. Deputy Speaker. I hope that my concern about the issues that have been raised this morning matches that of any Opposition Member. I read New Statesman and Society, I am a member of Amnesty International and I am still a communicant member of the Anglican church—three institutions which are slightly leftward-leaning to a greater or lesser degree. I lean leftwards to a tiny degree within the Conservative party, but I am not a socialist, partly because of speeches like that of the hon. Member for Gateshead, East. Having been led so far up the hill, ultimately there is nothing there.
The hon. Lady did not give solutions to the problems. She dare not give the solutions because, although there are answers, they are not socialist answers.
The hon. Member for Gateshead, East spoke of wage inequality, but dare she go further and commit herself—not her Front Bench or party, because I understand the position—to a minimum wage, and say how much it should be? She spoke of the link between pensions and earnings. Dare she go further and commit herself to a restoration of that link? I am afraid that unless one follows up one's concerns, one is left very much up in the air with the rest of us.
I am tempted to say that the policies of the hon. Member for Gateshead, East are rather like some of the lists that one occasionally sees in Private Eye. For example, "Labour policy on inequality: No. 1, become aware of inequality; No. 2, talk about fairness; No. 3, spend money; No. 4, er…; No. 5, that's it." Until we get a little more, that remains the feel.
The hon. Member for Gateshead, East dealt with a broad sweep of economic and social policy and covered some other items. She clearly feels that income inequalities are a bad thing. But one man's income inequalities are another man's pay differentials. We used to hear a lot from the Opposition Benches and the trade unions about the need to preserve pay differentials and reward skills. At what stage does recognising one man's difference in ability stop being a good thing, which is a differential, and become a bad thing, which is inequality?
Bill Jordan, the president of the Amalgamated Engineering Union, has made it clear that his union would oppose any "squeeze on differentials". He said:if the price of a minimum wage is wage restraint for higher paid workers, then our answer would be no".I suspect that there is a measure of realism in that remark, as there was in the remarks of the hon. Member for Garscadden when he dealt with the subject. That demonstrates how hard it is to be precise and to tackle inequality realistically, and it is why our more practical approach is better.
Much was made of the report, which was published at the beginning of June by the Institute for Fiscal Studies, under the programme of studies on the distribution of income and wealth sponsored by the Joseph Rowntree Foundation. It examined changes in the distribution of incomes between 1961 and 1991. The House will not be surprised if I make a few comments on that and try to 612 provide, not a gloss, as the hon. Member for Garscadden suggested, but some greater clarification of statistics that are difficult to interpret.
Alongside that report, Dr. Stephen Jenkins of Swansea university published a further report on income in the 1980s. Both studies draw on the same data as the Government statistical service report on "Households below Average Income", published in July last year and covering the years 1979 to 1990–91. As the Central Statistical Office announced on 30 June, the new edition of those statistics will be published next week, on 14 July. That brings the comparison up to 1991–92.
The Institute for Fiscal Studies report indeed describes a widening of the gap between the top and the bottom of the income distribution in the last decade, as compared to previous decades, and discusses the factors behind it. The general thesis is not new, although the IFS has provided some useful new insights into what has driven the changes. Members on both sides of the House have given their views at length.
To my mind, the key finding in the report is not the change in income share of different population groups, but the massive increase in average earnings in the past decade, compared with the preceding 20 years.
Page 19 of the report shows that, in 1961, the average household income was £140. In the 10 years to 1971, it had crept up to £165—a growth of 18 per cent. In the decade from 1971 to 1981 average income, on that measure, grew even more slowly—by 13 per cent. From 1981 to 1991, however, average income soared to £258—a growth of no less than 39 per cent. in a single decade. Put another way, the report tells us that average incomes grew by more in the past 10 years than in the whole of the previous 20.
That is a significant achievement—the product of successful economic and fiscal policies. It is the context in which all the study's findings on changes in income distribution have to be seen. During a time when there was such a dramatic rise in average income, it should come as no surprise that the income of different groups grew at different rates. The Government make no pretence of that fact and do not try to hide it.
The report by Professor Stephen Jenkins, published alongside the IFS report as part of the same research programme, goes into more detail about incomes in the 1980s. It shows that average incomes grew in real terms for all types of family in the population. Growth was not confined to particular groups. Couples with children saw their income rise 34 per cent, while that of pensioners went up 38 per cent. The hon. Member for Gateshead, East was asked by one of my hon. Friends whether she really believes that pensioners were better off in 1979 than they are now. Loyally, she said yes—but in her heart, she knows that she is wrong. On average, pensioners as a group are 42 per cent. better off in real terms, and 54 per cent. better off after housing costs, than in 1979. Sixty one per cent. of all pensioners and 69 per cent. of recently retired pensioners have an income from occupational pensions. The life of pensioners has changed. One has only to travel around the country to see some of the things that pensioners are now able to do.
More telling is the fact that the bottom decile of income distribution 20 or 30 years ago included a fair whack of pensioners, but today they are moving out of it. That is not to deny poverty, but whereas 20 or 30 years ago we thought of the pensioner as a single unit—always poor and in difficulty—that is no longer true. That group has changed 613 dramatically and the distribution of wealth within it has grown significantly. Pensioners are a key group in terms of the past 20 to 30 years.
Unemployed families saw a growth in their income of 30 per cent. I repeat that last point. The independent research found that the incomes of families with no full-time worker rose 30 per cent. The incomes of less well-off pensioners and those in work with relatively low levels of pay have also gone up in real terms. An unemployed couple on income support with two children are better off in real terms by £22 a week than with equivalent benefits under the previous Labour Government.
I will expand on other aspects of the IFS report which the hon. Member for Gateshead East did not emphasise. The report is clear about the importance of the social security benefit system in reducing inequalities in income. It shows that the social security system in the 1980s contributed more greatly to reducing inequalities than in previous decades.
The report also recognises that information about incomes at the very bottom of the income scale is uncertain. I hoped to provide that clarification to the hon. Member for Garscadden, with whom I discuss so much. I am sorry that he is temporarily absent, but no doubt he will read my remarks and we shall discuss them next week. The difficulty of interpreting statistics at the bottom decile is at the heart of the argument. Determining the living standards of that group is particularly difficult, and there is some reason to believe that those low incomes understate true living standards. We have been making that point for some time.
Income alone is not an accurate measure of living standards. As the official "Households Below Average Income" statistics show, between 1979 and 1990–91 the possession of consumer durables among the least well-off increased dramatically—nearly three quarters have central heating, more than half have video recorders and almost one half have cars.
