From the TUC

Policy on poverty: Our ambitions should be higher

14 Jun 2012, by in Society & Welfare

Today’s poverty statistics are encouraging for anti-poverty campaigners because they show that policy really can make a difference; at the same time, they highlight a missing dimension of the last government’s policies.

In office, Labour’s doctrine was that “work is the best route out of poverty“, but this principle was applied in different ways to different groups. The last government’s commitment on child poverty meant that it was politically risky to rely on employment alone to make progress. Certainly there were plenty of programmes to help parents – especially lone parents – increase their incomes from employment but there was also substantial investment in tax credits (much more generous than the Family Credit they replaced) and other benefits for families with children, including the only real-terms increase in Child Benefit for a generation. The number of people over state pension age in employment rose, but it would have been impossible to make progress on pensioner poverty without increasing pensions and benefits for older people and they did so (though most people will only remember the debacle of the 75 pence pension increase.)

But they specifically did not raise benefits for working age families without children. There, the doctrine was the reality; any improvement in the numbers in poverty would have to come from people getting jobs (or children).

Well, what happened to these groups?  Remember that, in 1979 14% of children lived in poverty,  by 1996/7, this had risen to 34%. Tony Blair’s government kept to its predecessor’s spending plans for two years, and in 1998/9, when the government adopted the target of ending child poverty this figure had risen slightly, to 34%. By 2010/11, when the last of the Labour government’s changes had come into effect, this proportion had fallen to 27%.

(Throughout this post, unless I state otherwise, when I talk about ‘poverty’ I mean living in a family with an income below 60% of the median for equivalent families. The main Child Poverty Act target is measured before housing costs are taken into account but most anti-poverty organisations use after housing costs figures and unless I say otherwise I follow that practice because it relates to how much money families have actually got to spend.)

There has also been progress on pensioner poverty. In 1998/9 29% of pensioners were poor, by 2010/11, this had fallen to 14%.

But if we turn to working age adults without children there is a remarkable contrast – in 1998/9 16% were poor. By 2010/11, this had risen to 20%. The proportion of single working age men who are poor rose from 15% to 21%.

Now this suggests several things to me. One is that it is very likely that benefits policy works – the last government targeted poverty among children, spent money on reducing it (lots of money, as the current government is keen to remind us) and we saw significant reductions in child poverty – which had been rising before those policies were adopted. They did not spend money on childless people of working age and not only did we not get a similar reduction in poverty, poverty actually went up. It looks as though what we have here is a counter-factual: what might have happened to children and pensioners in the absence of spending on tax credits and benefits.

A second point is that ‘work is the best route out of poverty’ is a bit of a pious fraud, or at least it has been so far.  Childless working age people could still have made gains by getting into and staying in employment through the last government’s active labour market policies, but they didn’t. Of course, its possible that childless people’s increasing poverty rate might have been even worse in the absence of these policies, but they certainly don’t look as effective as benefits and tax credits.

Despite all the commotion about workless families in recent months, this does not reflect an increase in worklessness. Today’s figures also show that the number of working age adults in families with no adult working rose from 2.9 million in 1998/9 to 3.0 million in 2010/11. This is not nearly enough to explain the increased number of poor childless people of working age. A far more likely explanation is the growth of badly paid and insecure employment: the proportion of individuals in poor families who were in working families rose from 39% in 1998/9 to 49% in 2010/11.

A third point is that the poverty of working age people without children was never taken seriously enough by the last government. In 1998/9 they accounted for 23% of poor people; in the latest figures for 33%. Everyone’s poverty matters and childless people in these statistics are often the same people at a different stage in their life. I find it hard to support a policy that cares about your poverty when your children are aged 17 years and 11 months but says it no longer matters once they reach their 18th birthday.

Iain Duncan Smith has responded to today’s figures by complaining about the emphasis on relative income poverty in the current official definition of child poverty and announcing plans to change the definition. If you just look at the latest year’s results there’s something to his point that a definition that’s related to the median will show an improvement if the median falls, though in his place I wouldn’t go on too much about the biggest one-year fall in middle incomes since 1981. But I’m much less happy to accept this as an explanation for improvements in previous years – today’s figures also include a time series for the cash value of 60% of the median for different family types and its true that the latest figures are down on the previous years but this is the first time that has happened. In addition, this doesn’t explain the difference between what has happened to families with and without children.

Another line of attack we can expect is that people are being moved from just below the poverty line to just above it, an argument previously put forward by Nick Clegg:

 Poverty plus a pound is simply not an ambitious enough goal.

But that isn’t what has happened over the past fifteen years. Yes the proportion of children in families with an income below 60% of the median came down from 34% to 27%. But so did the proportion in even poorer families (below 50% of the median) – from 24% to 17%. And so did the proportion in families not quite so badly off (70% of the median) – from 41% to 37%. The last government didn’t manipulate the statistics, there was a broad improvement for low-income families with children.

A final argument we can expect to see is the claim that relative income poverty isn’t real poverty. It’s interesting that the Centre for Social Justice has led the charge that the current definition “confuses poverty with income inequality” because back in 2006 (when the Conservatives were desperate to lose the ‘nasty party’ tag) they were very keen to emphasise that they now accepted the importance of relative poverty.

One of the headings read “Poverty is relative and social exclusion matters” and it quoted Oliver Letwin saying “of course inequality matters. Of course, it should be an aim to narrow the gap between rich and poor. It is more than a matter of safety nets… We do distribute money and we should redistribute money.” The report explicitly broke with John Moore’s 1989 claim that there was no poverty in Britain.

Actually, I rather liked what the CSJ said then and I think it’s a rather good response to what they’re saying now:

In an age when absolute poverty was a real danger for millions of people, the safety net represented an enormous advance. But in our own age, our ambitions should be higher. As individuals we should all have the chance to move forward and as a nation we should move forward with a sense of cohesion.