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Poverty and Inequality

I thank the hon. Gentleman for that, but I think I got there long before him, when I was writing pensions articles calling for the restoration of the earnings link and expressing great concern about the means-testing of people who did a little bit better for themselves than they would have by relying completely on the state. I urge whoever is in government not only to restore the link but to do so as quickly as possible. To go back to 1997, the poorest pensioners were expected to live on £69 a week. Thanks to the current Government, no single pensioner in this country need live on less than £132 a week. In 1997 we were very much aware of growing inequality. It will be recalled that there was consternation about the executives of newly privatised industries paying themselves huge amounts of money in salaries and share options. The name of Mr. Cedric Brown comes to mind. At about that time chief executive officers were paid about 40 times average pay, but today they are paid about 81 times average pay. There have been huge changes: the poorest pensioners and people on disability benefits have been guaranteed a minimum income; and there are now working tax credits and the child care strategy for families with children, with large numbers of extra child care places available, and help in paying for them, as well as Sure Start and improved maternity pay; and there is now a carers strategy and rights for carers, who are some of the most neglected people. However, sadly, inequality has continued to widen because of the large increases at the very top of the scale, such as those I have mentioned. It is not just a question of the highest-paid executives or a small number of people: the highest-earning 1 per cent. of the population has a huge impact overall on the median income—the income level at which half the population has more and half has less. We have a divided society. Disraeli wrote in "Sybil" of""Two nations between whom there is no intercourse and no sympathy; who are ignorant of each other's habits, thoughts and feelings, as if they were dwellers in different zones or inhabitants of different planets"." Only last week, echoing those sentiments, Richard Lambert, the director general of the CBI, pointed out that chief executive officers are so differently remunerated that they are in a "different galaxy" from the rest of us. The recent Evening Standard pull-out special edition on London's forgotten poor, said:""London is a shameful tale of two cities. In the richest capital in Europe almost half our children live below the poverty line."" Despite the best efforts of the Labour Government in lifting half a million children out of poverty we still face a huge, uphill task. I congratulate the Government on their commitment, in the Child Poverty Bill, to bring down those horrendous figures. As to solutions, we must first recognise that inequality is not just about the difference between the average and the poorest. It is about the total inequality in society. We are now a much more unequal society than many other countries in the OECD, apart from the United States and Portugal. The huge salary increases at the top end, which put people out of touch with the reality of life for those at the poorest end of society, have not been replicated in other countries with more equal societies, where economic development is just as good as ours, if not better. Richard Wilkinson and Kate Pickett have set up an organisation called the Equality Trust. In their book they comprehensively argue that in rich countries a smaller gap between the rich and poor means a happier, healthier and more successful population in terms of life expectancy, achievement in maths and literacy, infant mortality, homicide, imprisonment, teenage births, trusting one another, obesity, mental illness, drug and alcohol addiction and social mobility. They say convincingly, based on their evidence, that if we halved inequality in the UK murder rates would halve, mental illness would reduce by two thirds, obesity would halve, imprisonment rates would reduce by 80 per cent., and trust would increase by 85 per cent. More equal societies benefit everyone—those at the top as well as those at the bottom. Inequality is pervasive in society. It wrecks lives. Wilkinson and Pickett cite a very interesting study from 2000. World Bank economists Karla Hoff and Priyanka Pandey reported the results of a remarkable experiment. They took 321 high-caste and 321 low-caste 11 and 12-year-old boys from scattered rural villages in India and set them the task of solving mazes. First the boys did the puzzles without being aware of each other's castes. In those conditions the low-caste boys did as well as—in fact, slightly better than—the high-caste boys. Then the experiment was repeated, but this time each boy was asked to confirm an announcement of his name, village, father's and grandfather's names, and caste. The boys did the mazes and this time there was a large caste difference. The performance of the low-caste boys dropped significantly. The same phenomenon has also been demonstrated in experiments with white and black high school students in America. Black students performed as well as white when they were told that the tests were not a test of their ability, but when they were told that the tests were about their ability they performed much worse than white students, who performed equally in both tests. There is a stereotype, and people react to it. There is plenty of evidence of biological impacts on people who are of low status and feel threatened. When they are happy and well adjusted they release high levels of the hormone dopamine—the feel-good hormone. When they are threatened and under stress, they are ready to strike out and they have high levels of stress hormones, including cortisol. That has an impact on their behaviour, as is well documented in the "Early Intervention" booklet. The authors—our colleagues—argue strongly for early intervention, between the ages of nought and three, when young children are extremely damaged if they are not given the nurturing and love that they need. I commend the booklet for the action that it proposes for future Governments, but we must see that in the context of the need for a more equal society. The current