Both the HBAI and the Institute for Fiscal Studies point out that self-employed people who report nil incomes or losses are a significant factor in widening inequalities because they are heavily represented in the bottom decile. They also reduce the apparent level of income in the bottom 10 per cent of the population. If the self-employed are excluded, the income of the bottom decile is raised 8 percentage points.
The numbers in that group have risen dramatically since 1979 because of changes in employment, but the majority of that growing group with apparently no available cash are still able, on expenditure measures, to spend more than the national average. The picture is distorted. If one sets up a business, one may declare no income the first year, so the statistics show no income—but one's expenditure continues through normal drawings and everything else.
Who are the people in the bottom 10 per cent? Earlier this year, the authors of the IFS report gave a lecture brilliantly and imaginatively entitled, "Why Peter Lilley Was Right". [HON. MEMBERS: "Hear, hear."] I commend that sentiment to the House. In that lecture, they gave illuminating figures about the occupations of people at the very bottom of the income scale. They showed that more than 100,000 of them were farmers, 40,000 were taxi 614 drivers and an amazing 12,500 were chartered accountants. That is just fantastic. It shows that if we extrapolate numbers from a small sample and multiply them across the country, we get the sort of distortions I mentioned. The figures for low income and their composition must be treated with caution. The one factor that people in those occupations have in common is the ability to control the presentation of their income.
The clear message in all the income analyses is that the vast majority of people in the United Kingdom have enjoyed dramatic increases in their incomes since 1979. Incomes have grown at different rates, but that is consistent with a society that rewards individual endeavour and where everyone has the opportunity to do well.
There are some extreme examples of problems with that. The hon. Member for Gateshead, East referred to water board officials and one or two other cases. I do not like what happened. That is my personal view and it may not be shared by my colleagues. Some things give a sense of aspiration a bad name. Sometimes, something is seen to be so chronically unfair that it is hard to justify. That does not mean that a market society is wrong; that people should not have legitimate aspirations to do well; or that people in business, who sometimes operate under a high degree of risk, should not prepare a secure future for themselves and their families. Nevertheless, there are sometimes sets of figures that just do not make one feel right. I do not know much more about the case raised than what I have read in the newspapers, but it made me feel uncomfortable.
§ Mr. Clifton-Brown
Does my hon. Friend agree that people should be able to earn whatever is considered reasonable in the circumstances provided that their companies are successful, but that what are not acceptable are large severance payments where the companies under their management have actually declined?
§ Mr. Burt
My hon. Friend puts the point well and it is obvious that his sentiments are shared by many of our colleagues. It says a little more about the market system than does the case raised. Some people feel that the system has its boundaries.
At the beginning of my remarks, I said that I hoped I cared and felt as strongly about these issues as does any Opposition Member. How would I respond to the difficulties raised by the hon. Members for Gateshead, East and for Garscadden? Recognising the diversity of human talent and ability, I believe that it is right for societies to develop so that talent and ability are used for the good of all.
A proper system of reward for endeavour which benefits the whole of society inevitably means that people are rewarded differently. Therefore, a society that must be unequal in that sense is acceptable provided that, first, all people have the opportunity to take part in that society. There will be occasions on which Government intervention is necessary to ensure that those opportunities are provided. Secondly, all people should be able to participate in the increasing wealth of society, even if not equally. I am offended if the latter does not happen.
I believe in and support the sort of policies that the Government follow because we are determined to ensure that issues such as persistent unemployment, which deny people the opportunity to participate, are seriously and 615 genuinely tackled. It is because the Government's policies can tackle matters in the way that I have described that I believe we can do the job better than the Opposition could.
Let us consider what the Government have done and how they have tackled some of the important issues that are symptomatic of the problems raised by the hon. Member for Gateshead, East. Many of the income statistics quoted today reflect the damaging effects of the recession and, above all, the rise in unemployment. However, that is not a British phenomenon; it occurs in all OECD countries. Who is coming out best? Who is working hardest to overcome the problems? Our Government's economic policies are delivering growth and low inflation. Unemployment has fallen by more than 300,000 since 1992 and continues on a downward trend. Inflation is at a 25-year low. Interest rates have halved since 1990, helping industry and providing an extra £37 a week for the average mortgage-holder. We have created a flexible labour market.
Much was said about wages. The hon. Member for Rotherham mentioned the excellent speech of my right hon. Friend the Secretary of State for Employment. He would have no difficulty in lining me up on his side on that issue. At the same conference, Howard Davies, director general of the Confederation of British Industry, was asked to go through the issues that he felt were crucial to creating full employment and, of course, he tackled wages, saying:In the number three slot, the graveyard of English batsmen over the years, and perhaps the graveyard of this point, I put wages. As William Brown says 'hopes of full employment…are forlorn unless labour costs per unit of output can be kept in line with those of our competitors'. And even now, wages are rising more rapidly here than in most other developed economies.The OECD also, crucially, raised wage flexibility.
I say to the hon. Member for Gateshead, East that that poses her party more problems than it poses us. We recognise that jobs count and that having a job is better than not having one. We recognise that, at difficult times, jobs might be created offering low wages as a lead on to something else. None of us wants a perpetual, low-wage economy—that is not Britain's future—but, if we are to fight off foreign competition and build a better society in which more people have a part, it is essential that the wage and job structure remains flexible to market needs. The sort of equality and help that the hon. Lady wants at the lower end cannot be produced artificially. It will be produced only by industries staying in business, doing better and giving more rewards to all their employees.
§ Mr. MacShane
I am grateful to the Under-Secretary for giving way. I agree with Howard Davies's statement, which he repeated at the Trades Union Congress conference on Tuesday. It was central to the argument that I advanced. Although wages from full-time employment in Britain in the 1980s rose far more dramatically than in other OECD countries, our unit labour costs rose far more significantly than those of our main industrial competitors. Baroness Thatcher introduced free collective bargaining, and, in the absence of pay policy, inequalities have risen dramatically.
§ Mr. Burt
There we are. We are beginning to build some planks of Labour's next election manifesto. Pay policy is back and I wait with bated breath for my long-time colleague, the hon. Member for Islington, North (Mr. Corbyn), to give his version of the manifesto and to tell me how many votes he will give the hon. Member for Sedgefield (Mr. Blair) in the forthcoming election.
