Byers joins Labour debate with call to cut wealth gap

Stephen Byers, the Blairite former cabinet minister, will tomorrow fuel the debate over the Government's direction by calling for more to be done to tackle the widening gap between rich and poor.

In a speech to the Social Market Foundation think-tank, Mr Byers will warn that the poorest 10 per cent have become dangerously detached from the rest of society.

His intervention shows that concern about inequality is not confined to "soft-left" ministers such as Peter Hain, the Leader of the Commons, who angered Tony Blair on Friday by suggesting that Labour should raise taxes for the rich to help middle-income groups.

Mr Byers, still a close Blair ally despite resigning from the cabinet 13 months ago, will echo Labour activists' fears that the party has not done enough for its traditional supporters. While tax credits have raised the income of poor people, he believes they have not broken the "cycle of deprivation" because the poor do not have any assets.

The former transport secretary will express concern that the bottom 10 per cent saw their incomes rise by 6 per cent between 1979 and 1999 in real terms, while the incomes of the top 10 per cent increased by 82 per cent. He will say: "The most pressing issue is the bottom 10 per cent. Why should we bother with this minority when there are precious few votes to be gained from them? This is a group that is unlikely to register to vote, never mind get along to the polling station.

"It is a group that sometimes feels itself to be outside the world as we know it. They feel society has done little or nothing for them and therefore they don't owe anything in return. They are detached from political activities and don't have access to the levers of influence."

Mr Byers will argue: "As a centre-left political party, we do need to bother with this group. We recognise that every individual has talent and ability and each should have the chance to bridge the gap between what they are and what they have it in them to become."

He believes rising house prices have made it harder for the 30 per cent who do not own homes to buy property. He will call for tenants in the public and private sectors to be given a financial stake in their home, so they can use its rising value as a deposit to buy their own.

In a television appearance yesterday Mr Byers supported Mr Hain's call for a debate and said the tax system could be "rebalanced" without increasing the overall burden. He told GMTV's Sunday programme that there was a "real issue" about whether it was fair for so many to be drawn into the 40 per cent tax bracket. While not ruling out higher taxes for the rich, he said that should not be the first call. Instead, the Government should close the loophole under which 100,000 "non-domiciles" living in Britain escape tax on their earnings, to finance a trust fund of £2,000 for every baby - more than the £250 proposed by the Treasury.

Figures compiled by Mr Byers show that 34 per cent of people have no savings, 71 per cent have savings of less than £5,000 and 57 per cent less than £1,500. Twenty-four of the 25 areas of Britain with the highest proportion of households earning more than £100,000 a year are in London and the South-east.

Sir Bill Morris, the outgoing leader of the Transport and General Workers' Union, called yesterday for tax rises for the rich. But he dismissed Mr Hain's idea: "That is not redistribution," he said. "It is recycling to appease Middle England."