Are fewer children in poverty?

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The pledge to eradicate child poverty has been a source of great pride for Labour supporters but also some frustration, with dramatic progress in the wake of the 1997 election faltering badly more recently. David Cameron has committed the Conservatives to meet Labour’s new target of eradicating child poverty by 2020. But for MPs elected this year, 2020 may as well be in the next geological period and there is a danger that
the target will be warmly supported but progress toward it in the next Parliament will be negligible.
The Test:
With 2.3 million children in the UK still likely to be living in poverty at the time of the election, any government remotely serious about meeting the 2020 target of eradication will have to demonstrate significant progress during the next Parliament. So, by 2015, the absolute minimum requirement would be to reduce the proportion of children living in poverty in the UK (26 per cent in 1999) from 18 per cent now to 13 per cent (the missed 2010 target set in the optimistic days of 1999).

Are health inequalities narrower?

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All the main political parties have a commitment to reduce health inequalities. The experience of the last decade shows how hard this will be to achieve. Life expectancy has risen, but the gap between richest and poorest has not narrowed. Any government committed to reducing the health effects of social and economic inequalities will have to find a new whole of government approach.
The Test:
It may take a generation for important social changes to show up as reductions in inequalities in life expectancy. The test, therefore, is the degree to which a new government puts in place a cross-department strategy to deal with the 6 major domains that cause inequalities in health: early child development, educational performance, employment and working conditions, sufficient income for healthy living, sustainable and healthy neighbourhoods, action on prevention across the social gradient. Reductions in inequalities in all of these should be monitored and show progress in the direction of greater fairness

Is society stronger?

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Despite the debate over whether Britain is ‘broken’, all political parties now agree that Britain’s recent high levels of inequality have had profound negative social consequences. But whilst the left retains a faith in the state’s ability to improve the lot of the poorest and the right places its faith
in the family, the need to repair the social fabric through constraints on runaway top salaries and the bonus culture receives less attention.
The Test:
Compared to many other developed countries, Britain has a high level of income inequality, with the richest 20 per cent having incomes at least 7 times higher than the poorest 20 per cent, leading to our comparatively poor performance on levels of mental health, teenage births, imprisonment, drug abuse, social mobility and more. By the end of the next Parliament, the reduction of  inequality should be established as a national target and the ratio of the incomes of the top 20 per cent reduced to no more than 5 and a half times the incomes of the bottom 20 per
cent. This would bring our inequality down to levels currently enjoyed by Canada, France, Switzerland and Spain.

Fabian Society

Tory ‘efficiency savings’ a smokescreen for job cuts says Vince Cable

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Sat, 24 Apr 2010

“Cutting too soon and pushing the economy back into recession will make the deficit worse, as tax receipts fall and benefit payments rise,” the Liberal Democrat Shadow Chancellor said.

Commenting on the IMF report cited by Gordon Brown today, which said spending should be maintained through 2010 to support the economy, Vince Cable said:

“The end of the fiscal stimulus has seen billions taken out of the economy. We have already seen the effects of this with growth falling to just 0.2% and there is a very real danger the economy could fall back into recession.

“The IMF is right to argue spending should be maintained this year. Cutting too soon and pushing the economy back into recession will make the deficit worse, as tax receipts fall and benefit payments rise.

“The Conservatives’ so-called efficiency savings are particularly dangerous. They have no clue where or how these ‘efficiencies’ will be made, making it likely they will be nothing more than a smoke screen for job cuts.”

VAT rises are regressive

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The other concern is the impact of VAT increases on poverty and inequality. Compared to raising direct taxes like income tax, increases in indirect taxes like VAT have a much bigger impact on people with low incomes. As the Office for National Statistics has pointed out, direct taxes are progressive; they “contribute to a reduction in inequality”. Indirect taxes, on the other hand:

“Have the opposite effect to direct taxes taking a higher proportion of income from those with lower incomes, that is, they are regressive.”

If we divide the country by income into quintiles (fifths), income tax accounts for 3.2 per cent of the income of the poorest quintile, but 18.4 per cent of the income of the richest. VAT, on the other hand, accounts for 10.8 per cent of the income of the poorest quintile but just 4.5 per cent of the income of the richest.

If there are no measures to balance this impact, an increase in VAT will make inequality worse. It will also deepen poverty – VAT accounts for over 7 per cent of the spending of people in the bottom quintile, with no other source of income than benefits they will have few alternatives to cutting already low levels of spending when prices rise.

The most worrying thing of all is that there has been no mention in any news story of an increase in benefits and tax credits to protect the poorest. The last Conservative government actually froze benefits when it was trying to cut public spending and Robert Chote has warned that the coalition agreement:

“Leaves open the option of tougher action to cut social security spending.”

Both parties in the coalition government claimed to be pro-poor in the election. The Liberal Democrats have made this claim longer and more convincingly than the Conservatives, so I suppose the onus of responding to this criticism lies most heavily on them. Will they promise not to cut or freeze benefit rates? And will they commit to increasing benefits and tax credits to compensate for any increase in VAT?

http://www.leftfootforward.org/2010/05/lib-dems-set-to-support-regressive-tory-vat-increase/