Artificial constraints on labour markets will not provide the sort of society that hon. Members want. The OECD highlighted the flexible labour market being pursued by Britain as one of the key policies that would contribute to growth in wealth in the next 20 or 30 years. We have sought to improve wage flexibility, to strike a balance between job security and the pressures of the market and to move from passive income support to more active measures to help unemployment.
Those matters are particularly within my remit and touch on some of the comments of the hon. Member for Garscadden, who looked for some chinks of lights from me on how the Government might develop. One sees more chinks of light on what our policy might be in The Sunday Times than we ever get from the Opposition of what they might do.
It is best to consider what we have done in the past two or three years in the benefit system to try to create the bridge between dependency on benefits and getting back to work. That is proving to be a key issue. I have noticed in my two years in this job that social security systems around the western developed world have been changing. They are no longer regarded in isolation or in relation to what they do to protect the poor at a particular time, but are considered increasingly in the light of how they bring people back into the economy and how they ensure that people do not remain excluded—a term whose use I fully understand in this context—from the rest of society. If the benefit net is something into which people sink and out of which they have difficulty in climbing to get back into work, we all have problems. It has been recognised in various countries, whether they have right or left-of-centre Governments, that it is a problem to be tackled. It has been part of our job in the past few years to tackle it head on, and my right hon. Friend the Secretary of State has advocated such action.
A key objective of social security policy is now therefore to ensure that there is always a financial incentive to move into employment and that the transition from dependency on state benefits to financial independence is as smooth as possible. Maintaining work incentives in the benefits system is very much a question of achieving the right balance between providing for the most needy while not removing the financial incentive to work and between providing support for those working on low wages while also seeking to reduce dependency on benefits.
Our policies in recent years have been aimed at maintaining the correct balance. Before 1988, we reckoned that around 60,000 people were no better off in work than on income support—they were caught in the unemployment trap. The reforms and restructuring that we carried out then have ensured that almost everyone gets a return from work.
Since then, we have introduced a number of further measures to tackle this problem, including the restructuring of benefits paid to the unemployed and low-paid, especially those families with children. The cornerstone of those measures was the introduction of family credit. I regret the hon. Lady's reference to it, because it does not 617 depress wages. It is not paid to everyone, but only to those with families. It now helps to boost the incomes of more than 500,000 working families with an average award of £47 per week. Recent independent research showed that couples in work with family credit were on average £18 a week better off than when out of work, and lone parents were £30 a week better off.
However, not everyone is able or in a position to take up work. That is why the Government have spent millions of pounds protecting the incomes of the most vulnerable. Since the 1988 reforms, extra help worth more than £1 billion a year has been provided to low-income families with children and pensioners. Indeed, a typical unemployed family with children receiving income support has seen a real-terms increase of nearly 24 per cent. since 1979.
§ Ms Quin
The Minister said that he wishes to see a reduction in dependence on benefits, especially among people in work, but how does he envisage that happening, given the downward pressure on wages to which I referred? Some wages are as low as £1.85 an hour or even £1.40 an hour for security guards, for example. How does he believe that people in those circumstances can lessen their dependence on benefits?
§ Mr. Burt
The hon. Lady makes a fair point, but how are we to respond? If we were to remove family credit, for example, in those circumstances, I do not believe that such firms would suddenly offer higher wages. Firms will pay only what they regard as sensible, according to the sort of work in which they are involved. If we continually increase benefit levels and make it more difficult for people to move into even low-paid work, they become stuck. Improving benefit levels does not help with that problem.
Wages will rise as unemployment continues to fall and employers realise that in order to attract people to work they must pay proper wages. It would be a dereliction of our duty if we sought artificially to withdraw support and protection from people who need it. We find that family credit is working as a bridge to get people back to work. I did not hear an answer from the hon. Lady to that problem, and I do not believe that the answer that I suspect that she would favour—the introduction of a minimum wage—would do the job.
In conclusion, I should like to widen the debate slightly, as one or two hon. Members tried to do. Equality in British society is not merely a question of facts and figures and economics, although they are important. Governments must not stifle opportunity. To operate otherwise would mean imposing state controls and reducing choice which, ultimately, results in a levelling down of performance. Wherever there have been societies which have tried that approach—perhaps the hon. Member for Islington, North will be able to enlighten me if I am wrong—they have failed.
The report by the Institute for Fiscal Studies, which is cited in the motion, makes some especially telling points about the impact of pay policy in the 1960s and 1970s on reducing growth.
How do we encourage the policies that will foster equality of opportunity? Education is one method. In the early 1980s, there was growing recognition that while the brightest of our youngsters were able to achieve more than those on the continent and in the United States, our average 618 and below-average children were not keeping pace with their European and world counterparts. This Government were determined to address that. We instituted the reforms in education which are designed to improve the abilities of all our youngsters and to help them to compete. What chance would there be of equal opportunity if those attempts had not been made?
We should remember that many of the problems could be laid at the door of the reforms of education in the 1960s when there was no measurement of what was actually achieved by pupils and thus a slow sliding down of the educational attainment of our pupils was accepted. The number of 15-year-olds who achieve five or more GCSEs increased by a quarter between 1989 and 1993. The number of 17-year-olds achieving two or more A-levels has almost doubled since 1980. A record 70 per cent. of 16-year-olds go on to further education compared with 27 per cent. in 1979. We all know what the expansion of higher education has been under this Government.
The hon. Member for Rotherham mentioned, fairly casually, that the OECD report said, that we now had as many people in higher education as other countries in Europe. In 1979, we definitely did not have. We were well behind and it is this Government who have addressed that. That is real equality of opportunity.
The education reforms have done well because, we understand, the hon. Member for Sedgefield is taking a keen interest in one of the grant-maintained schools. That must be good news. To the hon. Gentleman's great credit, he has also commented favourably on a number of reforms introduced by the Government.
When the right hon. Member for Islwyn (Mr. Kinnock) was leader of the Labour party, I always remember his being asked during an election campaign whether there was anything that the Conservatives and Margaret Thatcher had done that he admired. He said no. To his credit, the future new leader of the Labour party, the hon. Member for Sedgefield, has been honest enough to say yes, there are things that even he thinks are right. We think that there are a lot more. At least politics in this country is moving on if some Opposition Members recognise that changes have taken place for the good, produced by this Government. I am pleased by that.
