Alan Milburn: State of the Nation 2013

The Chair of the Commission's statement on the launch of the 'State of the Nation 2013' report.

This State of the Nation Report was laid before Parliament this morning. The Commission on Social Mobility and Child Poverty is required by statute to report each year on what is happening on these issues in our country. This is our first annual report. I would like to place on record my thanks to my fellow Commissioners and our excellent Secretariat for their efforts in compiling this comprehensive survey of trends past and present and what we believe is likely to happen in future.

When Ministers created the Commission they explicitly asked us to hold their feet to the fire. I hope the report fulfils that remit in a way that is both authoritative and fair. Much of its focus is on what the UK Government and, to a lesser extent, those in Scotland and Wales are doing to tackle poverty and improve social mobility. We also look at schools and universities and the role that employers and professions, local councils and communities are playing. They are all players on the pitch when it comes to improving life chances. In future years our reports will subject each of them to greater scrutiny.

It is part of Britain’s DNA that everyone should have a fair chance in life. Yet compared to many other developed nations we have high levels of child poverty and low levels of social mobility. Over decades we have become a wealthier society but we have struggled to become a fairer one. When 2.3 million children are officially classified as poor it exacts a high social price. There is an economic price too in wasted potential and lower growth.

By definition, reducing poverty and increasing mobility is not easy. It requires a long-term effort. Some say it is an impossible task. The Commission does not succumb to that pessimism. We have seen enough evidence from around the world – and in our country’s own history – to know that with the right approach it is possible to break the transmission of disadvantage from one generation to the next. We have grounded much of our analysis and our recommendations in this global evidence.

We know these are challenging times in which to make progress. Britain faces a triple squeeze on economic growth, family incomes and public spending. In these circumstances it would have been all too easy for Government to abandon the aim of ending child poverty by 2020 and to avoid the long hard haul of making progress on social mobility. We believe the UK Government deserves credit for sticking to these commitments and making new ones. The test we apply in this Report, however, is not about good intentions. We take those as read. It is about whether the right actions are being taken. We find in our Report a mix of good and bad news.

On child poverty the UK has gone from having one of the highest levels in Europe to a rate near the average over the last 15 years. Since 2010 there has been a dramatic 15% decline in the number of children in workless households but recently there has been a big rise in the numbers of poor children measured as being in absolute poverty and in working poor families.

On employment we find that there are more people in work than ever before but that the numbers of young people unemployed for over two years is at a twenty-year high and the Government has been too slow to act.

On living standards we find that real wages were stagnating before the recession and have fallen by over 10% since 2009. Real median weekly earnings are now lower than they have been for over a decade, putting many more families under pressure and forcing many more low-income earners below the poverty line.

On public spending we find that some services, such as schools, have been relatively protected from cuts but that overall fiscal consolidation has been regressive with the bottom 20% making a bigger contribution than all but the top 20% and an inter-generational injustice which sees better-off pensioners protected but families with children bearing two-thirds of spending cuts.

On schools we welcome the Government’s energetic focus on reform to drive social mobility and find that the gap between the poorest and the rest has narrowed at primary school and GCSE but widened at A-level. The most deprived areas still have 30% fewer good schools and get fewer good teachers than the least deprived.

On moving people into work we welcome the big expansion in apprenticeships but not the decision to abolish the Educational Maintenance Allowance. We find that the Universal Credit could be transformative in encouraging more people into paid employment but its impact is weakened by high childcare costs.

On universities the worst fears about the negative impact of tuition fees have not been realized so far but big falls in applications from mature and part time students and the failure of top universities to diversify their social intake are causes for concern.

On the professions we find greater efforts to open doors to a wider pool of talent but new research for this Report finds that class is now a bigger barrier than gender to getting ahead in a top professional career. Senior professionals are still more likely to be privately schooled and privileged men.

There is much to welcome in what Government, employers, schools and universities are doing. We see considerable effort and a raft of initiatives underway. The question is whether the scale and depth of activity is enough to combat the headwinds that Britain faces if we are to move forward to become a low poverty, high mobility society. The conclusion we reach is that it is currently not. We conclude that the statutory goal of ending child poverty by 2020 will in all likelihood be missed by a considerable margin, perhaps by as many as 2 million children We challenge all political parties to say how they would make progress.

We conclude too that the economic recovery is unlikely to halt the trend of the last decade, where the top part of society prospers and the bottom part stagnates. If that happens social inequality will widen and the rungs of the social ladder will grow further apart. The promising reforms we see in schools and some aspects of welfare will not, on their own, offset the twin problems of high youth unemployment and falling living standards that are storing up trouble for the future. We see a danger that social mobility – having risen in the middle of the last century then flat-lined towards the end – could go into reverse in the first part of this century.

