Britain Risks Becoming 'Permanently Divided' Nation, Report Warns

Britain is on the verge of becoming a "permanently divided" nation with the poorest in society left behind, a major new report has warned.

In a stark warning, the Social Mobility and Child Poverty Commission said that the country was likely to see an "unprecedented" rise in child poverty over the next decade as the effect of welfare cuts and low pay bites, with "little prospect" of Britons' life chances improving in the immediate future.

This comes as another report, by the forecasting group EY Item Club, said that Britain's economic growth would start to slow down next year.

The Commission, led by former Labour cabinet minister Alan Milburn, says that it shares the view of experts who predict that 2020 will mark not the eradication of child poverty but the end of the first decade in recent history in which it increased.

"A decade of rising absolute poverty is unprecedented since records began in the 1960s," the report says.

"There is a clear risk that the year 2020 will mark not just a failure to meet the Government's legal obligation to have ended child poverty but could mark a permanent decoupling of earnings growth and economic growth at the bottom end of the labour market.

"2020 could mark a watershed between an era in which for decades there have been rising living standards shared by all and a future era where rising living standards will bypass the poorest in society."

It adds: "Social mobility, having flatlined in the latter part of the last century, would go into reverse in the first part of this century. The United Kingdom would become a permanently divided nation."

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Milburn, who chairs the Commission, also warned that the young are increasingly missing out on opportunities enjoyed by their parents' generation, with the under-30s at risk of being priced out of owning their own homes.

Those without the benefits of wealthy parents are condemned to languish on “the wrong side of the divide that is opening up in British society”, he told the Observer newspaper over the weekend.

He went on: “It is depressing. The current generation of young people are educated better and for longer than any previous one. But young people are losing out on jobs, earnings and housing.

“This recession has been particularly hard on young people. The ratio of youth to adult unemployment rates was just over two to one in 1996, compared to just under three to one today. On any definition we are nowhere near the chancellor’s objective of “full employment” for young people. Young people are the losers in the recovery to date.

"Youth unemployment is still higher than before the recession and by the time of the next election around half a million young people will still be without work, enough to fill Wembley stadium five times over.

“Urgent action is needed to prevent this generation of young people faring worse than their parents’ generation. Social mobility relies on young people having better opportunities to progress. Investment in the skills and employment of young people today is money saved in social security and the costs of poverty tomorrow.”

Meanwhile, the EY Item Club said that the UK economy would grow by just 2.4% next year, well below the 3.1% expected this year.

The forecasting group said that the upcoming general election and resultant political uncertainty would cool businesses' appetite to invest.

Their 2.4% figure is less than the predictions made by the Bank of England, the Confederation of British Industry and the International Monetary Fund.

Last week, the Bank of England's chief economist Andy Haldane said he was "gloomier" about Britain's economic prospects because of low wage growth and wider financial and political risks.

This outlook is "virtually unprecedented going back to the late 1800s, with the exception of the aftermath of the world wars and the early 1970s," he warned, adding: "This has been a jobs-rich, but pay-poor, recovery."

Peter Spencer, EY Item Club's chief economic adviser, said: "The forecast for GDP growth is still relatively good. What has changed is the global risks surrounding the forecast and the headwinds facing investment by firms.

"The UK's export outlook continues to look dreadful. The glimpse of economic rebalancing that we saw in the early part of this year has turned out to be a false dawn.

"Looming political uncertainty risks denting corporate confidence - the question now is how will these risks play out? I expect caution to become the order of the day."

The Social Mobility and Child Poverty Commission's report comes just months after a government adviser warned that Britain will be left with a "tiny elite and huge sprawling proletariat" who have no chance of "clawing their way out of a hand-to-mouth existence" in 30 years.

David Boyle, a fellow at the New Economics Foundation think-tank, predicted that rising property prices would effectively render the middle classes extinct as the dream of home ownership becomes ever more distant.

Barnardo’s CEO Javed Khan said the government must restore the link between benefits and inflation: “It’s shocking that poverty looms for a record number of children by 2020, no matter how hard their families work. Surely now it’s time for the UK Government to change its ‘slash and burn’ approach to welfare reform."

Prime Minister David Cameron's official spokesman said child poverty is at its lowest for 30 years and that there are now 290,000 fewer children growing up in workless households.

"We would put at the heart of how we address this the importance of work," said the spokesman. "It is through greater employment opportunities for the households in which children grow up that we can best address this issue.

"I would point to policies such as welfare reform and reform to reduce income tax bills through the personal allowance."

But he added: "Do we need to keep doing more? Yes. We need to keep doing more in this respect."

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