Poverty, but not as you know it, Roy

If only Roy Hattersley were right about what policies Labour should be pursuing, life would be so much easier for Tony Blair. The sad fact is, however, that the approach Roy advocates offers the Labour leader a hiding to nothing.

Last weekend on these pages, Hattersley advocated a return to prioritising the needs of the disadvantaged and the dispossessed. This, he said, should be done by an attack on poverty - specifically through improvements to the basic pension, and a massive building programme. Should the anti- poverty strategy he advances be adopted, most of the poor will be left untouched. Adopting the strategy, we are told, will enthuse the rank and file. But how will the voters, including most of the poor themselves, react?

On these big issues the punters have always been streets ahead of where the politicians think they are. The top-down, state-dominated strategy is likely to reignite all those old fears about Labour throwing money at every problem.

That is not to say that money does not have to be spent, or that an effective anti-poverty strategy should not be a key part of Labour's coming manifesto. It must be. There is little point in winning unless we are in business to move opportunities sharply in favour of the dispossessed. It is just that Roy's solution no longer fits the bill.

Not only have people's aspirations changed spectacularly, but an equally decisive change has taken place in the causes of low income. An effective anti-poverty programme must match these changes. So, too, must a political programme shadow the decisive change to the privatisation of life that goes so far beyond Mrs T's privatisation measures as to make it absurd to mention them in the same breath.

The approach of the Thirties, or even the Sixties, is no longer relevant. The world to which these programmes were addressed has largely disintegrated. Roy is right that unemployment must be tackled. But it is not like the old days. Britain is a small cog in a fast-growing global economy. Many of those well-paying unskilled and semi-skilled jobs have gone for ever. Effective policy has to start from this point.

So many recent demands for an attack on poverty are in the "more of the same" mould. The poor are to be done good to, and there is little or no discussion on the part they should play in an effective strategy. Labour's new approach to welfare reform must take account of how benefit systems react on people's characters. The fastest-growing bundle of welfare benefits are offered on the basis of a means test. Yet means tests penalise effort, confiscate savings and tax honesty. By concentrating help in this form, the Tories have created the very culture of dependency they publicly despise. Means-tested welfare teaches people at best to "work the system" and at worst to commit fraud.

It is crucial to link together two long-term strategies if Labour is to break dramatically with the discredited past. First, means tests must be phased out - perhaps a 20-year task - in favour of a new system of insurance. Such an insurance-based welfare system inculcates those moral values which society wants to protect and advance. Equally important, it may now be that an insurance-based system is the only kind the electorate will support.

And second, income support needs to be turned on its head, forming a life raft that takes people off benefit into work.

These sorts of proposals are not about cutting welfare bills. Given the changes that are rewriting our lives - the loss of jobs-for-life, and living for up to 30 years beyond the three score years and 10 - calls for more, not less, to be spent on welfare by those in work. A new unemployment insurance, for instance, must reflect the fact that many of us will move quickly between employers over the whole of our working lives. Similarly, most pensioners will soon be living beyond their 80th birthday. When pensions were first introduced at the age of 70, the average length of life was 48 years. But handing over successive parts of the welfare state to a new insurance corporation or society run by contributors would have a major impact on the government's budget and thereby on tax levels.

I do not believe voters are going to be prepared to pay more of their income to finance their welfare unless they have a decisive say over the schemes. The National Insurance Corporation must be run by the punters. A universal private pension provision, which would run alongside the state retirement pension, must result in individuals owning their own pension capital. Moreover, this scheme of compulsory savings for the second pension - for that is what Labour will need to advocate - must also allow people to borrow against their savings capital, within carefully defined limits.

As to a radical overhaul of income support, instead of anyone being able to claim entitlement for almost unlimited duration, all able-bodied long-term claimants should be required to draw up career plans. Income support would then act as an educational maintenance allowance, helping claimants achieve their ambitions. Most of the poor in my constituency have never been asked what they want to achieve during the rest of their lives.

This reform will begin to have a decisive effect on the most important cause of children being raised on low income. Unemployment used to be the culprit. Now those children who are on income support because they are part of a one-parent family are double the number in families whose breadwinner is unemployed.

In addition, there will need to be a medley of other programmes targeted towards particular groups. One of the most important will be for the long- term unemployed male worker. No amount of massive housing programmes advocated by Roy Hattersley will offer these workers hope, let alone a job. Building programmes should only be sanctioned if accompanied by pukka training schemes and the possibility of work on the project thereafter. This is where John Prescott's careful studies in the regional economy will pay dividends.

So Roy is right in insisting that Labour must have a clear strategy to tackle poverty. But it must be one looking forward to the new millennium, and not backwards into a world which, for all too many, has already disappeared.

The writer is Labour MP for Birkenhead.