How do we define social exclusion? It’s hard to imagine now, but as little as two years ago this key phrase in New Labour’s lexicon was hardly ever mentioned. Yet seldom a week now goes by without some new ministerial announcement on the subject.

With Tony Blair declaring that one of his key aims is to bring about an “inclusive society” the search is on to identify the principal causes and effects of exclusion, and to develop effective ways of dealing with them. It is this search for a new social agenda which, many believe, will eventually come to characterise Blairism as privatisation came to define Thatcherism.

A new report, to be published by a centre-left think tank next month, takes this search a stage further. It attempts not just to identify the main characteristics of exclusion but has devised a means of measuring society’s fluctuating fortunes over time. The result is a new index which, it is hoped, will record the ebb and flow of disadvantage.

The report, Key Indicators of Poverty and Social Exclusion, published by the New Policy Institute with support from the Joseph Rowntree Foundation, identifies 50 key signs of disadvantage, including 14 relating to children and young adults. The authors hope the new index will be taken up by Government and published annually. As such it could come to provide a key measure of New Labour’s progress in tackling inequality.

In drawing up the index the authors looked at the principal influences which determine the fortunes of families and individuals: their economic circumstances, health, education and employment background, and the social conditions in which they live. Key “indicators” were then identified for each phase of an individual’s life: childhood, the transition to adulthood, adulthood and old age.

At every stage the state of a family’s economic fortunes was seen as the key determinant of an individual’s life chances, but nowhere more so than for children. According to the report’s authors, children’s own future economic prospects are essentially determined by the economic status of the adults in their family.

Worryingly, a split has opened up between “work rich and work poor” households, with the number of children living in households with no working adults growing from under a fifth in 1979 to almost a third in 1997. Although the trend has stabilised in recent years, more than 2.5 million children are currently growing up in “work-less” households.

Another key indicator of disadvantage is the number of children living in households with less than half the average income. More than three million children - one in three - fall into this category, almost three times as many as in 1979 (see graph).

Not only is poverty - and thus potential disadvantage - being concentrated in particular households, there is also evidence to suggest the problem is being concentrated in particular schools (see graph). In 1994, 75 local education authorities recorded a reduction in concentration of children entitled to free school meals in particular primary schools, while 33 recorded an increase. In 1997, the situation had been reversed, with 37 recording a reduction and 67 an increase.

The overall picture, therefore, is of more children living in poverty, with more than ever living in households dependent solely on benefits, and of greater polarisation in particular communities and schools. The outlook for these children is bleak; they are more likely to leave school without qualifications, experience unemployment and get in trouble with the police.

This picture is confirmed by another key indicator -divorce. Family breakdown is identified as one of the most common factors behind mental health problems, low educational attainment and employment prospects in children and young people. While the number of children whose parents divorce has been relatively stable since the early 1980s, the rate for unskilled couples is more than twice the average for all couples (see graph).

One of the most important determinants of children’s life chances is their state of health. The report’s authors have chosen the percentage of babies with low birthweight as the key health indicator of likely future disadvantage. The new index shows that not only are underweight babies more likely to be born to parents in families with low social status - an increasing trend - they are also more likely to be born to lone mothers.

Education is the remaining area which has a crucial bearing on whether a child is able to grasp, or is excluded from, opportunities in later life. After considering a wide range of potential indicators, the think-tank authors have selected numbers failing to obtain at least one GCSE of grade C or above and the number of children who are permanently excluded from school as the key ones.

The figures show that more than 200,000 young people reach the end of their compulsory education without gaining a single higher-grade GCSE. Around 30,000 leave with no graded GCSE.

The index also charts the rapid increase in the number of school exclusions in England, previously reported, from just over 2,500 in 1991 to more than 12,500 in 1997. Black pupils are six times more likely than white children to be excluded (see graph).

For many young people the transition from school to adulthood is a painful business, as they discover that the disadvantages of childhood lead to exclusion from jobs. Once again, economic circumstances play a central role - with unemployment, low pay and hardship claims identified as key indicators. The report also singles out drug addiction and suicide rates, and criminal activity as key signs of poverty and disaffection among 15 to 24-year-olds.

But the critical factor affecting young people’s economic prospects is seen as educational qualifications. The authors have chosen the number of 19-year-olds without a basic qualification as the key indicator. In 1996, 30 per cent of 19-year-olds were without a level 2 national vocational qualification, GNVQ or equivalent (five GCSE passes at grade C or above).

Taken together, the indicators in the NPI report provide powerful evidence of entrenched poverty which is affecting a growing proportion of children and young people, damaging their life chances and increasing the likelihood of their being excluded from educational and employment opportunities as they grow up.

According to the authors, the report offers a “pilot” or “model” of what an official Government report, with annual updates, could look like. There’s likely to be much debate about the particular indicators selected. But if it does get the Government seal of approval it’s likely to provide an important guide to Tony Blair’s success in tackling social exclusion.

“Key indicators of poverty and social exclusion”, by Catherine Howarth, Peter Kenway, Guy Palmer and Cathy Street, will be published next month by the New Policy Institute, 109 Coppergate House, 16 Brune Street, London E1 7NJ. For more information telephone 0171 721 8421.