Many thanks to the Fabian Society and Bright Blue for organising today’s event and to the Fabians for your important Inequality 2030 report. Thanks are also due to the Webb Memorial Trust for supporting today’s event and for the work that you do to put poverty on the public policy map.
Putting the issue on the general election agenda is a shared endeavour between all of you and the Commission on Social Mobility and Child Poverty that I chair. With two months to go to the election it is time to speak up for the one in six children – 2.3 million – who are officially classified as poor in the UK. The scale of the challenge we face as a country in reducing such high levels of child poverty can all too easily give way to a profound sense of pessimism about the possibility of making progress. For decades British politicians have agreed that boosting social mobility and reducing child poverty are essential if Britain is to fulfil its potential, be at ease with itself and be confident about the future. The Attlee welfare state and the Butler education reforms expressed this consensus. The Thatcher and Blair Governments made aspiration their political calling cards. The Coalition Government placed itself in this political tradition by committing to make Britain “an aspiration nation”, one that seeks to be truly meritocratic and free of child poverty.
It is worth remembering that the post-war consensus has produced real results. Child poverty has fallen by 40 per cent from its post-war high in 1992. There are fewer children in workless households than at any time in over two decades. Today employment is at record levels and educational inequalities, though wide, have slowly narrowed over the last decade and a half. More working class youngsters are benefitting from higher education than at any point in history. Counter to today’s prevailing anti-politics mood, the fact that Britain has made progress on the most intractable social problems of our age, is testament to the fact that our political system can deliver.
Nonetheless, the progress that has been made has been too limited and too slow. While it is in Britain’s DNA that everyone should have a fair chance in life, all too often demography remains destiny in our country. Being born poor often leads to a lifetime of poverty. Poor schools ease people into poor jobs. Disadvantage and advantage cascade down the generations. Over decades we have become a wealthier society but we have struggled to become a fairer one. Compared with many other developed nations the UK has high levels of child poverty and low levels of social mobility.
The global financial crisis escalated public concerns about social inequality to a new level. To date the principal focus – even anger – has been directed at those at the very top of the heap. When excess reward becomes separated from effort and performance it causes understandable outrage. My plea, however, is to refocus those concerns about inequality so that as much attention is given to helping those at the very bottom as it is to finding ways of restraining those at the top. There are pressing reasons for doing so. The central conclusion of the Commission’s second annual State of the Nation report published in November last month was that Britain is on the brink of becoming a permanently divided nation. We came to that conclusion because while the economy has bounced back strongly, record numbers of people are in work and some promising school and welfare reforms are underway, the economic recovery is not being matched by a social recovery. 500,000 more children are in absolute poverty after housing costs than in 2010. For families in the middle – those on average earnings – despite welcome recent increases in earnings, it will be at least 2018 before their wages are back to where they were before the recession. The gap between the haves and the have-nots is growing. Between young and old. North and South. Rich and poor.
We share the view of those experts who predict that 2020 will mark not the eradication of child poverty but the end of the first decade since records began in which absolute child poverty increased. Even worse, after taking account of rapidly rising housing costs the Institute for Fiscal Studies predict that there will be more children in absolute poverty than there were in 2000 – an unprecedented two decades of stagnating living standards for those at the bottom. We have come to the relucant conclusion that there is no realistic hope of the statutory child poverty targets being met in 2020. None of the main political parties have been willing to speak this uncomfortable truth. They are all guilty in our view of being less than frank with the public. It is vital that they now come clean. We look to them to set out how they would supplement the existing targets with new measures to give a more rounded picture of poverty and to amend existing child poverty legislation to provide a new timescale for achieving them. The Fabians’ recent report highlights some ways of making progress.
One thing is for certain: without concerted political action there will not be social progress. There are those who think that a social recovery lies around the corner: that a growing economy will inevitably produce a fairer society. Nothing could be further from the truth. In our view a series of profound changes affecting the housing and labour markets threaten to have a long-term negative impact on both poverty and mobility in our country. None of the political parties have yet come to terms with the fundamental nature of the changes we are seeing. A tidal wave of change is simply overwhelming the current public policy response.
