A more equal country without crushing poverty was the primary demand of the early founders and leaders of the Labour Party. The 1945 Attlee government set the path that brought peak equality and a low point for poverty in the 1970s. With the reversal of this historic achievement – the pinnacle of egalitarianism – Labour governments from 1997 onwards set out to tackle the hike in levels of poverty from 1980, but simultaneously downgraded Labour’s traditional commitment to inequality.
Keir Starmer inherited a nation riddled with hardship and deprivation. The number of children in relative poverty stands at a record 4.5 million. This is 31 per cent of all children, a figure that is set to continue to rise.
Labour’s silence on inequality: A political blind spot?
Yet one of the starkest holes in Labour’s programme is the absence of a strategy to tackle poverty. It was mentioned just once in Rachel Reeves’s budget speech in October. Inequality didn’t get a single reference. None of the party’s missions commits to narrowing Britain’s burgeoning gap in living standards. The government has established the Child Poverty Taskforce, but its report planned for the Spring has now been delayed. Yet, there’s not much we don’t know about poverty – probably the most researched issue in social science – and the potential impact of different policy levers.
While waiting for the Taskforce to report, there have been measures that will have an impact, if limited, on poverty. Examples include the roll out of free school meals for children in families on Universal Credit and the extension of breakfast clubs to 180,000 children. In contrast, the government also tried to introduce planned cuts to disability benefits – designed to save £5 billion – that were abandoned in response to a sustained backbench revolt.
Then there are other progressive measures – such as the rise in the national minimum wage, a significant strengthening of workforce rights and attempts to tackle a high level of economic inactivity. These maybe part of a wider, if undeclared, plan to boost low incomes through labour market measures, while limiting the strength of the benefit system in order to encourage work incentives. Such a plan – if it exists – might have some echoes with the pre-distribution approach once favoured by Ed Miliband. Such a strategy, however, seems destined to have a limited impact unless it is backed by much more transformative economic policies. While the last decade has brought a boost to the lowest wages, for example, this has not resulted in a fall in in-work poverty. Yet the government seems intent on maintaining, with some small exceptions, the largely market-based, over-privatised and weakly regulated economic system with its inbuilt bias to profiteering, low investment and inequality.
The two-child limit: A test of Labour’s will
Ultimately, the level of poverty depends on how the cake is shared. Although the benefit system needs to be strengthened, there is a limit to its redistributive power. Take the pressure to end the two-child benefit cap. Such a move would be highly targeted. But although it would cut child poverty by around half a million, 28 per cent would stay poor, still double the figure of the 1970s. Other benefit changes would cut that proportion a little more, but a more decisive reduction would depend on much wider economic measures. In the event, Downing Street sources have made it clear that, following the rebellion over cuts in disability benefits, any possibility of dropping the two-child benefits cap is now ‘dead’.
Beyond redistribution: Building an economy that works for all
It is Britain’s yawning income and wealth gap – driven by the way the gains from economic activity have been captured by an over-powerful financial and corporate elite – that explains the rise of impoverishment. The achievements of the 1970s have been overturned by an end to the pro-equality philosophy of postwar governments, with the state being turned into an agent of inequality.
Although trends in poverty and the income and wealth divide are umbilically linked, that link is mostly ignored. For too long, political and academic debate has been focused on poverty alone. Tony Blair launched a targeted anti-poverty plan, but was also clear in welcoming the higher fortunes being accumulated at the top. The assumption seemed to be that widespread deprivation is unrelated to the actions of those who own and control economic resources.
How wealth extraction drives social decline
Yet the hike in top fortunes has come at the expense of downward pressure on overall wage levels and wider living standards. Soaring levels of personal wealth are not the result of a more productive and innovative economy. They have been driven by new processes of corporate extraction and appropriation. A range of predatory business methods have been to ‘skim’ or ‘top slice’ the gains from economic activity at the cost of weakened social and economic resilience and declining life chances. The effect is a diversion of resources from meeting basic needs to serving ever more expensive and luxury spending patterns. ‘The test of our progress is not whether we add more to the abundance of those who have much’, declared Franklin D. Roosevelt in 1936, ‘it is whether we provide enough for those who have too little’.
The result of over-consumption by the rich and under-consumption of the everyday goods and services that sustain communities has been an intensified ‘paradox of plenty’. Hence, we’ve witnessed the rising social crises of the last decade and the juxtaposition of enfeebled public services, growing levels of impoverishment and high levels of super-luxury consumption. To set this in reverse, the economic and political plates need to be moved.
The poverty gap: A nation divided by income
The scale of the task involved is revealed by the ‘poverty gap`. This is the amount by which a particular household falls below the poverty line. The current gap across all poor households is around 30 per cent. This is equivalent to an average shortfall of £6,200 a year for a couple with two children below the official relative poverty line. It is a gap that stood at around 23 per cent in the 1990s. It is a stark indicator of the inadequate share of national income and wealth enjoyed by those on the lowest incomes. The poorest fifth of households currently holds 7 per cent of the nation’s aggregate income (after taxes and benefits). In contrast, the top fifth holds 41 per cent.
Raising the aggregate income share of the poorest requires more than a few tweaks to an already failing economic and social system. As Harold Lever, Chief Secretary to the Treasury during the 1974–79 Wilson/Callaghan government, dubbed their sometimes tepid response to the crises of the time, it is merely ‘frolicking in the margins`.
Without a sustained reform of today’s extractive and increasingly monopolistic economic model, one geared to the further enrichment of an already over-powerful plutocracy, Britain will remain a high-inequality, high-poverty nation, just as – outside the postwar decades – it has always been. If Labour fails to deliver a clear and sustainable reduction in poverty, in line with one of its key historic missions, big questions will surely be raised about the party’s purpose in government.
Stewart Lansley is a visiting fellow at the University of Bristol. He is the author of The Richer, The Poorer: How Britain Enriched the Few and Failed the Poor, a 200-year History, Breadline Britain and The Cost of Inequality.
The Richer, The Poorer How Britain Enriched the Few and Failed the Poor. A 200-Year History by Stewart Lansley is available on the Bristol University Press website. Order here for £19.99.
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