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In this article, the Labour
MP for Luton North reminds us that after eleven
Labour years, the poverty
gap in the UK has widened and explains that the
Party leadership tried to "wriggle out" of
implementing the minimum wage and concludes that the
means-testing benefits system has been a failure. The
emphasis is mine. (Stewart Cowan)
Kelvin Hopkins MP
July 2008
Socialist
Campaign Group News
New Labour has many sins of commission to its shame,
but its greatest sin of omission is its failure to deal
with poverty. The gap between the rich and poor in
Britain is now wider than it was under the Tories before
1997.
The first Thatcher decade saw poverty rise dramatically,
with those living in poverty doubling between Labour’s
last year of 1979 and 1987, from 4.93 million to 10.5
million, or from 9.4 per cent of the population to 19.4
per cent (measured as those living below supplementary
benefit levels). A quarter of the 1987 total were pensioners,
another quarter were unemployed and a third quarter
were those in full time work on poverty wages.
A measure of Thatcher’s crime against the poor is shown
by international comparisons between the mid 1970s and
the 1980s. Numbers living in poverty fell by 12 per
cent in France, and three per cent in Germany, but in
Britain rose by a staggering 79 per cent. The pattern
of gross inequality set by Thatcher was what Labour
faced in 1997, and it is astonishing that 10 years later
the poorest 20 per cent of the population had a smaller
proportion of national income than when New Labour first
took office. Despite all New Labour’s claims to
have tackled poverty, with increased pensions and the
winter fuel allowance, the minimum wage, and the morass
of means tested credits the poor had slipped even further
away from the better off than under the Tories.
All this occurred before the recent surge in the
cost of living from rising oil and food price rises,
and before the abolition of the 10 per cent tax rate
which had the effect of raising taxes on the lowest
paid to fund tax cuts for those on middle and higher
incomes. Between 1997 and 2007, the poorest 20 per cent
became relatively poorer, with no change in the second
20 per cent and a significant increase in the relative
incomes in the richest 20 per cent. Incredibly too,
another change in income distribution was that the middle
and fourth 20 per cent, those on middle and upper-middle
incomes, saw their shares of national incomes actually
fall, an astonishing result given New Labour’s alleged
concern for Mondeo man and Worcester women. What actually
happened was that there was a relative shift of income
from those groups to the very richest.
It is useful to look at what exactly happened during
the Thatcher, Major and Blair years. When the Tories
first came to office in 1979 they immediately cut the
top rate of income tax from 83 per cent to 60 per cent
and raised VAT from 8 per cent to 15 per cent to fund
the tax cut to the wealthy. In the 80s VAT was raised
again to 17.5 per cent and the top rate of income tax
was reduced from 60 per cent to 40 per cent so that
the rich paid the same marginal tax rate as many just
above average incomes and who were just caught by the
40 per cent threshold. The substantial shift from progressive
income tax to regressive VAT was a major factor in widening
the chasm of inequality between rich and poor.
Another simple factor in widening the poverty gap
was the Tories’ decision to abandon the earnings link
for the state pension in 1980. Between then and
now the basic state pension fell from a figure of 25
per cent of average earnings to 15 per cent of average
earnings and saw state pensioners gradually slide further
into poverty as a result. It is indeed a national
disgrace that the state pension as a proportion of average
earnings is substantially lower now than it was in 1971,
37 years ago. It was then 21 per cent and rose through
the 1970s to 25 per cent, mainly under the then Labour
government and despite the serious economic crisis of
that time. Since 1997, during the most benign economic
circumstances since the Second World War, the state
pension has actually been in gradual decline as a proportion
of earnings.
From the start, New Labour refused to restore the
earnings link and set out determinedly on a drive to
means testing — for pensioners, for families and those
in work on low earnings. This had been the Tory plan
before 1997 but it was New Labour that put it into practice.
The reaction of many Labour MPs was strong, with a rebellion
on single parent benefits in New Labour’s first months
of office. The disquiet in Labour’s ranks was bought
off with an above inflation increase in child benefit
the next year, but that was simply a temporary one
step backwards in New Labour’s means testing revolution.
The panoply of tax credits has been hailed by New Labour
but is in fact deeply flawed and has failed to help
millions who do not claim.
New Labour has argued constantly that they are targeting
the poor with their approach to benefits, but given
the end result it is clear that the system has failed
and in some cases is just not true. The winter fuel
allowance is given to all and thus comes as a tax free
bonus to the rich. If it was built into the basic state
pension and paid as extra pension in the winter months,
this would mean that the rich would pay tax on it and
the extra revenue could be recycled to boost poor pension
incomes further.
And then finally one comes to the minimum wage.
This has been claimed as a major victory by New Labour
when in truth it was a commitment forced upon them by
the trade unions and Labour movement from years before
1997. Brown, Mandelson and Blair tried to wriggle out
of the commitment but had in the end to introduce the
necessary legislation for fear of a large backbench
revolt. In doing so they forced through a lower rate
for younger workers and subsequently kept the minimum
wage to the lowest possible level acceptable to the
party and the movement. The minimum wage has since been
too low and has not been effectively enforced.
An anti-poverty strategy must involve re-distributing
income from rich to poor. It can be achieved in no other
way and it is very simple. As said by an American wit
some time ago, ‘if all else fails, why not try money?’
New Labour has been in office almost twice as long as
Clem Atlee after 1945 yet has failed on the basic level
to recreate even the degree of equality Labour achieved
30 years ago. A return to real Labour policies with
a dramatic reduction in poverty in our country could
even now see Labour win the general election.
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