In the housing market, home ownership – the principal means by which asset-based wealth for the majority of citizens can pass between generations – is in rapid decline. The home ownership rate among 25 year olds has halved over 20 years. Young people are on the wrong side of the divide that is growing in British society. Their wages are falling and, the risk is very real that this generation of the young – from low income families especially – will simply not have the same opportunities to progress as their parents’ generation.
Developments in the labour market are even more fundamental. It is welcome of course that employment is rising and unemployment is falling but too many of the jobs that are now being created are low income and high insecurity. They are a dead-end not a road to social progress. It is no coincidence that whereas a decade ago child poverty was concentrated in workless households, today two in three children who are officially classified as poor live in a household where at least one parent is in work. Poverty has become the preserve of working people rather than simply the workless or the workshy. The proportion of children in workless poverty fell from over 15 per cent in 1997 to 6.4 per cent in 2013. This public policy success – reducing worklessness and protecting children’s living standards when parents are out of work – has exposed a policy failure – not ensuring newly working families have sufficient incomes to escape being poor.
So a series of fundamental changes are putting at risk the cherished notion that has glued British society together for a century or more: that the next generation will progress more than the last. The labour market has changed and with it the housing market. The state of poverty has changed and the state of the public finances has changed beyond recognition. The risk is these changes coalesce to make Britain a permanently divided nation. If we do not act, 2020 will mark a watershed between an era when rising living standards were shared by all and a future in which rising living standards by-pass too many in our society. If that comes to pass, social mobility, having flatlined in the latter part of the last century, would go into reverse in this. Poverty would rise not fall.
So the writing is on the wall. The question facing our country is whether we will choose to ignore it or address it. The 2015 general election should be an opportunity for political parties to explain what they want to achieve when it comes to tackling poverty and improving mobility – and how, if they are elected, they plan to do so. But so far in the 2015 election campaign, rather than facing up to the reality of a divided nation, politicians of all parties have ducked the challenge of setting out in detail how they would seek to make social progress in a time of austerity. Taking refuge in simple policy solutions and treating them as easy answers to the problem of high levels of child poverty and low levels of social mobility is not good enough. Simply relying on economic growth, any more than simply relying on a higher minimum wage or a lower starting level of tax will not make Britain a high-mobility, low-poverty country. Fundamental changes in the labour and housing markets, in the nature of poverty and in the fiscal position facing any future government mean that a new approach is needed if child poverty is to be beaten and social mobility improved. A concerted and holistic plan of action is called for.
That is why we look to all the main political parties – as they prepare to issue their election manifestos – to set out how they will bridge the great divide in Britain. We believe there are five priority areas for action.
First, to redeploy spending to maximise social progress. The old public policy answer to the problem of stalling mobility and entrenched poverty involved spending more. In an age of austerity that is no longer an option. The new approach must be about maximising the social mobility bang for the buck. Public spending is set to reach historically low levels over the next Parliament. Half of the reductions in public spending announced in this Parliament will not take effect until the next and all of the political parties are signed up to significant additional cuts if they win the election.
The Commission acknowledges that the next government will face hard fiscal choices. We accept that but we look to the next government to properly align public resources with its social policy objectives. We find it difficult to see how across-the-board reductions in public spending can be made without seriously affecting the public services that aim to level the social playing field and the income transfers that prop up the revenues of families in and out of work. In particular, plans to cut in-work support in real terms in the next Parliament can only make the working poor worse off, not better off. Nor do we believe that reducing support for the poorest working families while protecting benefits for better-off pensioners is credible. If progress is to be made on reducing poverty and improving mobility in an age of austerity, more will need to be done to reconcile the social policy ends the parties say they want with the fiscal means they plan to deploy. So we look to each of the political parties ahead of the election to set out clear and specific plans about what they will cut and what they will protect to avoid negative impacts on social mobility and child poverty. And we look to the next government – whatever fiscal approach it adopts – to give the Office for Budget Responsibility a new statutory duty to independently analyse the distributional impact of the government’s tax and spending decisions and to publicly report on the likely consequences for social mobility and child poverty alongside each Budget.
