Rich-poor gap 'widens' under Labour

Wednesday, 17, May 2006 07:23

The gap between rich and poor people in Britain has widened since Labour came to power if spending, rather than income, is used to measure poverty, a new report has claimed.

Since 1996/1997 the proportion of people living in households with less than 60 per cent of average spending levels had increased from 20 per cent to 22 percent, the study by the Institute of Fiscal Studies (IFS) found.

The government currently measures poverty according to the number of households whose income is less than 60 per cent of the average. Under this definition, figures show that the poverty rate has fallen from 25 per cent to 22 per cent over the same period.

But the IFS said that spending rather than income was a better measure of household wealth because it is a more direct measure of people’s material well-being and reflects their consumption of goods and services.

In addition the independent research consultancy said that people also used savings and borrowing to ensure their spending was more even over time and to combat the effect of any changes to their earnings.

The organisation said that as a result the government should use spending to measure poverty by monitoring the number of households who spent less than 60 per cent of the national median.

The average spending amount per household was found to be £263 pounds a week in the year through to March 2003, the IFS said.

Using such a measure, the research organisation said that in addition to a widening gap between rich and poor households, child poverty was also found to have increased since Labour came to power in 1997.

The IFS said that Britain’s child poverty rate had risen from 25 per cent to around 27 per cent, if measured according to expenditure, while it had fallen from 33 per cent to 28 per cent if measured according to household income.

The organisation’s report, published alongside the Joseph Rowntree Foundation, also found that while levels of pensioner poverty had remained largely unchanged if measured in terms of spending, they had fallen rapidly if measured according to income.

"While the government has made some inroads into reducing income inequality, it is yet to reduce spending inequalities, which arguably better reflect longer-term differences in society," the IFS said in a statement.

On taking office in 1997 Tony Blair’s government pledged to narrow the income gap between Britain’s rich and poor and introduced measures such as the minimum wage and tax credits in order to boost the income of low-paid families.