One of the other things in which equality comes in firmly, which we have done right, but which was fiercely resisted by the Opposition, is the reform of trade union law. What equality was there when people stood in the car park and put their hands up to go out on strike? People who did not were watched, known, seen and handbagged with a bag of stones. We ensured that there were individual postal ballots which enabled the individual trade unionist to have as much power as the trade union leader. That is equality. Who fought for that? It was the Conservatives, not the Opposition.
It would be nice if the reform had been taken still further and if each Labour Member used one vote in the forthcoming Labour leadership battle. How many votes do they have? There is equality for some, but not for others. We have Jeremy "Five Votes" Corbyn and Denis "Four Votes" MacShane. That is not equality.
§ Mr. Burt
The hon. Member for Garscadden says that it is a stupid point. It is not. I reckon that if we are talking about equal societies, what is sauce for the goose is sauce 619 for the gander. The hon. Member for Pontypridd (Dr. Howells) has said that he feels that it is fair to use one vote. It would do much more for Opposition Members to espouse such views than to go on at us about inequality.
§ Mr. Dewar
I would be rather more impressed by the Minister's remarks if there were a wider franchise for the leadership of the Conservative party. At least we have enfranchised literally millions of people who support, and who are actively involved in, the Labour movement. The Conservative party has taken no such steps. Yes, it is possible that some people have more than one vote, but at least we have a democracy, unlike the Conservative party.
§ Mr. Burt
Like the Labour party, we have an electoral college. In our electoral college, there is one vote for each Member. That seems pretty democratic to me.
The debate has been extremely good. In its most serious moments, we have recognised that we deal with problems in our constituencies which worry us all and to which society, over the past 100 years, has not found the answer. We have not found the answer to the problem of how, as wealth increases for the majority, we ensure that some people do not miss out for a whole variety of reasons. This Government have sought, previous Governments have sought and future Governments will seek ways in which to ensure that everyone is included in society. We will keep working on that.
Most crucially, the Labour party has tried to use selective figures from a number of sources to paint a too-depressing picture of a divided British society. The facts do not support its pessimistic view. Through policies adopted by this Government, the vast majority of people have seen their incomes rise, the less well-off have shared in that prosperity and the vulnerable have been protected. That must remain the aim of a Conservative Government: to see as many as possible in work; to protect those who cannot; to strengthen individuals so that they are better able voluntarily to give their time to build communities; to develop an economy that is determined to recognise the real world—not hide from it—and to prepare their people through training and education properly and honestly for that world. Any arrogance or conceit that goes with wealth is not part of that philosophy, for we are all equal in the sight of God, nor is any artificial bar to the legitimate aspirations of families and individuals to prosper. It is because there are better answers to the problems illustrated by the motion of the hon. Member for Gateshead, East that, although I listened to her argument with interest, I failed to be convinced by it.
§ Mr. Jeremy Corbyn (Islington, North)
The Group of Seven industrial leaders are meeting today and over the next few days in Naples and I should like to think, although I suspect that it is a faint hope, that they will leave the conference hall for an hour or two to visit the slums of Naples, to see what inequality is about in what is supposed to be a successful western European economy. I also hope that, in their deliberations, they will think about some of the effects on the poorest people in other parts of the world of the policies pursued by a very small number of industrial countries—the way in which poverty is visited on sub-Saharan Africa by the GATT deal and the imposition of poverty wages on countries that are trying to get out of the debt crisis.
620 The debate is about inequality in Britain and I suppose that we have seen the two faces of the Tory party. The hon. Member for Teignbridge (Mr. Nicholls) is a sort of Old Testament figure in political thinking. He positively glories in inequalities between the rich and poor in the country. Then there is the rather more sympathetic approach of the Minister. But the two faces add up to exactly the same thing, because they have supported a Government and their policies which have deliberately created further divisions in the country in the past 15 years. There is no mistake about that.
When I leave the House at the end of this debate, I shall go to my constituency, I shall hold my weekly advice surgery and I shall see a sense of desperation on the faces of those people who come to see me. Will they ever manage to get out of a one-bedroom flat where they are trying to live with three children? Will the council ever be able to offer them another flat? Will they get a transfer to a housing association place? Like councillors and others, I shall do my best to try to help them, but I know that, at the end of the day, the chances of many of them ever being able to get out of their problems are very slight because no houses are being built for rent. The private rented sector is simply closed to them because the rents have been decontrolled and a one-bedroom flat costs at least L150 a week in a poor area of London. They are in the ghetto trap; they are in the poverty trap.
In my surgery, I shall also be able, as could any other person, to look at the health inequalities which exist. Why do children from poor working-class families tend to have more bronchial problems than children from middle-class families? Why is the life expectancy of a company director 10 to 15 years greater than that of someone who sweeps the roads or who collects the refuse from our homes? Why is there a growth of inequality in our society? When I intervened earlier on the speech of the hon. Member for Teignbridge on the question of the people sleeping on the streets of London, all he could say was that a lot of hostels are being built, so that those people may be taken off the streets of London. Frankly, it was due to the embarrassment of the Government that those people were taken off the streets of London—it was nothing to do with solving the housing crisis. We have a terrible housing crisis and a terrible sequence of inequality of living in our society at the present time.
There are other areas of inequality—not only in health or housing, but in education and expectations. Anyone who goes, as I do, around schools often, will meet children of eight, nine, 10, 11 and 12 years old who are full of optimism, hope, ideas and expectations. They want to be doctors, lawyers, vets, meteorologists, physicists, engine drivers, bricklayers or carpenters—they want to do all sorts of things in their lives. In other words, they want to achieve. Similarly, their parents want them to achieve. When these youngsters reach the age of 14, 15 or 16, they find themselves living in a community where at least a fifth of the working population is registered as unemployed and where many others are not even allowed to be so registered. It is then that the sense of despair and hopelessness begins to set in.
The ideas are formed that perhaps there will not be a job, that perhaps they will not be able to afford to receive a university or polytechnic education, that perhaps that sort of life will not be available for them. There starts the spiral of decline and despair. That is followed by a rise in crime 621 generally, drug addiction and prostitution. Anyone who lives or works in an inner city area, or represents one, is aware of that and understands it only too well.
The complacency with which the Government present their case is breathtaking. They are entirely out of touch with the reality of life for so many people, who are leading a worse and worse existence with higher and higher levels of unemployment.
