Thank you very much.
I will just say a little bit about what the New Policy Institute is, since we're not within academia. We are an independent think-tank that has been around for more than ten years now. Over that time we have worked a lot, not exclusively, on poverty and social exclusion, usually funded in this work by the Joseph Rowntree Foundation.
In the first instance, our role here has been monitoring progress, using almost exclusively the official data sets, and I think this has meant we've probably done two useful things. One thing we have done slightly is to contribute to keeping the public discourse honest, and the other thing we have been able to do through that is to shape the way in which certain issues are seen, sometimes in advance of them becoming mainstream.
One thing I would particularly mention, because I think it's central—I imagine it's central to you too—is the point that while most people in work are not in poverty, in the U.K. at least half the people in poverty belong to working households. So the simple story that work is the route out of poverty is not in accordance with the facts.
Let me briefly divide my contribution into two parts. Firstly, going over some of the history, I don't in any way disagree with anything that Professor Gordon has said, though I perhaps might be colouring it slightly differently. I then want to make one or two remarks about where I think the U.K. is at with its anti-poverty policy that I hope may be relevant to you too.
As David said, really the first significant act in this move to deal with poverty took place in about 1999. There was an explicit focus on children and an implicit focus on pensioners. Since children live with adults, the adults who live with children also in some sense were both the object of the policy and also the beneficiaries. The great group that was left out and remains left out is those working-age adults without dependent children, and we would say that is important.
As David told you, really for the first five or six years of the government's policy, child poverty measured on the low-income measure was falling steadily, perhaps not quite as quickly as was wanted, but it was certainly coming down. I think at that stage the target was expressed in terms of a desire to remove a million children—that's about a quarter of the children in poverty—from poverty by 2004-05.
In the best year, which was 2004-05, I think something like 800,000 children had been removed from poverty, moved above that income poverty line. That was short of the target but was nevertheless a substantial achievement. We now have two more years' worth of data, and I think they show a very different story. It's not always clear that these things are statistically significant, but the headline figure is that since then, child poverty has slipped back up again by about 300,000. That means, compared with the objective two years ago of reducing child poverty by a million, we have actually now reduced it by only 500,000. We are only halfway to a target of two or three years ago.
The way we sum that up, and I think it is very important to get both parts in, is that this was a policy that clearly was working. The polices that have been pursued have not in any sense been a failure. But it's a policy that, having worked, has now stalled. Perhaps it's exhausted. It certainly seems to have very little momentum. Why is this, and where does this leave the U.K.?
David also very clearly explained that this policy, of course, is heavily dependent upon increasing employment, particularly among lone parents, where there are very high levels of worklessness in the U.K., and that was deemed to be a significant concern.
In the early years of the Labour government, post-1997, the employment rate was rising. It rose by about 1% in three years, which is quite significant, I think. Since then, it has struggled to rise very much further. I think that is part of the difficulty of a strategy that emphasizes work so much.
Nevertheless, I think what you can see there--an employment policy, income supplements to people in work through tax credits--was a policy wherein the instruments were well matched to the target. I think the difficulty with it, however, certainly as far as the tax credits and the use of the tax and benefit system is concerned, is that it was not addressing the deep causes, if you like, of poverty, whether that be in the labour market, whether it be to do with the levels of human capital, qualifications, and so forth, or whether it be to do with discrimination.
It also singularly failed to recognize, never mind address, this problem of in-work poverty. As I say, it is now the case that half the children in poverty belong to working families. Almost all the working families are paying tax. There are all sorts of areas that have not perhaps been addressed that might have been if in-work poverty had been recognized as a problem in its own right.
So where have we reached? I think the conclusion we draw is that the way the Labour government of Mr. Blair began its anti-poverty policy in the late 1990s was arguably the only way to begin, which was by focusing on children and by using very direct measures to try to boost incomes. It did work. It continued to work for several years, but it seems to have run out of steam. I think we've therefore reached the point at which you can't assume that these direct measures, these direct income transfers from the state to individuals and families, can go on working forever, unless you address wider problems. They have always been part of the anti-poverty policy here, but I don't think they've been a coherent part of it. I don't think they've been integrated within it properly.
Our challenge now is to ask how many of these other things are intended and are supposed, exactly, to affect poverty. I think the going from now on will be much harder. It will be much harder to see evidence on a year-by-year basis. Nevertheless, it is almost certainly the case that you have to, in the end, engineer fairly deep changes in society if you want to end poverty. You can't eradicate it. Perhaps you can't even reduce it substantially while in some sense the rest of society carries on the way it has and the way it does.
I think there are very big challenges ahead. I think the fundamental distinction that now lies with other policies is whether you are going to have policies that are targeted at low-income households or other disadvantaged groups--you've had a number of those suggested to you--or whether you are going to try to do things that perhaps alter society as a whole. I noticed in your list the suggestion someone put to you of having universal child care. I think that falls into that category, and I think there could be an interesting discussion about that if it's something that is of interest to you.
Thank you.