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Financial Inequality

My Lords, the noble and right reverend Lord, Lord Harries, has been a fighter for equality and fairness for as long as I can remember. The right reverend Prelate the Bishop of Liverpool reminded us that the noble and right reverend Lord debated this issue when he was on the Bishops’ Benches, and he is still fighting on the Cross Benches. As ever, he is right: it is unfair. However you measure it, there has been growing financial inequality. Like the noble and right reverend Lord, I am aware that greater financial inequality leads to more social upheaval. It leads to more crime, embeds greed and, as the noble Lord, Lord Layard, said in his recent book, leads to less happiness. I say to the noble and right reverend Lord, Lord Harries, that we have to balance this with other considerations, such as the economy. My noble friend Lord Desai reminded us that globalisation and technology have eliminated unskilled jobs and created the need for greater skills. Innovation has changed the face of industry. Our membership of the single market has created more competition. We deal with this through empowerment. We need to empower people and to give them the tools to improve their skills, to be innovative, to be entrepreneurial, to be more competitive and to grow the economy, as the noble Lord, Lord Marlesford, said. Certainly, there have to be safeguards such as a minimum wage and human rights. To a degree, legislation has provided these. If you are going to empower people, you cannot set limits. As my noble friend Lord Desai said, it is not a zero-sum game. As a result, income differentials arise. This empowerment may have created excessive wealth for the few, which the noble and right reverend Lord, Lord Harries, described dramatically, but it has also created jobs and opportunities for the many. To give credit where it is due, 29.5 million people are at work in Britain today and unemployment is the lowest since 1975. My noble friend Lord Giddens explained that our 75 per cent employment rate is among the highest in Europe. In general, the policy seems to have worked. It has been successful for the economy as a whole, in spite of the increasing financial differentials. However, I agree that there is one area of society where rising income differentials are not acceptable and the damage is too great. Many noble Lords have given the answer: children. What convinced me were those wonderful longitudinal surveys, where the same people are interviewed regularly every few years. Some go back to the 1940s. They make it absolutely crystal clear that if you do not reduce financial differentials among children, disadvantage is passed on from generation to generation. This is the consolidated poverty about which the right reverend Prelate the Bishop of Liverpool spoke. Growing financial inequality at work might be tolerated, but financial inequality between children is not. It has to be deliberate government policy to close this gap. In the 20 years before this Government came to power, the proportion of children in relative poverty more than doubled and something had to be done. As the right reverend Prelate the Bishop of Ripon and Leeds said, the tax and benefits system had to be reformed. Child tax credits were introduced specifically to increase the income of those households with the poorest children. As a result, the 2008 Budget book tells us that, in real terms, compared with 1997, households with children will this year be on average £1,800 better off. In spite of what my noble friend Lord Giddens said about child tax credits not reaching the lowest levels, the Budget book tells us that households with children in the poorest fifth of the population will be on average £4,000 better off. Tax credits are reducing financial differentiation among children. Money is not enough. In addition, you have to deal with the consequences of financial inequality on children in order to break the cycle of deprivation. To do this, a whole new sector of public services for the under-fives has been created. Noble Lords who read the House Magazine will have learnt that I took my youngest grandchild to the One O’Clock Club at Brockwell Park, south London, on Friday afternoon. It is one of the 2,460 Sure Start children’s centres established so far. That is where you can see for yourself Sure Start working and financial inequality reducing. Other things work, too. Every Child Matters was introduced in 2004. We have enhanced maternity, paternity and adoption leave and the children’s element in the working tax credit. The results have been truly remarkable. The independent evaluation report published on 4 March shows what a positive impact all this has had on the lives of children. This is important, because I hope that by now noble Lords will agree with me that income inequality between children is everybody’s business. This is why I am concerned when David Cameron says that he would cut government investment in Sure Start in order to employ more health visitors. He said so on 15 March. I say to those on the Front Bench opposite that surely this would have the effect of increasing the income differential between children, not reducing it, and increasing the funding difficulties that the right reverend Prelate the Bishop of Liverpool described. Perhaps they think that, politically, it does not matter. I agree that reducing the differential is a thankless and expensive task, but it is brave and it is right. Right now it is something that may produce very few political dividends and so may be easy to cut, but eliminating financial differentials between children will be one thing for which this Government will be remembered. Irrespective of which Bench we sit on, we should all be prepared to play our part.