In the mid-90s, when John Major’s traffic cones hotline was still the biggest thing in politics, I discussed with a senior New Labour adviser how a Blair government might change the country. The Thatcher governments had succeeded in doing so, we agreed, because so many policy proposals could be tested against a simple question: “How does this create a market?” Civil servants, ministers, advisers and thinktanks all came to understand that if their ideas didn’t create or enhance markets they were probably wasting their time.
What, the adviser asked, was the equivalent question for New Labour? We didn’t, given the constraints imposed by four election defeats, find a sufficiently crisp formula.

But I now think the question that ought to dominate Labour policy has been staring us in the face all along. It is: “How do we create a more equal society?” By this, I don’t mean a more meritocratic society, in which everyone, regardless of birth, has an equal chance to get rich. I mean a society where the gap in income and wealth between rich and poor is very much less than it is now, as Polly Toynbee argued on these pages yesterday.

If the government could bring this about, many of the goals it attempts to achieve by other means – higher educational standards, a healthier population, a fall in violent crime, a revival of democratic participation, a reduction in racism, even protection against Islamic extremism – would be much nearer realisation.

Ministers could then expend less of their and other people’s energy on, for example, new state schools with fancy names, exhortations to eat health-giving nuts, roots and berries, and wheezes to allow us to vote without leaving home.

This may seem a large claim, and one that comes from a bygone age of egalitarian dogma. But consider for a start a paper presented in London this week at the World Congress of the Econometric Society by two American researchers. After following 6,000 children from the age of five to 14, the researchers concluded that the tax credits for poorer working families introduced by Bill Clinton in 1994 had had a dramatic effect.

With $1,000 in extra income, children’s test scores had risen on average by 2.1% in maths and 3.6% in reading. With the maximum tax credit of about $4,000, the researchers calculated, the gain in reading scores was more than 16%. The gains were even higher for black and Hispanic children. In Britain, Gordon Brown’s tax credits could well turn out similar results.

Tax credits were introduced for a host of reasons, and not just to raise school performance. But I doubt if any educational policy alone will be able to claim such significant effects for such a small outlay. More pre- schooling and drastic cuts in class sizes, perhaps, but certainly not city academies or enhanced powers for Ofsted.

Many words have been expended on what poor people are thought to need: better schools, more books in the home, more counselling, more seaside holidays and so on. What they need most of all, however, is more money. But it is important to understand that trickled-down wealth won’t do it. Inequality is the killer.

I use the word “killer” advisedly. The effect of inequality on health is extraordinary. In rich areas of the US, 16-year-old white men can expect to live to their mid-70s; a black 16-year-old in a poor area cannot expect to celebrate his 60th birthday. As the social epidemiologist Richard Wilkinson puts it in his newly published book The Impact of Inequality: “We are used to feeling indignation at the human-rights abuses in countries where people are imprisoned without trial, are tortured or simply disappear, but health inequalities exact a much greater toll.”

Not all such differences in life expectancy are attributable to differences in lifestyle, such as smoking, drinking, drugs, exercise and diet. Poverty and inequality induce stress: one survey in the 90s showed that families living on less than £10,000 a year were more than twice as likely to have daily arguments as those on more than £20,000. We look admiringly at high life expectancies in Japan and Sweden and debate if raw fish or lingonberries would do the trick for us, too. It never seems to occur to us that the longevity may be connected to these being two of the most equal societies on Earth.

Wilkinson’s book quotes a wide range of evidence on how inequality affects other areas that preoccupy policy makers. More than 50 studies show a clear tendency for violence to be more common in societies where income differences are larger. About half the variation in homicide rates between different states or provinces in the United States and Canada is accounted for by differences in the amount of inequality. Racial hostility and discrimination against women is greater in the more unequal American states.

In the US and Italy, involvement in community life (including voting) is highest where income inequalities are least. There seems to be nothing on the relationship between income inequality and violent Islamic extremism. No doubt we shall soon have an inquiry. We have had such inquiries before, after the inner-city riots of the early 1980s and after those in northern towns in 2001. If we don’t now know the answers – poverty, social exclusion, employment discrimination even against those who have qualifications as good as those of their white peers – we never will.

It is easier to quote the figures for the effects of inequality than to explain precisely why it works as it does. The best guess is that high inequality leads to status anxiety, which in turn leads to stress and anger and a breakdown of trust and social cohesion. We may say that people should learn to be grateful for what they’ve got, but we all know from children’s demands how important status symbols – the right clothes and gadgets – are to the human animal.

Even harder is to know what policies would reduce inequality at a time when all economic forces work in the opposite direction. Wilkinson suggests more progressive taxation and more economic democracy, with a rise in employee share ownership and employee participation in company decisions. But there’s no getting away from it: if we are to reduce inequality, it’s not just a matter of the poor having more but also of the rich having less.

Despite Brown’s tax credits, New Labour has never accepted that. The Office for National Statistics reported this week that both the richest 10th of the population and the poorest 10th have seen their disposable incomes grow by a fifth since the mid-1990s. Unfortunately, these rises are worth £119 a week to the first group, £28 to the second. So the absolute difference between the two is widening. As long as that continues, governing Britain will be hard work and all New Labour’s clever little initiatives, from city academies to antisocial behaviour orders and voting from your BlackBerry, will come to nothing.

Peter Wilby is a former editor of the New Statesman

peter.wilby3@ntlworld.com Guardian Unlimited (c) Guardian Newspapers Limited 2005

http://www.guardian.co.uk/comment/story/0,3604,1557387,00.html

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