`More power to the pocket of the poor'

Nicholas Timmins reports on the `real challenge' of wiping out inequality
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Over the past year, an idea that has provided much succour for the left for more than a decade - that under the Conservatives the rich have got richer while the poor have got poorer - has taken a considerable knock.

Research showing that the bottom 10 per cent of the population has seen its income fall by 17 per cent, while the top tenth has seen a 62 per cent rise, has been supplemented by new data on spending and mobility.

When spending is examined, far from falling, that of the bottom 10 per cent has risen by around 14 per cent. And those who make up the bottom 10 per cent are not a static, poverty-ridden underclass, but a much more mobile group than many once thought - with between a quarter and a half moving out of the bottom 10 per cent each year to be replaced by others falling down the income ladder.

The world is more complex than it seemed - and the evidence that the poor have got absolutely poorer since 1979 is decidedly suspect.

The latest figures are the first good news the Tories have had on the subject in a decade, and Peter Lilley, the Secretary of State for Social Security, was using them yesterday.

But as with all figures, there are problems. For a start, a tenth of the population is a huge number of people - 5.7 million. And the data from which all the figures come, household surveys, exclude those at the very bottom of the pile - the homeless on the streets, those in hostels and in bed and breakfast. Their numbers are not large, but there are undoubtedly many more of them than 20 years ago and they are the visible evidence of a more unequal society.

This is the core of the argument. For whether or not the bottom 10 per cent have got absolutely poorer since the mid-1970s - the widening gap in income distribution started before Margaret Thatcher came to power - it is clear they are relatively poorer, compared both to the middle and the top.

For them, paradise has been denied. Even using the spending figures - which show a less sharp growth in inequality than the income figures - those at the top have done three times better than those at the bottom, and have been able to save an awful lot more to boot. And while widening inequalities have been a feature of most developed societies in recent years, what evidence there is suggests that inequalities have widened faster in the UK than in most other countries.

The challenge Peter Lilley laid down yesterday to those who believe society is too unequal was to state what level of inequality they would accept - and why. But it begs exactly the same counter-question to those who believe the recent acceleration in inequality not only does not matter but has been a positive good because it has provided greater rewards to those who have succeeded. What final level of inequality are they prepared to accept, and why? And do they believe the current trend is sustainable?

The challenge is a real one for both parties, and it is unlikelythe trend will cease under the next government. It is driven not just by domestic policies on taxation, employment and benefits, but by global forces which include trade and technology.

To halt, even to reduce, the trend towards greater inequality at the bottom is likely to require higher spending - on in-work benefits, on education and on training as well as on benefits. Dramatic economic growth aside, that means either higher taxes or a more selective welfare state in pensions, education and health: a route which would further detach the have-a-lots from the have-nots, while hitting those in the middle who are only just too well off to qualify for tax-funded aid.

Neither provides an easy answer. But without one, the poor will not only always be with us but are likely to get relatively poorer.