Labour has failed to end class divisions, ministers admit

The Government is to draw up plans to close the gap between Britain's rich and poor after ministers admitted that Tony Blair's New Labour project had failed to eliminate differences in opportunity, wealth and health.

Although ministers claim they have started to redistribute income through the flagship tax credits of the Chancellor, Gordon Brown, a growing number of them admit that the Government has been too cautious about tackling class inequalities.

Mr Blair now wants measures to ensure that all social groups benefit from economic prosperity and the extra money that is now being ploughed into public services.

One minister said yesterday: "We have had our eyes focused too firmly on Middle England since 1997. We have not been bold enough in ending the inequalities which still plague Britain."

Further pressure will come shortly in a study by the Institute for Public Policy Research (IPPR), a think-tank with close links to Downing Street, showing that the life prospects of children are shaped heavily during their first 12 months – or even while they are still in the womb. It will say that a baby born into the bottom social class is more than twice as likely to die in its first year than one born into the top social class.

A draft of the report seen by The Independent says: "It is difficult to imagine a more potent measure of a progressive society than the achievement of an equal start for every child. The persistence of stark inequalities emerging early in life ... is a depressing reminder of our failure to achieve a fairer society."

Many Labour MPs will welcome the new approach. But they will be sceptical about whether Mr Blair will bring in "bold" policies to tackle privilege – for example, by raising inheritance tax.

The IPPR will give a firm nod in that direction by saying: "If we are serious about providing children with an equal start in life, we have to be prepared to counter the impact of (or compensate for lack of) inherited privilege."

The report will urge the Government to appoint a network of mentors or "home visitors", perhaps grandparents, to help support parents after a baby is born.

It says the state must "cross the threshold into the private world of the family".

Peter Mandelson, the former Cabinet minister, admitted the Government had failed to create a "genuinely meritocratic society".

Writing in the modernisers' journal Progress, he said: "New Labour should focus its crusading zeal on what will help people get on in life and make the most of themselves, instead of being held back by the absence of privileges of birth, wealth and family connections."

The MP for Hartlepool added: "So far we have talked a good game, one that includes obligatory denunciations of snobbery, racial prejudice, the closed shops of the professions and restricted access to universities and the civil service.

"But we have yet to take these citadels by storm and make a profound difference to young people like those who live in my constituency and who feel shut out because so many paths are barred to them," Mr Mandelson wrote.