The second priority is to restart the twin engines of social mobility – education and housing. A good education opens the door to a good career. Owning a home fulfills aspiration today and cascades family wealth tomorrow. Neither engine is currently firing properly.
For decades the priority in schools has been to raise standards for all children. That policy is working and must continue but on current trends it would be at least 30 years before the attainment gap at GCSE between pupils who are entitled to free school meals and their better-off classmates even halved. We do not believe that the next Government should settle for that. It should focus early years services on ensuing children are school ready as part of a new national drive to ensure that the attainment of disadvantaged children rises and the gap between them and their better-off peers closes. Just as previous governments have set targets to raise the bar in schools we look to the next government to set new targets to narrow the gap. Illiteracy and innumeracy should be eradicated among 11 year olds by 2025 and the attainment gap between 16 year olds entitled to free school meals and their peers should be halved. By the end of the next Parliament – if the right effort is made – it is perfectly possible for at least 50% of children on free school meals to achieve five good GCSEs. That is what London schools manage to do today. It is what schools in every part of Britain should be doing within the next five years. That will mean focusing resources so that the poorest areas have far more of the best schools and that the best teachers are offered stronger incentives – including better pay – to work in struggling schools.
The same steely focus will be needed when it comes to housing policy. It has been a second order issue for previous governments. It must become a priority for action for the next. Demand for housing is rising and supply is not keeping pace. Home ownership rates among the young are falling sharply. The private rented sector, once seen as a temporary haven for young single people, is now home for millions of families, most of whom are living on short-term tenancies with little security – one in four families with children now live in the sector, four times as many as a generation ago and twice as many as before the recession. Rents have risen while mortgage costs have fallen. So housing law will need to change to offer families more secure, reasonably-priced rented accommodation and new approaches – such as shared equity schemes – will have to be brought to scale if home ownership is to be open to many more young people. Making the education system and housing market work better have to be priorities for any future government serious about tackling poverty and improving mobility.
The third priority is to realign public policy on the working poor. Britain’s economy is moving forward. Low inflation and interest rates help all families including the poorest. There are more jobs than ever in the British economy. The number of poor children in workless households is falling but today there are almost twice as many poor children in working households than in workless ones. For decades successive governments have relied on welfare to work policies as a cure for poverty. A job does remain the foundation for a life free of being poor and more is needed to get young people into employment. But work alone is not a cure for poverty. It is not the panacea it once was. Even at the height of the boom in the 2000s earnings growth was lagging behind economic growth. The uncomfortable truth is that work is failing to provide a reliable route out of poverty for too many families, despite welfare reforms by successive administrations aiming to “make work pay”. More than five million workers – mainly women – earn less than the Living Wage. The UK has one of the highest rates of low pay in the developed world. A two-tier labour market means that, all too often, a low paid job is not a stepping-stone to a better-paid one. Research for the Commission by the Resolution Foundation shows that of those who were in low paid work in 2002 only one in four had completely escaped from low pay by 2012. Most cycled in and out of low pay over the decade. Unless parents moving into low paid entry level employment are able to progress in work and see their earnings rise a move into work merely ends up substituting workless poverty for working poverty.
For all these reasons while getting more parents off welfare and into work – and tackling unacceptably high levels of youth unemployment – is still very important, it is no longer sufficient to guarantee progress. Public policy needs to realign to focus far more effort on the working poor. The priority – for Government and employers alike – is to move people from low pay to living pay. That means action to improve vocational education, to make childcare affordable and to tackle the “poverty premium” which forces the poorest families to pay the highest prices for many of life’s essentials. It means recognising that the road has run out for the old approach of asking taxpayers to effectively subsidise employers to pay low wages that do not cover living costs. In an age of austerity employers now have a bigger responsibility to pay living wages and parents have a bigger responsibility to work more hours. The next Government should commit to making Britain a Living Wage country by 2025 at the latest. It should work with employers to bring about improvements in productivity and skill so that by then no worker is earning less than the Living Wage. Even then, our research bears out what you have found in your report. More jobs and higher wages cannot, on their own, defeat child poverty. Even world-beating employment levels and better pay rates would still leave millions of children doomed to a life of poverty. It will remain intractable unless the next government is willing to recycle some of the savings made from increased jobs and earnings into supporting families through the tax and benefit system. A priority for the next government is to enable the poorest families to better share in the proceeds of economic growth.
