Economic Inequality

Lord Newby Excerpts

Monday 10th February 2014 Lords Chamber

[Lord Giddens]

To ask Her Majesty’s Government what policies they have to address economic inequalities in British society.

[Lord Newby (LD)]

My Lords, according to the latest ONS statistics, income inequality in the UK is at its lowest level since 1986. The Government are committed to ensuring that all families benefit from the return of growth to the economy and maintain that the best route out of poverty and the best way of reducing inequality is for households to move into work.

[Lord Giddens (Lab)]

My Lords, I thank the Minister for that response. However, I do not recognise it at all. Burgeoning social exclusion on the bottom; stagnant wages in the middle; runaway incomes and wealth at the very top—this is not a formula for a stable and integrated society. Surely the Government need some more radical and far-reaching policies to deal with this disturbing situation, which even the grandees at Davos are rather perturbed about.

[Lord Newby]

My Lords, one of the priorities of the Government is to ensure that work pays for everybody. This is one of the benefits that the Universal Credit will bring. This is one of the advantages of taking 2.7 million people out of income tax altogether. This is one of the reasons why my colleague, Vince Cable, has asked the Low Pay Commission to look at raising the minimum wage beyond what it might otherwise do, and this is why the Government support the living wage. Ensuring that work pays—and pays well—for people at modest levels of income is a top priority for this Government.

[Lord Lawson of Blaby (Con)]

My Lords, does my noble friend agree that it is far more important to focus on making the poor richer than on making the rich poorer?

--- Later in debate ---

[Lord Newby]

My Lords, we want to make sure that everybody makes a fair contribution to society and that all those in work get a fair wage for their labour. Obviously, there comes a point when taking too much tax from those right at the top becomes counterproductive. However, certainly in terms of income tax take, the proportion of income tax now paid by the top 1% is at a historically high level.

[The Lord Bishop of Worcester]

My Lords, is the Minister aware of the first report published today by the Living Wage Commission, chaired by my friend the most reverend Primate the Archbishop of York, which found that emerging economic recovery will have no effect on more than 5 million workers unless employers pay a living wage. It found furthermore that 6.7 million of the 13 million people in poverty in the UK are in a family where someone works—which, for the first time, is more than half the total. Will the Minister tell the House what steps the Government are taking to address this real concern?

[Lord Newby]

My Lords, the Government are encouraging employers to pay the living wage where they can. One of the key things about people in work on very low incomes is that a large proportion of them are working a small number of hours or a smaller number of hours than they would like. Economic growth will mean that more of those people are able to work longer hours, which will help deal with their household circumstances.

[Baroness Lister of Burtersett (Lab)]

My Lords, not everyone is able to take paid work. Will the Minister explain what impact the raft of social security cuts, which will make the poor poorer, will have on inequality?

[Lord Newby]

My Lords, the prior question to that is: why are these changes being made? The answer is that we inherited a completely unsustainable economic circumstance which this Government are putting right.

[Baroness Hussein-Ece (LD)]

My Lords, despite recent efforts there remains a significant youth unemployment gap between black and white youths and some ethnic minorities—45% compared to 19%. While urgent improvements in skills and employability are needed to reduce the remaining structural problems, what more is being done to tackle the racial inequality that appears to be the key underlying factor?

[Lord Newby]

My Lords, one of the key challenges that the Government face is that educational attainment for some ethnic minority groups is lower than for others. That is why the priority being put in by the Government, via the pupil premium, to those schools with a larger than average proportion of children from those backgrounds is so important. Raising their attainment, as well as, as we have heard in an earlier question, putting in place UTCs, will provide much more vocational training, which is one of the key things for helping children from those communities.

[Lord Peston (Lab)]

My Lords, I must apologise to your Lordships for being an economist and for allowing some economics to get into an economics question. Is the Minister aware of the research evidence on these matters, which is that we need some inequality in our society in order to provide a proper incentive system? However, it is possible—and it is almost certainly the case in our country—that we have far too much inequality, which is a disincentive to economic growth. The Government do not seem to understand that, but when the Labour Government take over next year they will understand it and will deal with the matter.

[Lord Newby]

My Lords, that is no doubt why we inherited such rosy economic circumstances.

[Lord Davies of Oldham (Lab)]

My Lords, the Minister used the graphic phrase, “making work pay for everyone”. It certainly pays for bankers, as Barclays tomorrow will announce another £2 billion in bonuses, following the £2 billion that it paid out last year. Since 2008, banks will have paid out, in accumulation, £80 billion in bonuses—£1,000 for every man, woman and child in this country. How can the Government talk about us all being in this together when there is such an obvious imbalance in the economy?

[Lord Newby]

My Lords, as the noble Lord will be aware, bonus levels in the City—although he finds them outrageously high—are now very much less than they were. There is a now a raft of domestic and EU rules in play that will reduce the extent to which bankers can take bonuses, except over a period and when bonuses are linked to the performance of the bank.