New Labour turns the tide of poverty, but inequality still runs deep

The new study, by a team of members and associates of the Centre for Analysis of Social Exclusion (CASE) at the London School of Economics, is being launched today at a seminar organised by the Smith Institute. Its detailed review of policy areas includes education, employment, health and neighbourhood renewal, as well as economic disadvantage. It draws on more than 500 separate sources from evaluations of policy initiatives, government reports and statistics, and academic studies.

 A more equal society? observes that in 1997, when New Labour was first elected, poverty and inequality had reached levels unprecedented in post-war history. The Government’s commitment to tackling social exclusion has been in contrast to its predecessors and includes high-profile targets for cutting child poverty and ensuring ‘over 10 to 20 years’ that no one will be seriously disadvantaged by the place where they live.

Where Government has concentrated its efforts, the study suggests there is now clear evidence of progress. Child poverty has been reduced by its tax and benefit reforms. New analysis of spending patterns also shows that low-income families with children, who have benefited most from the reforms, have increased spending on goods for children, such as clothing, footwear, games and toys, as well as on food (but their spending on alcohol and tobacco has not increased).

But the study argues that there are gaps in the Government’s strategy in other areas. For instance, the latest available figures show that poverty among working-age adults without children has reached record levels. While some vulnerable groups have been the target of special initiatives, others have not. And in the case of asylum seekers, government policies have actively increased social exclusion, especially in relation to employment, income and housing.

Prof John Hills, Director of the Centre for Analysis of Social Exclusion and co-editor of the study, said: “There are substantial differences between the policies pursued in the years since 1997 and those followed previously. In some of the most important areas, the tide has turned and policy has contributed to turning that tide. This is no mean achievement.

“However, it does not follow that policy has already succeeded, or that Britain has yet become a more equal society. In virtually all of the areas discussed there is still a very long way to go to reach an unambiguous picture of success. Sustained and imaginative effort will be needed to make further progress and to reach groups not touched by policy so far.”

The study, published by The Policy Press, and its contributing research were supported by the Joseph Rowntree Foundation and the Economic and Social Research Council. The key areas under examination include:

• Child poverty: Tax and benefit changes mean that the Government is on track to hit its target of reducing the number of children living in relative poverty by a quarter of its 1998/9 level by 2004/5. Nevertheless, relative child poverty levels are still greater than the average for the (pre-enlargement) European Union, and a long way above the ultimate target of being ‘amongst the best in Europe’.
• Working-age poverty: Relative poverty among working-age adults has only fallen slightly overall since 1996/7– and increased among those without children to a record level in 2002/3. Although many employment measures have been successful and registered unemployment has fallen substantially, significant numbers are dependent on state benefits whose value has been frozen.
• Pensioner poverty: Changes in the real value of state benefits for older people are helping to achieve a significant reduction in the number of pensioners living in relative poverty. However, the potential for more generous support, through the means-tested Pension Credit, to bring further reductions depends on levels of take-up.
• Income inequality: Reducing overall income inequality has not been a New Labour aim, and it has neither risen nor fallen significantly since 1997. The gap between those at the very top and those at the very bottom has increased, but the gap between those near the bottom and those near the top has fallen a little. However, if the Government had left the tax and benefit system as it was when it took power, the inequality gap between rich and poor would be far greater than today.
• Employment: Registered unemployment is at its lowest level for 30 years and long-term unemployment is among the lowest in Europe. However, the ‘New Deals’ may have lost steam, and outside the count of those actively seeking work ‘economic inactivity’ rates have only fallen slowly for working-age women and have increased for men.
• Education: Class sizes have fallen and the numeracy and literacy strategies in primary schools have been positively evaluated. Primary school achievements have improved, with poorer schools showing the greatest improvement. At secondary level the picture is more mixed. Overall, strong social class differences in attainment remain and may even have worsened in terms of university access.
• Health: Health inequalities have been a major focus of analysis, and the formula for allocating NHS resources between areas has become better tuned to the needs of disadvantaged communities. But other policies have been rather vague or limited. It is too early to judge the impact of recent policies, but there is little evidence yet from time trends of narrowing gaps between social groups.
• Poor neighbourhoods: Data for the poorest local authority areas as a whole suggest that services and key indicators are improving, and in some cases closing the gap with other areas. But despite progress, substantial differences remain between areas, and not all poor neighbourhoods are improving. Particular initiatives, such as Sure Start, are popular with residents, but crime is a recurring concern, and many feel they have no influence over decisions that affect them.
• Ethnic inequalities: Despite evidence of improvements for most ethnic groups in the past seven years, inequalities remain high in many dimensions, and there have been big differences between minority groups. For example, there has been a clear fall in the proportion of the Indian population and black, non-Caribbean people with incomes in the poorest fifth of the population, but no decline in the very high proportion of the Pakistani and Bangladeshi population with low incomes.
• Vulnerable groups: There has been progress tackling problems among targeted vulnerable groups as varied as children at risk of school exclusion and rough sleepers. Other vulnerable groups, such as older pensioners and disabled children, have not been selected for special attention. In the case of asylum seekers, Government policy has actively sought to reduce rights to income, employment and housing. This runs in the opposite direction to nearly all other policies assessed in the study.

Dr Kitty Stewart, a Research Fellow at CASE and co-editor of the study, said: “While highlighting evidence of undoubted progress, our assessment of the Government’s record reveals recurring problems. These include the conflict between targets for raising standards for all, and those that aim to reduce differences between disadvantaged groups. For example, overall improvements in health and education can leave the most disadvantaged lagging even further behind.

“Other problems relate to the growth of means testing, where a focus on those ‘in greatest need’ may be thwarted by low take-up, or create new disincentives to work or save. At the same time, the continuing decision to link social security benefits and tax credits to prices, rather than living standards, has created problems for groups like childless working-age claimants who do not receive any extra, targeted help. More generally, there is no overall strategy for ‘poverty proofing’ policies to ensure that action for tackling social exclusion is treated as a mainstream priority in every area of government.”