What are the prospects for those who get jobs? They are faced with the deskilling of the economy. We have lost so many skilled jobs, including jobs in engineering, over the past 15 or 20 years. The privatisation programme has made British Steel a phenomenally successful private enterprise company. But who is paying the costs of unemployment? Who is paying the costs of redundancy? Who is paying the social costs? We all know the answer—the rest of the community.
The Government talk about incentives. Apparently, the heads of the privatised industries require phenomenal salaries to do their jobs. They need the incentive of being able to earn £300,000 a year plus share issues, performance bonus payments, a free car and a free home. They probably do not even pay their water rates. Such people need incentives to work and produce.
On the other hand, there are those who sweep the streets for a local authority, cook meals in a school canteen or old people's home and provide the necessary care assistance for disabled people. Apparently, the incentive of high wages is not for them. Instead, they face the stick of compulsory competitive tendering, which means that their job is sold to the lowest bidder—some spiv company—every four or five years, when local authorities are forced to put out their services to competitive tendering.
Conservative Members may smile and think that it is all rather funny. They should try to understand the feelings of someone who has given a lifetime of work in a local authority garden, for example, or tending a cemetery, looking after an old people's home or working in a hospital. Such people have given a great deal. Indeed, they meant to give a great deal. They want to continue to do so. Instead, they are told, "Sorry, you are dispensable. Your job is on sale. We shall see if anyone is prepared to do it for less than you." So the cycle of despair and decline continues.
How would Conservative Members feel if they had to suffer that indignity after they had given 20 years' service to a local authority or health service? It is an indignity. It is a disgrace. A disgusting process is being implemented. Incentives for the rich, sticks for the poor. That is the argument that Conservatives advance.
The Government tell us that high economic growth is achieved through a process of inequality. There is no evidence anywhere to sustain that argument. In Britain, employers pay less in tax and social contributions than most other employers in Europe. Wage levels are lower than those in most other countries in Europe and unemployment is high and rising.
§ Mr. Corbyn
With 25-plus changes in the method of calculation of unemployment statistics, I am unsure 622 whether unemployment is higher or lower here than in other European countries. There is no common base for the measurement of unemployment.
I do know, however, that the attacks on trade unions, compulsory competitive tendering and the abolition of wages councils, along with the removal of any sort of wage protection and the introduction by the Prime Minister, when he was a Minister at the Department of Social Security, of the actively-seeking-work formula have meant that many people are forced to work in low-paid jobs. We know that 40 per cent. of the work force is now in either short-term contracts or in part-time jobs.
We do not live in a particularly health society. The knock-on effect of that is the current level of crime, misery, hopelessness and suicides. There have been 1 million recorded crimes so far this year in London alone. While I recognise that that is not all due to unemployment and to poverty, there is a cause and an effect. There is a link and it is about time that some people recognised that.
I find it baffling when the right argues that we can no longer afford the welfare state or to sustain the present level of state old age pension. In an attempt to unbaffle myself, I read an article the other day by the president of the Adam Smith Institute, a man who glories in the name of Dr. Madsen Pirie. The article was fascinating. Dr. Pirie writes quite well. He can spell and his grammar is excellent. The former Prime Minister would be proud of him. With regard to the welfare system, Dr. Pirie stated:There is one central problem which lies at the heart of the system. It is this: 'Anything you do to relieve distress will instigate more of the behaviour which caused the distress."'In other words, if we have unemployment benefit, people will become unemployed to obtain the benefit. If we have child benefit, people will have more children to obtain that benefit. Presumably the same argument applies to disability and sickness pay. That is an extraordinary argument. Dr. Pirie then uses his argument to justify wholesale privatisation of the welfare state through the encouragement of private insurance and private pension schemes. That appears to be the strategy which the Government are following.
One might describe that strategy as successful if one believes in the objective behind it. As my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) said, in the past 15 years the value of the state pension has fallen from more than 20 per cent. of average earnings to 15 per cent. According to the Minister, it will be at a nugatory level by the turn of the century. I assume that he means it will be below 10 per cent.
That drop has occurred because of the break with earnings that occurred in the 1980s and the rigging of the retail prices index. I wish that the previous Labour Government had achieved more on pensions. I wish that they had increased pensions much more. However, the Labour Government passed the 1975 legislation, according to which the state old age pension was to be linked to prices or earnings, whichever rose by the larger amount in that particular year. That is how the 1975 legislation was worded. It was not worded in the way described earlier. However, in his first Budget after the general election in 1979, the Chancellor of the Exchequer, Lord Howe, described breaking that link as his greatest achievement.
It is claimed that average pensioner income has increased by up to 38 per cent. The figure seems to increase by 1 per cent. whenever the Minister makes a speech. It used to be 33 per cent., but it has increased to 38 per cent. 623 in only a matter of months. I thought that the stock market had been declining, but that is the main source of the increase in the average income for pensions to which the Minister refers.
It is true that many pensioners have occupational pension schemes. Some have private pension schemes and some have savings. However, they are taxed on those savings and on that income. The Minister completely fails to appreciate the fact that many pensioners, particularly women pensioners, do not even qualify for the full state pension when they become eligible for a pension. Very few women, particularly older women pensioners, have access to occupational pensions. Desperation and poverty among older women pensioners are growing. Those pensioners are becoming more desperate.
The solution to the problem must be a much higher basic state pension. However, the Government propose to phase down continually the value of the state pension and of SERPS. They are spending £9 billion to promote private pension schemes through a process of subsidy and promotion. As a result, 1.5 million people have left SERPS and entered the private pensions industry. I am worried about the security of many of those private pension schemes and the lack of democracy in the way in which they are run; there is no democracy or guarantee in the way in which private pension schemes are run.
In addition, there has been the nonsense of the imposition of VAT on fuel. That obviously affects low income earners or low income households the greatest. It is another poll tax and it is totally unfair. The compensation system is unfair. It will result in deaths from hypothermia. It is a totally wrong form of taxation. The compensation system does not work. Two million people are signing yet another petition for the removal of VAT on fuel. I hope that they are successful in achieving their target number of signatures, and I hope also that they are successful in mounting a campaign to force the Government not to go ahead with raising VAT on fuel to 17.5 per cent. in this year's Budget, prior to abolishing it altogether. Frankly, it is wrong.
We must now consider what is happening to the welfare state. The Government suddenly say, I do not know on what basis, that we can no longer afford the present level of the welfare state, and that the economy is held back because of it. Such thinking was behind opposition to the social chapter, and it is that, in effect, we must privatise welfare by encouraging people to take out private insurance and private pension schemes and have two tiers of welfare.
