LABOUR admitted yesterday that it had failed to transform the life chances of Britain’s poorest children, despite a succession of initiatives costing billions of pounds.

By the age of six, clever children from poor homes have already fallen behind less-able pupils from wealthy backgrounds in the classroom, according to a progress report on Labour’s eight years in power.

The report also revealed a growing gap between rich and poor.

David Miliband, the Cabinet Office Minister who presented the assessment, said that the gap between the incomes of rich and poor families had levelled off, thanks to government policies such as the minimum wage.

When savings and investments were taken into account, however, the gap had widened considerably.

Tony Blair will announce another increase in the national minimum wage today, taking it above £5 from its current rate of £4.85.

That will help to stop the income gap from widening dramatically again, but will do little to narrow the so-called wealth gap.

The report found that despite a series of government programmes to encourage low-income families to save, the poorest 10 per cent of homes have average net debts of just under £5,000 but the top 10 per cent have savings of about £35,000.

Baby bonds worth £250 to all new children are among the new policies designed to encourage low-paid families to save.

Mr Miliband, who is writing the Labour manifesto, said that despite the disappointing progress on eradicating social inequality, there had been outstanding reductions in NHS waiting lists, dramatic falls in crime and massive improvements in employment.

“Britain has never had a better chance to meet the challenges of the modern world,” he said.

“Thanks to the foundations laid since 1997, we are making prosperity, security and opportunity realistic goals for the British people.

“The demons that confronted the Government in 1997 — the demons of mass unemployment, the demon of people being paid £1.50 an hour, the demon of people waiting on trolleys in hospitals — those demons have been slain.”

He denied that he was overselling Labour’s achievements. “I deliberately didn’t say ‘You’ve never had it so good.’ But we are saying that there has been significant progress on which to build,” he said.

He was, however, immediately accused of using a supposedly independent report to paint a rose-tinted picture of Britain in the approach to the general election.

Oliver Letwin, the Shadow Chancellor, seized on the remarks, pointing out that they appeared to echo Harold Macmillan’s “most of our people have never had it so good” statement of the 1950s.

“Never had it so good? What about Labour’s 66 tax rises? What about the million violent crimes last year, or the two million pensioners below the poverty line?” he said. “If this is the Government’s definition of never having had it so good, it shows just much Mr Blair has lost touch with the British people.”

Improving social mobility, addressing poverty and exclusion would be a top priority for the Government, the document said.

There would be an increasing focus on early development and on what it calls hard-to-reach groups.

The children who have already reaped the benefits of early-years programmes such as Sure Start have not yet started school, so the Government will be looking for a great improvement in educational attainment from this group over the next few years.

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