Government have already been trying to intervene. There have been area programmes such as the new deal for communities. However, we still find that those societies are disadvantaged. It is interesting that the right hon. Member for Chingford and Woodford Green cites statistics about council estates. I think that in 1980 more than 70 per cent. of people living on council estates were on above average incomes and those areas were mixed areas, where people worked. Now, they are wholly deprived areas, and that concentration of deprivation has been the result of Government policies over the past 30 years that have not recognised that good-quality rented housing is important and should not be regarded as only for the very poorest. We have seen the sale of the best council houses, which are lost to the stock altogether once the people who bought them move away. I am talking about the more affluent people moving out of council houses or people moving out of the area and out of council and social housing altogether. We have seen the ever greater concentration of deprivation in those areas. We must break that cycle and we must do that on the basis of tackling inequality. There is a lot of stereotyping of lone parents, and many people in the areas that we are discussing are lone parents. However, the Wilkinson and Pickett evidence shows that more unequal societies have more lone parents and that in more equal societies, even families headed by a lone parent are not disadvantaged, because they are less unequal than they are in this country. That brings me on to the point about the deserving and the undeserving poor. Rightly, hon. Members on both sides of the House have wanted to do their best for pensioners, for people who are obviously disabled, shall I say, rather than those who are less obviously disabled, and for children—so long as they conform to our stereotypes. Let us consider the case of children such as baby P and Khyra Ishaq. Society—both the authorities and the communities in which they lived—failed them. They are rightly seen as victims of our unequal society, but let us imagine what would have happened if they had not been killed and had been taken to a place of safety—taken into local authority care. What would their prospects have been? Although children in local authority care represent only 0.6 per cent. of children, 25 per cent. of the prison population is made up of people who have at some time in their lives been in care. That is a disgrace. It does not happen in other societies. In this country, people in deprived areas who go into care do very poorly educationally, despite the best efforts of the Government and the fact that there have been improvements in educational attainment. Very few of those children go into higher education, whereas in Denmark, for example, 60 per cent. of youngsters who were brought up in care go into higher education. So it does not have to be like this. We do not have to have such a low regard for children. Our society does not have a high regard for children. Yes, when they are victims, it does, but when they are not well brought up and when they are damaged, they are seen as evil. They are described as yobboes and hoodies and in other pejorative ways. When the Leader of the Opposition expressed sentiments about how we regarded young people in this country, which I agreed with, I was dismayed that he was condemned as wanting people to "hug a hoodie". I would have liked the Government to say that at last the Conservative party was coming round to our way of thinking with regard to not labelling young people when they perhaps go off the straight and narrow. We must look to ourselves as a society and what we are doing to those children, and recognise that in other, more equal societies, children who face disadvantage do not suffer in the long run, and then society does not suffer from the activities in which young people from disadvantaged backgrounds all too often engage. There was a TV sitcom called "Keeping Up Appearances", and there is too much of that behaviour in this country. Why do people feel the need for such huge incomes? It is all about competition. If one executive is paid millions of pounds, another must be paid a bit more. In fact, there is a race not to millions, but to billions of pounds. When we were having the Cedric Brown arguments, that was all about millions; now it is about tens of millions in remuneration. We heard at the weekend about the president of Barclays. Let us just think of someone on the national minimum wage of £5.80 an hour—£240 a week for a normal week. It would take them hundreds of years to earn—or to receive in income—what some executives receive in a year. That cannot be tolerated. The Labour Government set up the Low Pay Commission to introduce the minimum wage in a way that did not damage employment. There is still scope for improvements in the minimum wage, and I invite the hon. Member for South-West Bedfordshire (Andrew Selous) to confirm the Conservative party's commitment to the minimum wage and to increasing it in line with recommendations from the Low Pay Commission. The Low Pay Commission has been enormously successful, although I regret the fact that young people under 21 are paid less for doing the same job. Is it not time that we had a high pay commission to consider disparities in earnings in society and in companies? I say that because such huge disparities are not conducive to a good economic outcome. As Richard Lambert explained in the speech that I mentioned, no one denies the importance of companies making adequate profit for reinvestment and reasonable remuneration; indeed, some of the most successful companies—Richard Lambert cited Dave Packard, one of the founders of Hewlett-Packard—realise the importance of rewards, but rewards should be proportional and profits need to deliver wider goals than shareholder value. As the Member for Selly Oak, which includes Bourneville, I echo that entirely. Shareholder value was the only issue that was considered in Kraft's takeover of Cadbury. Hewlett Packard is not the only enormously successful company whose founders recognised that they must engage with their work force and that employees must feel part of the company. Other industrialists who have been extremely successful and recognised that excessive pay divides rather than