Fewer poor - a tall Tory tale?

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The Independent Online
It has become axiomatic that, under the Tories, the poor have got poorer, the rich richer. But last week Peter Lilley, the Secretary of State for Social Security, produced a new study from his department and proclaimed that this conventional wisdom had been "blown apart".

Is he right? The answer is both yes and no. The evidence that the poor are worse off in absolute terms than they were in 1979 is beginning to look shaky. The evidence that they are relatively poorer, however, remains.

The study from which Mr Lilley quoted - covering 80,000 men aged 25 to 44 - is not about poverty as such but about earnings mobility. It shows that only 16 per cent of those who were in the bottom 10 per cent of earners in 1978 were still in the bottom 10 per cent by 1993.

So far, so good for Mr Lilley. The study, however, has its limitations. It excludes those who earn too little to pay National Insurance contributions (currently pounds 61 a week). It excludes pensioners and fails to track those who became "unavailable" for work. And a large part of the better earnings performance enjoyed by those in the bottom fifth was simply due to age - the young earn less when they start work, more as they gain experience and promotion.

Nevertheless, the evidence that the poor have got absolutely poorer under the Tories is a lot less convincing than it was.

The main evidence came from figures showing that, while the income of the top 10 per cent of the population had risen by 62 per cent under the Conservatives, that of the bottom 10 per cent fell by 17 per cent.

However, new figures on spending tell a different story. Far from falling, the expenditure of the bottom 10 per cent has risen - by around 14 per cent. And another study - so far covering only one year - shows that between a quarter and half of those in the bottom 10 per cent by income move up and out over the year, to be replaced by others falling down the ladder.

In other words, those at the bottom are not a static, poverty-ridden underclass, but a more mobile group than once thought. And that may help to explain the difference between the income and the spending figures.

Aside from the self-employed with clever accountants who declare little or no income, the bottom 10 per cent by income is also likely to include people drawing down savings or borrowing to tide themselves through a spell of unemployment: their income falls but their spending, at least for a time, continues. Such mobility may also help account for the relatively high proportion who own video recorders, washing machines and other goods - bought in better times.

Further, the composition of the bottom 10 per cent has changed since 1979. There are many fewer pensioners and many more unemployed people and lone parents. So the poor, in the main, are not the same who were poor in 1979.

But if the bottom 10 per cent are not the same people, are they, as a group, none the less poorer than in 1979? In absolute terms, the evidence now suggests probably not, though even here qualifications are needed. None of the figures, for example, include people at the very bottom of the pile - the homeless on the streets and in hostels or B&B.

There is no doubt at all, though, that the poor are relatively poorer than 20 years ago. Even on the measure which shows the smallest growth in inequality since 1979 - spending - those at the top have done three times better than those at the bottom.

Mobility may indeed be considerable. But on all the measures available, today's poor are much further behind the middle and the top than their counterparts of 20 years ago. And Mr Lilley's study changes that not one jot.