Labour: Growing Inequality And High Personal Debt

3.24.00pm BST (GMT +0100) Mon 27th Sep 2004

Liberal Democrat Shadow Chancellor, Dr Vince Cable MP, today criticised Gordon Brown for failing to tackle problems of inequality, poverty and growing personal debt.

Dr Cable said: "It is undoubtable that Gordon Brown has a good record in macro-economic stability, low inflation and falling unemployment but these achievements stem from decisions made early in his first term and now other problems are becoming apparent.

"Seven years ago when Labour came to power they spoke of introducing a fairer system in which inequality would be reduced.

"But inequality is even higher under the Labour Government than ever under Margaret Thatcher.

"Despite the myriad of anti-poverty policies latest Government figures show that one in five pensioners still live in poverty. A major contributory factor is the extreme complexity of means tested benefits. This stops many from claiming. For those that do claim there is no incentive to save.

"Under Labour, 6.7 million people of working age are living below the poverty line - an increase of 200,000 in the last year alone.

"The brutal fact is that the poorest 20% still pay more of their income in tax than the richest 20%. The failure of the Labour Government to tackle the regressive council tax has hit the poorest the hardest.

"Labour has failed to get a grip on inequality and poverty."

Dr Cable also warned of the growing imbalance regarding personal debt and the overvalued housing market.

Dr Cable said:

"Personal debt has reached over £1 trillion pounds, which is equivalent to £16,500 for every man, woman and child in the country. The ratio of debt to income is also at unprecedented heights with most debt secured on housing assets.

"Despite concerns raised by my colleagues and I over the last year the Chancellor has ignored this fundamental imbalance in the economy. He cannot rely on the Bank of England alone to secure a 'soft landing'.

"A number of reputable commentators, including the IMF, argue that as interest rates continue to increase we are likely to see a sharp downward adjustment in house prices.

"It is clear that the housing market is going into reverse and we are heading to a position where people could find themselves in negative equity and debt.

"The Government must focus on whether there are adequate safeguards in the market.

"Despite the promises of New Labour we are faced with high levels of inequality and poverty and there is risk of a bust equivalent to the early 1990s."

Ends

Notes

1. ONS figures published in May 2004 show that under Margaret Thatcher's administration the Gini Co-efficient averaged 29.9. Under Labour so far it has averaged 35.0. Income inequality under Labour so far, on the ONS measure, has thus averaged one sixth higher than it was under Mrs Thatcher.

2. Latest figures by the Department for Work and Pensions show that in 2002/3, 2.2 million pensioners and 6.7 million people of working age were living below the poverty line.