Leading article: Only policies, not posturing, will bring down inequality

Political leaders must show they understand the roots of poverty

Thursday 28 January 2010 01:00

Harriet Harman's National Inequality Panel, which reported yesterday, does not tell us anything that we did not already know. We knew that Britain was an unequal country, with high income inequality between the rich and the poor, and the distribution of wealth is deeply skewed. We knew that an individual's life chances tended to be determined more by the circumstances of their birth than their own talents.

We know, too, the story of how we came here; how inequality rose sharply in the 1980s as Margaret Thatcher's liberalising economic reforms took effect; how Labour managed to rein in this inequality after 1997; how it has been slowly creeping up in recent years. But Professor John Hills's report does serve a purpose in that, by clarifying the economic state of Britain, it raises a challenge to all those political leaders who proclaim "equality of opportunity" to be among their cherished goals.

The Conservatives and the Liberal Democrats are justified in pointing out just what a disappointing record this is for Labour. In almost 13 years of government, Labour has missed its own targets for reducing child poverty and is now reduced to trying to pass laws binding future administrations to achieve what it failed to do itself.

Social mobility has been a grave disappointment too. Today's news of a rise in the number of poor children going to university is welcome, but it cannot disguise the fact that the primary beneficiaries of the expansion of the university sector in the past decade have been the children of the middle classes. The comfortably-off have consolidated their hold on the professions, from the law, to medicine, to the media. By some measures it is harder for a child born into poverty today to rise up the social ladder than at any time since the 1950s.

The Conservatives and Liberal Democrats are also right in their conclusion that to tackle inequality it is manifestly not enough merely to redistribute income through the tax system. The roots of inequality need to be pulled up, which means dealing with a range of issues: the shortcomings of a state education system that too often discourages achievement; parents who fail to bring up their children properly; and whole communities blighted by low aspiration and welfare dependency. Yet where the Tories go wrong themselves is in failing to acknowledge what Labour has achieved on the equality front. Gordon Brown's tax credits have kept a lid on inequality by increasing the incomes of the working poor. The minimum wage has propped up the living standards of those in the lowest-paid jobs. Without such measures, the income gap would have been still higher.

The Tories' proposals on education have their merits. And it is encouraging that they have committed themselves to reducing poverty. But if the Tories simply dismantle tax credits, inequality will surely rise. And the immediate effect of some of the Conservatives' other policies – a marriage tax break, a rise in the inheritance tax threshold to £2m – will be to increase the social gap by disproportionately benefiting the better off.

Sensible governments harness the wealth- creating power of free markets to pull us all – as a society – in the right direction. The challenge for all three parties in the run-up to the election is to convince us that they understand this and that they possess the policies to achieve it.

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