The arguments that the Government use now about not being able to afford welfare are exactly the same as their predecessors used against the introduction of the state old-age pension in 1908, and they were probably used in opposition to the Poor Law before that. They were certainly used against the universal welfare state of the late 1940s. According to the Government's very own publication entitled "Containing the cost of social security—the international context", social protection expenditure by Britain is nowhere near the highest in Europe. There are much higher levels in Luxembourg, the Netherlands and Germany. If we examine the sources of contributions to social protection expenditure, we find that employers' contributions are among the lowest in Europe, and they are seeking to make them even lower in future. The Government's argument is designed to break the universal welfare state to which we have become accustomed.
§ Mr. Corbyn
The words "almost all" and "cut" are rather relative terms. They are not very precise and not very accurate, either. Nearly all other countries start from a much higher base. In Sweden, parents are allowed 60 days sick leave a year to look after children who are ill. That is regarded as very important for parents and children. Sweden has a much more advanced system of social security than this country. In Sweden, the proposed reduction in holidays is very small compared with the wholesale cuts that are proposed in this country. The same cock-eyed economic thinking seems to imagine that all that matters is reducing welfare expenditure and that, somehow or other, everything will be all right.
The main plank of what the Government have done in the past 15 years has been to lower rates of taxation for the very rich, to increase taxation for the poor and to promote inequality to an incredible extent. The richest are 65 per cent. better off and the poorest are 14 per cent. worse off than they were 15 years ago. The idea that the trickle-down theory works is peculiar and perverse—that is, the idea that if we allow the rich to become as rich as possible, they might employ more gardeners and maids and we will solve the unemployment problem. The Government have destroyed the economic manufacturing base that the wealth of this country relied on, in favour of the speculative and spiv economy.
We will not have a more equal society and a more equal world merely by promoting the idea of a market economy. We can do so only by providing a decent level of social protection and also decent housing, education and health services for the people of this country. Reports on the way in which the health service operates show that queues are becoming longer, the quality of service in many areas is becoming worse and inequalities in health are growing.
Housing inequalities are becoming worse. Various bits of housing legislation are designed not to increase access to housing but to reduce it. More and more people now live in ghettos of very poor quality housing from which there is no possible escape. We also have an economic strategy which apparently is that if it is making money, it is probably all right, never mind the quality or what it is doing. Such thinking led to the de-industrialisation of many areas of this country.
I hope that, instead of that, we can look forward to saying that we want to live in a society where all are equal. I make no bones about that. I should like to see much higher levels of taxation for the very rich in our society. They have had an easy ride for the past 15 years. I should like a society where not as many people did not have to pay tax because they were too poor to pay it, as at present. I should like much higher levels of social investment. I should like a society that planned for its future, rather than leaving everything to the vagaries of the marketplace.
We live in a crazy world where the poorest are getting poorer and the richest are getting considerably richer. The undoubted benefits of technology are not being passed on in the way of a shorter working week or an improved life style for the poorest people. Those benefits are being used to make a great deal of money, causing inequality and alienation in our society.
625 Those who preach such gobbledegook economic policies find that they do not work. There was plenty wrong with the political and economic systems of eastern Europe and the Soviet Union, where plenty of mistakes were made and there were ludicrous degrees of centralisation. But those countries are now receiving, via the BBC Marshall plan for the mind and other such plans, the message that all that matters is a free market economy, with mass unemployment, beggars on the streets and high levels of prostitution. There has to be a more civilised way of organising life than the methods of the Government in this country and a number of other Governments.
Those of us who believe in equality do so because we believe in socialist values and ideas—we do not apologise for that. We believe in it because it is the only way to unlock all the talent. How many brilliant writers and scientists are wasting away because they did not get a chance at school or a college place and are living in poor conditions? The waste of talent, and human and other resources, which are used to control people rather than liberate them, is phenomenal.
Today's debate is welcome for the opportunity that it provides to discuss these issues. I congratulate my hon. Friend the Member for Gateshead, East on promoting the debate and allowing us to place on record our belief that the inequalities of Britain must be removed if we are to live in anything resembling a happy and harmonious society.
§ Mr. Roger Evans (Monmouth)
We have just been reminded in clear and certain terms that the hon. Member for Islington, North (Mr. Corbyn) represents the authentic voice of the Labour party. He said that there was plenty wrong with the economies of eastern Europe and the former Soviet Union. I find it deeply morally shocking that the evil tyrannies of the east should be dismissed in such trivial language.
One of the most poisoned political ideas of the 20th century has been the concept that the state has a right to enforce equality of income or equality of wealth. Before the hon. Member for Gateshead, East (Ms Quin), who introduced the topic with charm and effectiveness, wonders why I put that so strongly, I shall tell her. No doubt she would regard the inquisition as something to do with a bleak, dark age when the organs of the state and the church enforced similarities of belief with all the force of the state. She would deplore that. Those of us who stand for liberty reject also the idea that the state should use its power and force to confiscate incomes for no other purpose than a vindictive vendetta against one section of the community.
The answer to the debate has been spelt out by my hon. Friend the Member for Teignbridge (Mr. Nicholls). The statistics are clear. When we look at the proportion of the income tax take of the top 10 per cent., the top 1 per cent. or the top 5 per cent., now and in the late 1970s, we see clearly that the top 10 per cent. is now contributing 45 per cent. of the income tax take compared to 24 per cent. 15 years ago. That is a staggering statistic.
My hon. Friend the Minister explained that average earnings have risen. The top 10 per cent. is contributing a larger slice, and the freedom and opportunity now available to the self-employed—not just those employed 626 by large monolithic corporations, but small business men, professionals, those in enterprise companies who work hard and expect a return—have allowed them to prosper over the past 15 years. We now know clearly what the Opposition would have to offer them if the Labour party ever came to power again—political persecution based on some perverted doctrine of the community.
The hon. Member for Gateshead, East said that the top tax rate of 40 per cent., which was introduced in the 1988 Budget, was wrong. She would not answer—understandably in her position—what rate she wished to increase it to. The hon. Member for Glasgow, Garscadden (Mr. Dewar), who spoke on matters which were safe Labour party topics, avoided that vital and fundamental question. Apparently, no explanations will be given if they can possibly be avoided.