To avert this we believe that policy-makers need to come to terms with a new truth that emerges from the mass of evidence contained in our Report. Although entrenched poverty has to be a priority - and requires a specific policy agenda some of which the Government is pursuing - transient poverty, growing insecurity and stalling mobility are far more widespread than politicians, employers and educators have so far recognised.

Too often – in political discourse and media coverage - these issues are treated as marginal when in fact they are mainstream. Poverty touches almost half of Britain’s citizens at some point over a nine-year period and one third over four years. Today child poverty is overwhelmingly a problem facing working families, not the workless or the work-shy. Two-thirds of Britain’s poor children are now in families where an adult works. In three-quarters of those households someone already works full-time. The principal problem seems to be that those working parents simply do not earn enough to escape poverty.

Then there is the growing cohort of low and middle-income families squeezed between falling earnings and rising house prices, university fees and youth unemployment, who fear their children will be worse off than they have been. Many of today’s children face the prospect of having lower living standards than their parents when they grow up.

These are profound challenges. We believe, however, that they also present an opportunity: to make the pursuit of a society with less poverty and more mobility something that is relevant to the many not the few in Britain.

We find, for example, that there has been a change in the geography of educational inequality. London state schools, which used to be the worst in the country, are now among the best. 100 per cent of secondary pupils in Camden, Hackney and Tower Hamlets are now in good or outstanding state schools, but in Middle England places like Bournemouth and West Berkshire it is just over 50 per cent. The nature of the problem has changed – and so too must the policy response.

For decades the focus has been on moving people from welfare to work. With 2.5 million people still unemployed and appallingly high levels of youth unemployment renewed effort is still needed there. A job remains the best safeguard against being poor. But it is not a cure for poverty. Over the last decade earnings growth has been lagging behind prices. More and more people are at risk of poverty as a result. Today the UK has one of the highest rates of low pay in the developed world. Five million workers, mainly women, earn less than the Living Wage. These are the people that heed the urgings of politicians of all hues to do the right thing, to stand on their own two feet, to strive not shirk. Yet all too often the working poor are the forgotten people of Britain. They desperately need a new deal.

During the late 1990s and early 2000s, public spending through higher tax credits subsidized stagnating earnings and propped up living standards. Austerity removes that prop. The taxpayer alone can no longer afford to shoulder the burden of bridging the gap between earnings and prices. We conclude that Government will need to devise new ways of sharing that burden with employers in a way that is consistent with growing levels of employment. Making headway on reducing poverty and improving mobility requires a fresh settlement between what the state does, what the market does and what the citizen does.

Our key recommendations for Government are that it firstly, aims to end long-term youth unemployment by increasing learning and earning opportunities for young people who should be expected to take up those opportunities or face tougher benefit conditionality. Secondly, that it reduces in-work poverty by getting the Low Pay Commission to deliver a higher minimum wage, rewards employment support providers for the earnings people receive not just for finding them a job and reallocates Budget 2013 childcare funding from higher rate taxpayers to help those on Universal Credit meet more of their childcare costs. Thirdly, that it better resources careers services, pays the best teachers more to teach in the worst schools and helps low-attainers from average income families as well as low-income children to succeed in making it to the top, rather than aiming to simply get them off the bottom to succeed at school.

Next, employers will need to more actively step up to the plate. Our key recommendations are that, firstly, they will need to provide higher minimum levels of pay and better career prospects, enabled by higher skills. Secondly, we call on half of all firms to offer apprenticeships and work experience as part of a new effort to make it easier for those who aren’t going to university - “the other 50 per cent” - to pursue high quality vocational training. Thirdly, we call on the professions to to end unpaid internships and recruit from a broader cross-section of society than many do at present.

Finally, and perhaps most importantly, we say that every citizen who can should be expected actively to work their way out of poverty by seeking jobs, working enough hours and seizing the opportunities made available to them. We say that the key influencers on children’s life chances are not schools or governments or careers services. They are parents. And we urge Government to break one of the great taboos of public policy by doing far more to help parents to parent.

We recognise that these, alongside the other proposals we make in this Report, are very challenging recommendations. A far bigger national effort will be needed if progress is to be made on reducing poverty and improving mobility. That will require leadership at every level. Government cannot do it alone. But it does have a special role to play in setting the framework for policy and mobilizing the country to action.

To play that role effectively we believe Government will need to do more to embed social mobility considerations in its own processes. Currently, we see good intentions and initiatives undermined by too little clarity and coherence. We suggest that the Office of Budget Responsibility is charged with producing independent analyses of key government decisions to ensure that Ministers are getting the maximum mobility-enhancing, poverty-reducing bang for the buck.

Just as the UK government has focused on reducing the country’s financial deficit it now needs to redouble its efforts to reduce our country’s fairness deficit. If Britain is to avoid being a country where all too often birth determines fate we have to do far more to create more of a level playing field of opportunity. That has to become core business for our nation. We look to Government and others to make it happen.