Leading Article: The giant of poverty still stalks Britian, but it can be slain

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THE AVERAGE individual in the richest 1 per cent of the British population is now worth pounds 1.4m, while a quarter of the adult population have no significant assets at all - estimated at less than pounds 5,000 in the Inland Revenue statistics published last week. These are the stark facts that lie behind our campaign this week to draw attention to the unacceptable consequences of persistent poverty.

Britain is a painfully unequal society, and making it less so should be one of the urgent aims of any civilised government. It was one of the most corrosive faults of Margaret Thatcher that she appeared to rejoice in inequality; the government's duty to try to reduce inequality was accepted - as if spoken under his breath - by John Major. But now we have a government explicitly committed to ending social exclusion: this is an opportunity to move the history of this class-conscious, divided nation in a new direction, towards a meaningful equality of dignity and respect, which requires some closing of the gap between the dispossessed and the comfortably off.

Let us first dispose of the doubly false notion that it does not matter what happens to the rich as long as the poor are materially better off in real terms. This is a sort of sub-branch of the discredited American "trickle-down" theory - that the poor will benefit from the spending of the rich. Another bunch of official figures published last week, on family incomes, confirmed that the poorest are still worse off - in absolute terms, that is, adjusting for inflation - than they were in 1979. And this over a period in which average disposable incomes rose by 40 per cent more than inflation.

Even if the incomes of the poorest had stayed ahead of inflation, they would have fallen further and further behind the rest of us, and that is what real poverty is: exclusion, loneliness, the inability to do the things that society takes for granted.

As Sir Donald Acheson, the former chief medical officer, pointed out last week, in a speech trailing his report on poverty and health, poverty is not just a matter of money; it is a question of how far you have to walk, with a pushchair, in the rain, to a shop that sells food that you can afford to spend it on.

It is one of Tony Blair's most powerful messages that what happens to the poor should concern us all, not simply out of altruism but for reasons of self-interest. Crime, drugs, the quality of our public spaces, and the sense of well-being and security that come from belonging to a cohesive society, are benefits that should be valued by everyone.

And this government's approach has much to commend it. It has abandoned the crude redistribution attempted by Labour in the Sixties and Seventies, which simply looked at the cake, noticed how unfairly it was sliced, and proposed to take some away from those who had a lot, and give it to those who had a little. It was interesting to note that when New Labour politicians have their backs to the wall, the "redistribution" word makes an occasional guest appearance. Just before she paid the price for the Prime Minister's unnecessary cut in lone parent benefit, Harriet Harman used it in her defence. Then, when Gordon Brown, the Chancellor, was under fire from Frank Field, Ms Harman's fellow casualty in the reshuffle, he resorted to a bit of the R-word too.

Mr Field had bitten the right-wing Thatcherite hand that had patted him by proposing a 50p-in-the-pound income tax rate on earnings over pounds 100,000 a year. Which stung Mr Brown into retorting that his tax increase on the better-off was bigger than Mr Field's pounds 1bn tax increase, pointing out in the New Statesman that he had clobbered the privatised utilities for pounds 5bn and the pension funds for another pounds 5bn a year. Of course, straightforward redistribution has its place for many of the old and the disabled, and our treatment of state pensioners in particular over the past 18 years has been a stain on our national honour. So far, the Government's attempts to produce a "guaranteed minimum pension" worth more than welfare benefits have been largely a play on words, and an attempt to remove the stigma of claiming means-tested benefits. Surely a better approach would be a general rise in the level of the state pension so that fewer pensioners need benefits to top them up - which could be clawed back from the better- off elderly, of whom there are a growing number, through less generous income tax allowances.

But the emphasis in the fight against poverty should always be on the labour market, which is the central mechanism for the distribution of income. The biggest single cause of poverty is not having a job. As well as taking a slice of cake from one group and giving it to another, we should be trying to ensure that people can earn their own slice of the action. That is why the so-called "New Deal" is broadly welcome, even if there is worrying evidence that it is much less successful than the Government hoped. There is no harm - and a lot of good - that can come from requiring benefit claimants to attend interviews, simply to inform people of their rights and options, and to weed out fraud. (Although it is worth noting that Michael Howard at the Employment Department was once mocked by his Labour shadow, a Mr Blair, as the "Secretary of State for Interviews", because they were all he was offering the unemployed.)

If we step back and look at the big picture, the main factors responsible for the rise of inequality in the past two decades are the widening of earnings differentials, and the changing pattern of employment: both the extent of unemployment, and the distribution of work among households. The significant trends have been the growth of the "workless class", including the big rise in lone-parent households and the continued increase in the number of of unemployed couples.

Inevitably, the ability of government to influence these trends is limited. Differentials have been widening as a result of global competitive pressures that have destroyed demand for unskilled labour. In the long run, higher educational standards are the answer. Meanwhile, the growth of lone parenthood has been a fundamental social change, way beyond the reach of plaintive cries from Yesterday's Woman to "get them to a nunnery".

At least the Government is more in touch with the realities of modern life than that. Although its cutting of lone parent benefits was unnecessary, and has now been reversed, the attempt to find work for as many lone parents as want it is the best short-term response to a problem which requires long-term social re-engineering.

But, in tackling deprivation generally, we are entitled to ask for greater honesty from Mr Blair and Mr Brown than we have had so far. They have pretended, in one voice, that poverty can be ameliorated and no one need pay - while, in another voice, boasting that they have stripped pounds 10bn from shareholders and occupational pension fund members to pay for the New Deal.

Let us hear them say clearly this one thing, at least: that there is a way in which the rich do need to pay more taxes - that is, when they are dead. The post-war trend towards greater equality, which was stopped around 1979, ensuring that the benefits of economic growth since then have accrued overwhelmingly to the already well-off, was driven by one of the great government interventions this century - the inheritance taxes brought in by Attlee's administration. For the sake of the poor, who are not only still with us but more numerous than 20 years ago, Mr Brown should raise inheritance tax.