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Thursday, 12 December, 2002, 01:02 GMT
Poverty 'unchanged' under Labour
Deprived housing
Many people still live in "absolute poverty"

After five and half years in power, Labour has made virtually no impact on poverty.

And the government will miss its target of cutting child poverty by one quarter by 2004.

These are the findings of the New Policy Institute, which monitors trends in poverty for the Joseph Rowntree Foundation.

Open in new window : Poverty in Britain
The key indicators and facts explained
Professor David Piachaud of the London School of Economics, and Holly Sutherland of Cambridge University, who analysed trends in child poverty, say: "Without increased resources it will be difficult for ministers to meet their goals.

"More resources will be needed each year just to keep up with income levels generally, let alone make progress."

The findings will make uncomfortable reading for the Chancellor Gordon Brown, who has made poverty reduction one of his central goals.

Problem for Chancellor

He has poured money into schemes such as the working families tax credit, the child tax credit, and the minimum income guarantee for pensioners.

But now his war chest is empty, as the huge sums needed to modernise public services are pushing public spending into deficit.

The researchers found that poverty would have been worse without these new measures.

But they say the limited effect is due partly to the fact that most benefits rise with prices, not incomes, and are therefore bound to fall behind.

Worst in Europe

Britain has the worst poverty record in the EU, except for Greece, with more than one in five people living on less than 60% of median earnings.

Approximately 13 million people are poor, the same number as 10 years ago and double the rate of 20 years ago.

Child poverty is even worse, with about 4 million children, or nearly one in three, living in families below the poverty line.

That represents a decline of 500,000 since 1996/7, according to Professor Piachaud.

In contrast to some popular myths, the majority of the poor on benefits are pensioners or the long-term sick or disabled.

Only 3% are unemployed, and only one in five is a lone parent family.

Rising inequality

London has the sharpest contrast between rich and poor, with some of the highest poverty rates in country, as well as many of the richest households.

Elsewhere, the North East is the poorest region, and the South East the richest.

That stark contrast is reflected in the figures that track inequality.

The income of the bottom 10% of the population has fallen to less than half the median income, while the income of the top 10% has risen fastest in the past 20 years.

And those who are without jobs - not only the unemployed, but also the long-term sick and disabled - have fallen furthest behind.

Guy Palmer, the director of the New Policy Institute and one of the report's authors, said: "Significant progress is being made in tackling social exclusion but there is a long way to go."

Social benefits

As well as cash benefits, poor people also disproportionately receive free services from the government such as health care and education.

People on low incomes receive twice the value of these benefits in kind - sometimes known as the "social wage" - as rich people.

The average cash value of these benefits is about 4,000 per household, or 1,700 per person.

For the poor the value is about 2,000 per year per person, compared with 1,000 for the richest households.

That is partly due to demographics - the fact that the main beneficiaries of health and education are the young and old, who are disproportionately poor - but it also reflects the fact that some rich people pay privately for health and education.

Over the past 20 years the value of the social wage has gone up by nearly 50% in real terms.

But in recent years it has not been rising as fast as wages, with cash incomes up by 12% in real terms in the past five years, compared with an 8% increase in social benefits in kind.

Monitoring Poverty and Social Exclusion 2002, by Guy Palmer, Mohibur Rahman, and Peter Kenway, is published by the Joseph Rowntree Foundation. Poverty rates refer to England and Wales only. The official EU definition of poverty is a household living on an income below 60% of the median income. The latest figures go up to April 2001.

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