How serious is the Government about redistribution, poverty and social exclusion?
There is every sign that they are very serious indeed. It is where they spend most of their money, energy and enthusiasm. Last week’s minimum wage is another proof of their intent - however stupidly bungled its announcement. (Creating a row instead of a celebration, the Treasury saved just one-fiftieth of 1 per cent of the national wages bill.) But if Tony Blair means it when he asks to be judged on his success in achieving a fairer society, how will we know how well he has done?
Today the centre-left think tank the Institute for Public Policy Research publishes an important report, An Inclusive Society - Strategies for Tackling Poverty. It calls for an annual official poverty and social exclusion report that would pull together all the data right across all departmental programmes and measure the real impact, year on year. There are deep academic and political disputes about how to measure poverty. If it’s just a percentage living below average incomes, that’s a shifting target. Can you create an agreed national poverty line? The advantage of a comprehensive report of this kind would be to include every kind of measurement and indicator to argue over and compare.
The Office of National Statistics would produce the equivalent of the Bank of England’s annual Inflation Report, with predictions for the coming year. Currently income statistics always arrive years out of date, capturing a portrait of a long-gone and now irrelevant part of the economic cycle. Figures are so dilatory that we won’t know the real impact of the Working Families Tax Credit until after the next election. Other major poverty reports arrive like Haphazard thunderbolts from Rowntree or the churches, a shocking one-week story, easily side-stepped by governments. But there would be no escaping an annual audit. The reason why we need these figures pulled together is that good intentions don’t always lead directly to the intended results. Take the minimum wage as an example. There is no doubt that it’s an important act of social justice. Two million people will be better off, most of them part-time women, the rest mainly the young. On average they will gain a remarkable 32 per cent increase in their pay. The Low Pay Commission’s report last week is littered with stories of appalling exploitation - the 18-year-old earning £1.70 an hour as a storekeeper, home workers earning 2.9 pence per umbrella frame (37 pence per hour) and security guards earning £1.25 an hour, while paying for their own uniforms. The wonder is the sheer strength of the work ethic. Despite the relatively easy availability of benefits, so many millions of people are willing to work for so little.
Now you might hope that the minimum wage will make an important difference to the redistribution of wealth, a step towards Blair’s fairer society. But a report from the Institute of Fiscal Studies casts a sobering light on its likely redistributory effects. Dividing the nation’s households into 10 income groups, the IFS shows that the two poorest groups gain very little - only 3.5 per cent at the bottom gain at all. The groups with the highest number of gainers are the middle-income households. Why? Because the very poorest families are those where no one works, so no one will gain. A high proportion of very low earners are not the main earners in their families, as most of the low-paid young still live at home, and most low-paid women live with working partners. It shows how unexpectedly difficult it can be to make a real impact on the poor.
The story of the minimum wage is an example of how the Government might hit all kinds of separate targets and yet still make little overall impact on the numbers of poor/excluded households. Labour has a good array of programmes designed to root out poverty and social exclusion, of which the minimum wage is just one. And yet it has no way to audit their total impact on poor people’s lives. Simple income figures are not enough because poverty and social exclusion are not necessarily the same, though closely linked.
Millions of people are excluded from mainstream life because they have no jobs, no transport, bad schools and health, live in ghettos of hopelessness, belong to no community and identify with nothing. While poverty is one key explanation for their plight, it isn’t everything: their benefits could increase but that alone might still make little impact on their quality of life. On the other hand, others surviving on a pittance do manage to live thriving, productive lives within their communities, poor but not excluded.
So all the other social exclusion indicators would need to be included in the annual poverty audit. Each on their own might not tell us what we really need to know, but cumulatively, they would offer powerful evidence. Health indicators might improve in some areas, schools might do better in others. More people might get new good training - but are they the right people, does the training reach people in deprived areas, and does it make them richer in the end? Some incomes may rise - and yet we still want to know if there was a real improvement in the life chances of deprived children. Some government targets might prove to be damaging: cutting waiting lists in the NHS may end up worsening the overall health of the poor.
The Government may look favourably on the IPPR recommendation, for the recent Welfare Reform Green Paper suggests all kinds of success measurements. The Prime Minister has said he thinks measurement matters. But this would be an expensive commitment. Consider the fate of the Low Pay Commission, which has been told to monitor the effect of the minimum wage on the jobs market - a very difficult task, especially now unemployment is starting to rise anyway. Their research budget for next year? A pathetic £80,000.
An annual poverty and social exclusion audit would be a brave and politically dangerous innovation, deliberately creating a hostage to fortune and a self-embarrassment tool. It may be relatively easy to hit individual targets, but a hard-headed annual audit of their overall social impact would demonstrate beyond doubt whether Labour had succeeded in creating a fundamental social revolution.