What would be the purpose of increasing the top tax rate from 40 per cent. to 60 per cent., 80 per cent. or the 93 per cent. rate imposed by the Labour party on what it used to call "unearned income"? The fruits of people's life savings, money saved rather than spent, the hard work of a lifetime were traditionally called "unearned income" by the Labour party. There can be no economic purpose of raising the top rate of tax. There can be no benefit to the Government and no benefit to those who benefit from the welfare state. If we increased the rate, we would simply reduce the amount of money that the Government had to spend on the welfare state.
§ Mr. Clifton-Brown
Does my hon. Friend agree that the effect of increasing the top rate of tax to the sort of rates that he described would be, first, to drive businesses and their executives offshore into other countries and, secondly, to encourage the wealth creators of this country to work less hard, and thereby pay less tax?
§ Mr. Evans
My hon. Friend is right. Those would be the inexorable consequences of such a foolish and short-sighted policy—a policy which Labour Governments have pursued ever since they have had the opportunity to pursue them. We have the spectacular consequence that the tax havens of this world, which are nice, respectable and rich and all enjoy the protection of the British Crown and the rule of British law—I think of places from Hong Kong to the Channel islands—have thrived and prospered on minimal top tax rates. I can tell the hon. Member for Islington, North, who did not seem to be aware of the wealth of learning that has now been made clear, that some people in America and Japan are concerned at the rise of the Pacific rim countries, where, for example, in Hong Kong, Singapore and South Korea, top tax rates are much more favourable for enterprise than in Japan and certainly in Germany.
The gaping gap in the debate on the Opposition Benches is in any understanding of where wealth comes from. It apparently grows on the trees of the garden of Eden. They say that there should be more jobs, but doing what and for what purpose? Of course everyone wants to be rich or to have a well-paid job, but how does one get such a job? Who provides one? It is not the British state. It is not somehow the Workers International. It is not the trades union movement. It is individual businesses, which stay in business only so long as they provide goods and services which someone in the world is prepared to buy at a price.
If one puts up the price of something, be it a consumer durable or the price of labour, there is less money to be 627 spent and people buy less. The British work force has rightly had a noble tradition of valuing itself extremely expensively. That is part of the engine of driving up average earnings, but it has a social cost. It prices a section of the community out of labour. The hon. Member for Islington, North seemed to think that everyone should be paid exactly the same. That was the only socialist logic that I could discern from his description of the uncertainties of being a cemetery keeper or the managing director of a large company. If they are not to be paid the same, who is to decide what each should be paid unless it is the free market and the choice of the community? It is a community decision, whether people buy more of this or pay for less of that. That is what freedom is all about.
It is ironic that the hon. Member for Rotherham (Mr. MacShane) should have raised this particular argument. I have a copy, which I much enjoyed in childhood, of Newnes "Children's Encyclopedia of the World". It contained a graphic illustration of the eclipse of the sun of 1921 or 1922—I forget which. It depicted the eclipse as a glorious ray of sunshine across a section of northern England which it could properly describe as the richest place on the face of the earth. It was once the richest place on the face of the earth. The brilliance and success of the textile industry at that time, which was a result of enterprise, initiative and technical advance, have now been wasted. Some businesses prosper, others do not.
The motion is based on a political fallacy—the idea that the British state should control its subjects in such a way that equality would be the end. It will not work.
§ Mr. Evans
The motion reads:To call attention to inequalities in the United Kingdom".The hon. Lady should be drawing attention to poverty, welfare and all the important aspects of this debate that my hon. Friend the Minister and, in fairness, the Opposition spokesman, the hon. Member for Garscadden, dealt with.
Through the wording of her motion, the hon. Member for Gateshead, East interjected into a serious discussion of welfare matters some left-wing political nonsense about inequalities of income and wealth. She criticised the 40 per cent. top tax rate and that is why I am criticising the motion and why I say that it would not work.
Happily, we do not live in a world where one can impose socialism in one country. We live in a freer world, where trade moves around and where people can buy their goods from Singapore or South Korea and buy refrigerators from Italy. That is why such goods are cheaper than they were in the 1950s by substantial amounts in real terms.
§ Mr. Evans
Of course there is nothing in the motion that is against free trade, but it is the logical consequence of the hon. Lady's argument that this place should be concerned about income equalities at the top. If she is right, presumably we have to do something about it. She is presumably suggesting that the British legislature should increase tax rates for those on higher incomes. I am simply pointing out that in a free world, where there is free trade, and as part of a European Union, which increasingly has a single market, the British Government have happily lost the power to impose socialism in one country.
628 Although the motion has drawn attention to some serious matters, which the hon. Member for Garscadden certainly discussed, a fundamental political error of a very dangerous variety is at its heart
§ Mr. Stephen Timms (Newham, North-East)
I am grateful for the opportunity to take part in this debate, Mr. Deputy Speaker, and welcome the initiative taken by my hon. Friend the Member for Gateshead, East (Ms Quin) in causing it to happen.
I apologise for being unable to be here at the start of the debate, but I wish to introduce some information from my constituency, the London borough of Newham, where I had the privilege to be leader of the local authority for four years, until a couple of months ago.
In Newham, we suffer from poverty and the effects of inequality to a severe degree. The Department of the Environment's local conditions index, which was published earlier this year, placed Newham as the local authority area suffering from the highest urban deprivation. The local authority commissioned a report entitled, "Poverty on your doorstep" which was a poverty profile for the London borough of Newham and was published in March this year. I shall draw attention to some of its findings.
The research showed, not surprisingly, that the problems of poverty are closely linked with high unemployment. Between May 1990 and November 1993, there was a 72 per cent. increase in the number of unemployed people claiming income support in the borough of Newham. In November 1993, the official unemployment rate was more than 20 per cent.—a total of nearly 20,000 people registered as unemployed—which is 55 per cent. higher than the rate for Greater London and more than twice the rate for the south-east and the whole of the United Kingdom.
According to the 1991 census, 31 per cent. of the 16 to 24-year-olds were unemployed, so unemployment was particularly focused on that age group. Since 1991, the official unemployment rate has increased considerably. Members of the Asian, African, Afro-Caribbean and other ethnic groups in Newham suffer higher unemployment than the average for the community, which is a particular problem in east London.
Household incomes in Newham are considerably lower than for the capital as a whole. Fifty-five per cent. of gross annual household incomes were below £10,000, compared with only 40 per cent. for the rest of London. In November 1993, 47,800 people were claiming income support, and 37 per cent. of Newham children were entitled to free school meals in January 1993. The borough had 9,000 overcrowded households—twice the London average.