unites companies include Ove Arup, founder of the Ove Arup Partnership. John Spedan Lewis founded the John Lewis Partnership, one of our most successful retail companies, and acted on the philosophy that differences in reward must be large enough to induce people to do their best, but in 1957 he declared that the differences were too great. It is time for greater company publicity about people's earnings. A pay audit is an excellent idea. A high pay commission might not be able to impose on companies' remuneration, but could suggest reasonable benchmarks. Some years ago, Channel 4 produced a series of programmes about high pay, and a high pay commission was set up. I do not remember its membership, but it included someone who was a cook, although I cannot remember her name. It concluded that there should be maximums and minimums in company employment for fairness and good performance. We need fairer organisation in companies. We have seen the demutualisation of the banking and financial services sector, and the squeezing out of trade unions. Countries such as Japan do not have a large welfare state and transfers, but they have much more equal societies in terms of remuneration. It is common in Japanese industry for people to come up through the trade union movement and to become company executives as a result of partnership working. We must encourage more worker participation, and it is appropriate to flag up the 1977 Bullock report on workers' rights and representation on company boards. We should reconsider some of those philosophies, which were not welcomed by many people in industry. Many trade unionists did not welcome involvement in decision making at the highest level, although I am pleased that one of my predecessors, Tom Litterick, who was the MP for Selly Oak in the 1974-79 Parliament, was the chief sponsor of an early-day motion welcoming the Bullock proposals, so it is appropriate for me to flag him up in my valedictory speech today. He was not my predecessor, but my predecessor but one. The Government have proposed that football club members should have a share in their clubs, and perhaps we could extend that to other companies to provide more worker participation, more worker shareholders, more worker involvement and more co-operation in companies, as in the John Lewis Partnership, where performance is much better than in companies where workers are badly treated and their efforts are not sufficiently rewarded. I turn to other things that Governments can do, including small measures. Post-Thatcherism, the present Government adopted too many of the stereotypes and attitudes to people, particularly unemployed people. Although the Government have done a lot for pensioners and families with children, unemployed people's incomes have not increased, but have merely been pegged to the retail prices index. At present, an unemployed person on jobseeker's allowance receives £65.45 a week—1.6 million people receive that allowance—and couples receive £102.75 a week. They receive help with housing costs, but those are the sums that they must manage on to meet all their needs—food, gas, electricity, clothes, social life and so on. I defy anyone in this Chamber to live on that level of income. The figure for young people under 25 is even more obscene at £51.85 a week. A small number—around 37 per cent.—have children and have benefited from the Government's measures to deal with child poverty, but the situation is a sad reflection on a Government led by a Prime Minister who in his maiden speech in 1987 castigated the then Government for their philosophy that unemployment benefits should be so low that people would be forced into even low-paid work. I do not expect that sort of attitude from the Government. At a time when unemployment is high—it has not risen to levels seen in previous recessions thanks to the Government's measures, which were opposed by the Conservative party—we must remember those who have been affected. We are still dealing with the fallout from the 1980s. Although unemployment fell after the peak of 3 million before rising again in the early 1990s, at the end of that period we saw a doubling of the number of workless households in which no one was in work. That has further exacerbated division and deprivation in our society. I urge future Governments not only to consider measures to deliver public services and early intervention but to consider equality of incomes and the damaging effect that very unequal incomes have on our society. There are measures that the Government could take, but the issue is not just redistribution of tax and benefits. I would like a much more progressive tax system. I am pleased that we now have a 50p income tax rate, but I am not pleased about the complexity resulting from withdrawal of the tax-free allowance. It is about time we started to talk about a truly fair and progressive tax system, so that people on low incomes of around £10,000 did not pay any tax. I realise that if that were to be introduced without making changes higher up the income scale, it would benefit higher earners as much as the low paid. We need a properly progressive income tax. We also need to consider other ways of making taxation fair. The Conservative party is castigating the Government for the increase in national insurance. I am unhappy about that change because it will affect everyone, but I am not at all happy about the alternative of meeting the £6 million gap that will result from the Tory promise on national insurance. Meeting it by increasing VAT would be even more regressive. Why do we have an upper threshold as well as a lower threshold for national insurance? Rather than having an across-the-board increase of 1 per cent., why should we not extend the upper limit? The 1 per cent. rate goes higher up the threshold; perhaps we could recoup some of the money lost through not levying the national insurance increases by raising the threshold. We should also consider property taxes. They are easy to collect and difficult to evade, but the only property tax that we have is the council tax. That is unfair because people with lower-value properties pay proportionately more than those with mansions. There should be a small taxation on increases in the value of land resulting from public investment, as it would be difficult for rich people to evade.