A couple of Saturdays ago Goodbody Stockbrokers predicted that Ireland could be the third-wealthiest country in the EU within six years. This astonishing news went down like a lead balloon. There was no dancing in the streets, no church bells were rung in celebration, no fireworks blazed into the sky.

Part of the reason for the cold reception lies in a report published yesterday. That report also puts us high up in an EU league, but this time it's the low-income league. Ireland has 21 per cent of its population living on low incomes. On this particular table we rank joint second with Greece. Only Portugal, of the 13 member-states measured, has a higher proportion (24 per cent) of its population living on a low income.

How can we reconcile these two apparently conflicting views? It's easy enough to do; we are wealthy but we are deeply unequal. What is more we are, if anything, becoming more unequal as yesterday's report from the National Economic and Social Forum (NESF) makes clear.

This is despite the fact that unemployment has fallen dramatically and the economy is booming dramatically. And it is despite the fact that what is now called consistent poverty has fallen. A person lives in consistent poverty if, as well as having a low income, he or she also lacks certain basic necessities such as heating, electricity, a substantial meal or a warm, waterproof coat.

In 1996 nine to 15 per cent of people were in this situation. By 2004 this should be no higher than 5 per cent. The problem is, though, that reductions in extreme poverty don't necessarily do anything to reduce the gap between people on the highest and lowest incomes. That gap is very resistant to closure and it is widening.

In the 1970s, for instance, the lowest 50 per cent of people in income terms had less disposable income than the top 10 per cent. In 1994 the lowest 50 per cent had the same share of disposable income as in 1973.

That was back in the dark days of 1994. Then everything changed and the Celtic Tiger sprang to life. Between 1994 and 1999 there was a "dramatic widening of the gap between the poor and the better off," a study by the Conference of Religious of Ireland Justice Office found.

It is the gap that counts. It is one thing to reduce or eliminate extreme poverty, and a very good thing, too. But if you no longer live in extreme poverty because you have found a low-paying job which enables you to pay the rent, you are unlikely to feel that you are sharing in the economic success of the country. The same goes for that large army of people who are sick, disabled, lone parents or living on small pensions.

They are not in extreme poverty, but relative to the average person they cannot participate in society because they cannot afford to do so. That is relative poverty. It is easy to dismiss the term as though it was coined by comfortable social researchers - and it probably was - and is not particularly deserving of sympathy or of intervention by, for example, the State.

Tell that to the lone parent who is so in debt she is afraid to answer the door but whose child wants a £35 pair of Nike runners and will not wear a perfectly adequate £15 pair of non-Nike runners from a department store. Only those who have children will know the absolute insistence with which this mother is faced and will know why it is that the children of poor people wear designer clothes.

To pay for those designer labels, she herself can forget, for the umpteenth time, the trip to the dentist, and may dine on beans and toast for the week. She may be able to manage the Nike runners, but she won't be able to fork out the £20 a week for grinds for her child so her child is going to do worse, educationally, than children whose families can manage to pay.

Nor will she have the car which is needed to ferry children to the ballet, the speech and drama, the swimming, the Scouts, the Girls' Brigade, and all the rest of it, so her child will miss out socially, too.

University will not even be a far-off dream to her child. Indeed, to this child, the possibility of earning cash from a dead-end job may be dazzling. And an economy desperate for labour will be glad to oblige.

And the cycle will begin again. Suddenly, that pair of Nike runners doesn't look like such a big deal any more, not when looked at in the context of the way in which relative poverty stunts prospects and lives.

IN 1997 the Government adopted a National Anti-Poverty Strategy, known as NAPS. The purpose is to get Government Departments working to tackle poverty. One of the key ways in which they are meant to do this is through "poverty-proofing" their policies.

In other words each Department, while assessing its plans and projects, is supposed to assess how these proposals would affect the aim of reducing poverty. It is inherent in this that they should not increase poverty and should aim to be part of the Government drive to reduce it.

But the NESF has found that the poverty-proofing strategy is not being applied consistently by all Departments. It has come to this conclusion for the simple reason that some Departments are unable to make any clear statement as to how they are implementing it.

Most important of all, perhaps, is the NESF's conclusion that the last Budget was not fully poverty-proofed and that there is an "absence of clear evidence that reductions in poverty were a key guiding principle under the National Development Plan".

This is serious stuff. The fact is that if the reduction of poverty is not being taken fully into account in the Budget and the National Development Plan, the whole strategy is a waste of time.

The Budget and the National Development Plan are among the most important engines we have for tackling poverty. Politicians, presiding over a system in which fewer and fewer people bother to vote, should be using these mechanisms to make politics relevant again and, as important, to ensure that another generation of children is not condemned to live on the margins of society, Nike runners or no Nike runners.

pomorain@irish-times.ie