What do the Government think about inequalities and poverty on that scale? I believe that the view is held that they are a good thing because they drive people to work harder and drive the economy. Is that the view of Conservative Members? Are we being told that inequalities and poverty are a statistical error and do not really exist, because the people on lowest incomes are really chartered accountants? Are we to believe that the figures in the Newham, IFS and other reports are statistical flukes? Or are inequalities and poverty something which the Government want to change?
629 Is it Government policy that the gap between the richest and poorest in society should stop widening? Having listened to several speeches from Conservative Members, I have not heard those questions answered.
The Minister suggested that there is not a problem with poverty because the people who show up in surveys as being poor own video recorders and microwaves. The clearest refutation of that argument are investigations into the health of the poorest. The Newham poverty profile showed that 47 per cent. of children with long-term illnesses live in households where no one is in employment. That which we describe as poverty translates into poor health among not just the unemployed head of the household but his or her children. That is the clearest indication of real suffering and measurable poor health among members of the community who endure poverty and are the victims of inequalities.
The first step is to make it an explicit Government objective to narrow the gap between the richest and poorest and not allow it to widen. Are the Government prepared to acknowledge that policy objective? If so, we can move forward, to discuss how that objective may be achieved. I welcome the change of heart among Government Members in respect of full employment, which now appears to be an explicit and realistic policy objective. For many years, we were told that it was not. I hope that reducing inequalities will also be a Government objective—not their sole objective but part of the Government's intentions.
I enjoyed the Minister's speech. He drew attention to the Government's achievements in education and suggested that the introduction of the grant-maintained system would contribute to a reduction in inequality. I strongly disagree with that view and point the hon. Gentleman towards the example of Stratford school in the constituency of my hon. Friend the Member for Newham, North-West (Mr. Banks). There is no doubt that the granting of grant-maintained status has led to a radical fall in standards, to the extent that that school's level of GCSE achievement last summer was the lowest of any school in London. When the school was maintained by the local authority, it had a much higher level of achievement.
I accept that that example might be extreme, but it clearly shows why the school should not have been given grant-maintained status. Indeed, it should have been closed, as the local authority wished, to meet the Government's objective of removing surplus places. Instead, there will be significant reduction in life chances for a large number of the pupils at that school who otherwise would have been pupils at other Newham schools with much higher levels of achievement.
I endorse what my hon. Friend the Member for Islington, North (Mr. Corbyn) said about his experience of large numbers of bright young people with enormous potential, optimistic and looking forward to the future, reaching their middle teens and seeing no opportunities ahead, losing their optimism and no longer looking forward to the future. That is a terrible indictment of Government policy over the past 15 years.
It should be a specific policy objective that the gap between the richest and the poorest should be narrowed, or at least should not be allowed to widen, as it has done inexorably over the past 15 years. Full employment should also be a policy objective. Until job opportunities are 630 provided, people will not be able to find a way out of poverty. There should be a minimum wage so that those in work can live at a decent standard.
Taking a parochial view, I must stress that east London needs investment. The local authority in Newham has developed partnerships with the Government and the private sector to work for the regeneration of our area. That has proved successful. I hope that soon the Government, consistent with their commitment to securing regeneration in east London, will give the green light to an international passenger station at Stratford on the high-speed rail link, towards which the local authority, private sector development companies and construction firms have been working for a couple of years. It will not cost the Government anything, but it will be the catalyst for the substantial new development, new jobs and new opportunities that east London so desperately needs.
There have been a number of references to the Labour party leadership election. I welcome the fact that throughout the country there is enormous interest in the issues that have been raised by that election. One effect of that is a growing revulsion towards the effects of narrow marketisation within our society. My hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) said that there are signs that the Government have a worsening conscience about what has been happening to our society. I hope that that is so and that we shall increasingly agree on the need to reduce inequality in the United Kingdom.
§ 2.9 pm
§ Lady Olga Maitland (Sutton and Cheam)
I have listened to the debate with tremendous interest, but, depending on whether one was sitting on the Opposition or Government Benches, one would have gained a completely different impression of Britain and of its role in the world.
I am fed up with Opposition Members bashing Britain and talking it down. The time has come for us to stand back and take a cool, calm look at where we are today and how society, across the board, has improved in terms of prosperity, standards of living and expectations.
The Opposition's talk about this country becoming "worse and worse" and their scaremongering bears no relation to reality. The striking point made in the debate that highlights the differing approaches of the Conservative party and the Opposition to social problems is that the Opposition seem to trade on the politics of envy and on resentment for one man's success. That is the most destructive element of their policies and is why I trust, hope and believe that the Labour party will never become a party of Government until it recognises that people are entitled to strive, achieve and gain reward for hard work.
In a thoughtful speech, the hon. Member for Gateshead, East (Ms Quin) made some telling points. She mentioned full employment and asked why we could not have a new environmental task force. Another spending pledge—that typified the Labour party. How much will such a scheme cost? Who will pay for it? It will be an artificial form of providing labour, which will not build the prosperity that we need. It simply would not work.
§ Lady Olga Maitland
I am sorry but time is short and I shall end my remarks shortly.
In a caring society, parents can know that their children will receive a proper education up to university level. I 631 applaud the Government for ensuring that one child in three goes on to higher education. That is a big advance on 10 years ago, when one child in eight did so. I applaud the fact that children are now better fed than ever. People might criticise junk food, but improved diets have made children healthier and fitter.
The health service is treating more people more rapidly using the latest technology and is making more investment. People are now expected to live longer; hence the problems that we shall face in coping with old age pensions in the future.
We have not dealt with moral poverty. We all face the problem of the breakdown of family life. Why do couples no longer believe that they can marry and make a commitment to each other that will last throughout their children's lifetime? A spin off from that was the establishment of the Child Support Agency to chase feckless fathers, the absent dads—the people who believe in the "I want to have it" society and the "I can then dispense with it" society. We must deal with that moral poverty with a great deal of energy and diligence.
We should be clear in our minds and condemn lesbians seeking special facilities from the health service for fertility treatment. That is moral poverty; it has nothing to do with building family values.
I found it depressing that the Archbishop of Canterbury this week launched a model religious education syllabus but downgraded the Christian input. Our children cannot grow up in a moral-free and value-free society. If there is one thing that we must do, it is to ensure that Christian beliefs, culture and philosophy are included in our children's education and that they are thus enriched.
§ Motion, by leave, withdrawn