John Kampfner reveals the new "trickle-up" theory
Monday 14th June 2004

After "trickle down", in which more wealth for the rich helped the poor (or so the Tories said), comes "trickle up". If there's less poverty, the rich pay less tax (or so Labour says). By John Kampfner

With the local and European elections out of the way, the coming weeks will see a new focus in Downing Street and the Treasury on ideas for the next five years. Party strategists are using a rhetorical device to guide them into the general election: what is the question to which a third term provides the answer? In other words, what is the point of another Labour government?

A debate is raging as much about the message the party should project as about the policies it should put into the manifesto. Seven years on, many in government are wondering how it is that they have failed throughout the second term to convince the public of the merits of public spending as a social good.

In the Treasury, there was a sense that the 2002 Budget had broken new ground. The rise in National Insurance, particularly for the better-off, led to only muted complaints, and these were offset by praise for the candour of the announcement.

From that moment, however, the government lost its nerve. It became sidetracked not just by the war, but by the rows over foundation hospitals and tuition fees.

"We had a chance then to nail down the social democratic argument about the needs of society as a whole, but we didn't take it," says a senior government figure. Will Labour now try to sell to the affluent the case that their needs will be better served if the poor are less poor?

As ever, they are hamstrung by Tony Blair's reluctance to challenge some of the basic tenets of conservatism. His unwillingness to express concern about the growing wealth gap, when challenged to do so during the 2001 campaign, is still seen by many in the party as a defining moment. And yet those around Blair, Gordon Brown and those others preparing the manifesto see, in the Prime Minister's weakness, in the disillusionment of the core vote and in the visceral hostility of parts of the media, a chance to take more risks.

They are watching, for instance, Blair's projection of the campaign against child poverty. The government is expected this year to meet the target it set in 1999 of reducing child poverty by a quarter. That is no mean feat, but the going will get much tougher from here if it is to go on to cut the numbers by half by 2010 and eliminate it altogether by 2020.

According to Jonathan Stearn, director of the umbrella group End Child Poverty, ministers "have started to talk about distribution, but mention the word redistribution and they start to twitch."

There are already suspicions that the government is trying to massage the statistics. The parliamentary select committee for works and pensions told the government in April that it must continue to measure child poverty after housing costs had been paid.

Ministers responded on 8 June by arguing that they preferred to calculate the figures before housing costs, which will conveniently cut the number in poverty from 3.6 million to 2.6 million.

Either way, if Labour is to meet these longer-term poverty goals, it is going to have to find the money from somewhere. The Joseph Rowntree Foundation estimates that the income of the bottom 10 per cent will have to rise at three times the rate that it rises for the top 60 per cent. Blair has made clear he will stick to his pledge of the past two elections not to raise the basic or top rates of tax.

If taxes are to be raised by other means, the ground will have to be laid more carefully. Indeed, government strategists are casting around for ways of doing just that. One point of reference is the 1980s and the case made by the right for wealth as a social good, with its mantra of "trickle-down economics". Labour strategists are now looking at stealing that idea and turning it on its head. "Trickle up" could, they say, be the next big thing, persuading the comfortable majority that its interests are best served - in terms of crime, antisocial behaviour and the income-related public health problems which burden NHS - by improving the lot of those at the bottom. By way of example, one recent report showed that the gap in life expectancy between the top and bottom economic categories rose from 5.5 years in the 1970s to 9.5 in the 1990s and has come down by only one year under the Labour government. The argument is simple: people who are poor and who suffer from chronic illnesses use the NHS much more often than those who are better-off. People who are poor are also disproportionately filling our jails. Provide them with better life chances, and ultimately they will cost less.

So far, the rights and responsibilities agenda has been applied almost exclusively to the disadvantaged. Some in the cabinet want it applied more broadly, but that would require a message that is more courageous and a redistributive agenda that is less coy. It is on this territory that the battle for the soul of a third Labour government will be fought.


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