The fourth priority is to refocus on opening up the top of British society. More mobility and less poverty relies on access to the top universities and professions being open to all those with ability and potential, regardless of background. While both universities and employers have worked hard in recent years to open their doors to a broader range of talent, Britain remains, at heart, elitist. The top universities and the top professions have been dominated by a social elite for decades. In the next five years they have the chance to break from that past as both are set to expand rapidly. By 2020 there could be 100,000 more university places and 2 million more professional jobs. That expansion provides the potential for a big social mobility dividend if both universities and employers more actively diversify their intakes.
If, collectively, universities put their shoulders to the wheel we believe that by 2020 thousands more young people from the poorest backgrounds could have been given the chance to enter higher education. That will require universities to more actively build long-term relationships with state schools in poorer areas and to make greater use of contextual admission procedures. The professions have a similar opportunity to make progress. An expansion of professional jobs provides space for employers to up their efforts to diversify their workforces. One way they can do so is by making internships openly advertised and fairly paid. If evidence is not forthcoming that progress is being made we look to the next Government to legislate to end internships that are unpaid.
That brings me to the fifth and final priority for action. Rebuilding a coalition in the country behind less poverty and more mobility. Government has a key role to play, not only in getting public policy right, but in forging a coalition for action in the country. Tackling poverty and improving social mobility require action at every level. As the Prime Minister once put it, we are all in this together. Parents, communities, schools, colleges, councils, employers and universities all will need to take a lead if Britain is to avoid being a permanently divided nation.
Over recent years the issues of social equity and mobility have had renewed public salience and political focus. There is much goodwill in place and many excellent initiatives underway. A growing economy provides the foundation for a new national effort to make Britain the most open, fair and aspirational society in the world. The opportunity now exists to forge a genuine coalition in the country for change. The next Government won’t be able to do it alone but it will have a key leadership role to play. It can start by reframing the debate on poverty. Today it is all too often seen as an issue only for some in society when it is actually an issue for all. Pitching strivers against scroungers is not the right framework for a national call to arms. Of course there are a cohort of people who live in entrenched poverty but they are a minority of today’s poor not the majority. Poverty is dynamic. Almost half of Britain’s citizens find themselves being poor at some point over the course of a decade. Insecurity is endemic today. It affects people in work and out of work. It affects low income families and middle income ones. It is recognisable to both. It is by tackling insecurity that government can best frame its anti-poverty efforts to build a genuine national coalition of support behind them. It can make sense of the three-legged stool that government has to construct if it is beat poverty: ensuring that everyone who can work does work; guaranteeing that poverty is escaped through work; supporting those who are genuinely unable to work.
We believe action on these five fronts could form the basis of the new consensus we seek. It is now up to the political parties to decide whether they allow the fiscal and political challenges of our age to overwhelm them, or whether they will rise to this challenge, and together make social mobility and child poverty core business for the next Parliament.
All the main political parties say they want a fairer, more open society in which people have an equal opportunity to realise their aspirations. Noble ambitions but ones, in our view, that simply will not be deliveredby their current agendas. The circumstances are so different, the challenges are so great, that the old ways dominating public-policy making for decades will simply not pass muster. What worked in the past will not serve as an adequate guide for the future. A new agenda is needed if poverty is to fall and mobility is to rise.
If more progress is to be made in the next parliament than in this one, urgent action and renewed energy will be needed to navigate the strong headwinds any new government will almost inevitably face. The election is the moment when we can reset our ambitions as a nation in the light of the circumstances in which we find ourselves. It is when we can define clear objectives and new timescales for first reducing and then ending child poverty. It is when we can better align resources with policies and mobile the whole of society to action behind radical new approaches.
The election is the moment for the political parties to step up to the plate. It is when politics can make the ending of child poverty a priority for Britain. It is time to make it core business for our nation.
The Rt Hon Alan Milburn is the Chair of the Social Mobility and Child Commission