Labour government presides over worsening poverty and inequality

Work and Pensions Secretary James Purnell told us as he introduced Labour’s latest proposals for welfare reform that ‘Today, when the national effort is about a global downturn, we can no more afford to waste taxpayers’ money on those who play the system.’ He was clearly not thinking of those who ‘play the system’ like Sir Fred Goodwin, or Labour ministers like himself and MPs with their second home fiddles – the rich and the admirers of the rich. Instead, he was asking us to endorse Labour’s brutish attack on the poor, those who face a daily struggle to survive, and those who will join the dole queues this year as unemployment grows to three million. But that strategy is now backfiring, as millions compare the pittance they receive in income support with the vast benefits Labour politicians receive by reason of being in parliament. Robert Clough reports.

Purnell (salary £142,000 per annum) has milked the House of Commons expenses system to the utmost. Over a five-year period, clearly regarding his salary as insufficient to feed him, he claimed £9,094 on groceries, and since 2001 has received £145,000 for utilities, council tax payments, fixtures, fittings and cleaning as second home allowance in London. In 2006 he sold his then London flat but avoided paying capital gains tax because HMRC regarded it as his primary residence. In his first speech as Works and Pensions Secretary in January 2008 this free-rider said there would be ‘no free-riding on the welfare state’. His predecessor, Peter Hain, was of the same opinion, saying in the same month just before he resigned: ‘We have had great success in cutting benefit fraud by more than half since 2000…but we know that thieves are intent on stealing money from those most in need’, even as he received £103,000 in undeclared support for his bid to become Labour’s deputy leader.

Whilst squeezing the most out of their own benefits system, Labour MPs since 1997 have endorsed a policy which has continuously impoverished the unemployed and those on income support. One of the earliest actions of Labour on coming to office was the implementation of cuts in state benefits to lone parents which the outgoing Tory government had proposed in its final budget. It also proceeded with the draconian Jobseeker’s Allowance (JSA) regime, and over the years continued to tighten eligibility for the miserly income it provides. Today’s £64.30 a week JSA (£50.95 for the under-25s) has fallen by 25% against average earnings since 1997 and now stands at 10.5% of average earnings. This is half what unemployment benefit was worth on average from its introduction in 1912 until 1979 when the Tories tied it to inflation.

What is also staggering is the extent to which income support levels for those who are not working have fallen under Labour. This is especially so for those without children but even families with children on income support are still forced to live well below the poverty line:

Income support levels in relation to poverty thresholds by family type (after housing costs)*

People on income support are the ‘undeserving poor’ and are amongst the seven million people who are no better off than they would have been in 1998/99. Over half a million are subject to fraud investigations each year to ensure they get no more than the pittance they are due. The imposition of greater poverty on the unemployed has been accompanied by a stream of punitive measures: the ASBO regime; the proposals that unemployed people in council housing could risk losing their homes if they don’t prove that they are looking for work; and the current Welfare Bill which says that in the future ‘virtually everyone’ claiming benefits will have to do something in return for their money, meaning that most people on incapacity benefit will be required to attend job interviews and the unemployed would be expected to do four weeks’ full-time activity after a year out of work.

Peter Mandelson, who infamously declared that ‘we are intensely relaxed about people getting filthy rich’, demanded in 1997 that ‘doubters’ as to Labour’s commitment to reduce inequality ‘judge us after ten years of success in office’. Since then Mandelson has become one of the ‘filthy rich’ he so admires. He started with an undeclared loan of £373,000 to buy a house in London, moved on to become an EU Commissioner on £182,000 a year, before receiving a £234,000 golden handshake to enable him to live on a ministerial salary of £104,000 with a London home worth £2.5 million. For the rest of us, inequality has consistently increased during the years of the Labour government. Between 1996/97 and 2007/08, the income share of the poorest 20% fell from 5.9% to 5.3% whilst that for the richest 20% rose from 43.2% to 45.6%. The ratio of the income share of the richest to the poorest 20% rose from 7.3:1 to 8.7:1.

Whilst there have been reductions in poverty, these have been limited and as early as 2004/05 had started to reverse. The number living in poverty (defined as below 60% of median household income after housing costs) in 1979 was 7.9 million; by 1997, it had risen to 14 million. After 12 years of Labour, it is still 13.5 million and growing. Pensioners fared better: 29.1% were living in poverty in 1996/97; this fell to 17.6% in 2004/05 but is now rising and stands at 19%. Improvements for children were far more limited: although the proportion living in poverty fell from 34.1% in 1996/97 to 28.4% in 2004/05, this has also started to rise, and by 2007/08 had reached 31%.
Despite record levels of GDP and average income growth at least until 2007, Labour has been unable to recreate conditions of the post-war boom when successive governments were able to guarantee the privileges of the middle class and better-off sections of the working class whilst maintaining an adequate standard of living for the mass of the working class. The result is an explosion of working class rage at Labour corruption, an anger that is shared by swathes of the middle class facing an uncertain future, shattering the electoral coalition that handed Labour three successive general election victories. With Labour now facing disaster in the 4 June European elections, the left has issued a coded call to come to its support by urging us to vote against the BNP. Socialists should be taking a stand: no vote for Labour!

Child poverty and inequality

In 2007/08 there were 4.0 million children living in poverty (2.1 million in 1979), of whom nearly half lived in persistent poverty (defined as being below the poverty line in three out of four successive years). Labour failed to meet its initial target – reducing child poverty by 25% by 2004/05 – by a considerable distance, and is nowhere near its second target – halving child poverty by 2010. Indeed, as increases in state expenditure on child-related tax credits and benefits tailed off from 2004, the proportion living in poverty started to rise again.

Income is not the only measure of inequality. Labour also committed itself to reducing health inequalities by 10% by 2010, as measured by infant mortality – a very modest target which would have seen infant mortality amongst the poorest fall from 13% above the national average to 12% over a 13-year period. In fact the gap has widened: in 2004-06 infant mortality among manual workers was 5.6 deaths per 1,000 live births, 17% higher than the national average of 4.8 deaths per 1,000 live births.

FRFI 209 June / July 2009

 *Drawn from Towards a more equal society? Hills, Sefton and Stewart (eds), Policy Press 2009, Table 2.4, p30