We Need to Talk About Poverty

Last night I subjected myself to the first debate of the General Election. It was painful viewing but I was struck by the first question asked and I found the response to it illuminating but for the wrong reasons.

The first question came from Paula in Huddersfield who asked about the cost of living crisis. You couldn’t fail to be moved by her plight as she set out the stark reality of living in poverty. I found it particularly poignant as I watched it while in Huddersfield with my mum. I grew up on a council estate outside of Huddersfield in a single-parent household where my mum was a cleaner. Times were tough as my mum was forced to work several jobs to make ends meet.

Unfortunately too many people still face similar struggles as yesterday’s debate showed. The Trussell Trust does fantastic work in providing support such as food banks but in an ideal world they would not exist. More and more households have been forced to rely on them and we are seeing children who cannot concentrate at school because they are hungry.

What the debate also revealed is that neither Rishi Sunak or Keir Starmer seem to have a real plan on how to deal with poverty. 

Sunak pointed to his support for households through the furlough scheme (something which he is rightly proud of) and promised to cut taxes. While tax cuts can mean that people have more money in their pocket, they only obviously help people who actually pay tax. As such, cuts to income tax and national insurance do nothing for the very poorest households. Sunak also pointed to the proposed ‘Triple Lock Plus’ for pensioners. Again, this will only help pensioners – many of whom are not in need of extra support.

Starmer’s response was dismal as well. He repeated the economically illiterate claim that ‘Liz Truss crashed the economy’ while also promising that a Labour government would never implement policies which would see the cost of mortgages increasing. While this is obviously welcome it only applies to households with a mortgage and so again does nothing for the very poorest people who have practically no chance of being in a position to have a mortgage.

There seems to be a reluctance to talk about poverty and no appetite to actually deal with it. I imagine this is because it doesn’t poll well with voters and politicians, the media, and a substantial proportion of the population have a Victorian view of poverty where there may be some ‘deserving poor’ people but for the most case people are in poverty because they are lazy, feckless, or defective in some other way. There were obviously a number of reasons why people voted for the Tories in 2010 but the idea of clamping down on ‘scroungers’ who didn’t work certainly did appeal to voters. This was probably helped because despite the devastation of the Great Recession we didn’t see what we’d normally expect as jobs were protected. I had hoped that there would be more sympathy for people in poverty as we’ve seen two major shocks with very high inflation and the economy being shut down during Covid meant that people who would never have imagined being out of work were suddenly reliant on the State. Perhaps attitudes have changed on this but I haven’t seen any polling to suggest that it has.

Tackling poverty may not be a vote winner but politicians should make it a priority regardless. It is shameful that so many of our fellow citizens cannot afford the very basics to survive and are reliant on food banks. What is more, even if you happen to be a believer that people are undeserving of help because it is their own fault that they are poor then surely your sympathy should extend to children who have most certainly not to blame for their condition and are going to sleep and school hungry.

So, what should be done?

At this point I want to distinguish between poverty and the high cost of living. They are obviously related but the responses from the State should be different. When it comes to dealing with the high cost of living then for the most part the State needs to get out of the way. We need to liberalise the planning system so that more homes and sources of energy generation are built. The same goes for childcare as we need to look at things such as staff to child ratios. Not only would these bring costs down they would also increase productivity which would boost real wages meaning that everyone is better off.

As for tackling poverty, we need the State to do more (albeit in a less meddlesome way). For example, rather than attempting to provide support through the VAT system, the government should levy the same rate of VAT on everything and then use the extra revenue raised to provide targeted support for low income households. 

This is the key issue: direct cash transfers are the most effective way to alleviate poverty and are preferable to adding further complexity to the tax system, increasing the burden on businesses, or intervening in the market.

Ideally we’d see all welfare (including the State Pension) replaced by a Universal Basic Income. Sadly I do live in the real world and I see no realistic prospect of that happening anytime soon. However, direct cash transfers to low income households remains the optimal solution.

In the current context this would look like a significant uplift to Universal Credit. I would like to see all parties sign up to the Trussell Trust’s ‘Essentials Guarantee’. This would mean that the basic Universal Credit would at least cover the very basics such as food, bills, and travel.

The Department for Work and Pensions (DWP) also needs to stop plunging benefit claimants into debt. I’ve written about this before but essentially people who are entitled to Universal Credit are entitled to apply for an advance on their benefit in order to tide them over. This is a good thing but unfortunately they have to pay it back and so it is deducted from future Universal Credit payments which means the already meagre payment is reduced. DWP should either make an advance payment a grant rather than a loan or at least wait until people are in a more secure financial situation before they start to extract it from them.

Finally, and perhaps most importantly, the next government should scrap the two-child limit on Universal Credit. The government introduced the measure in the hope that it would act as a disincentive to parents to have more children then they could support, thereby reducing the burden on the State. As with so many of the Coalition Government’s policies this turned out to be a poorly thought out and short sighted ambition; changing demographics means that the UK is in dire need of more young people of working age in order to prop up the State Pension and provide care for the elderly. What is more, the evidence now shows that the policy failed on its own terms. The two-child limit has had practically no impact on the number of children being born into low income households. The only thing that the policy has achieved is plunging more families into poverty. The next government should do the decent thing and scrap it.

Thanks as ever for reading. I’ve decided to try and write something every weekday either here or elsewhere during the campaign. Today rather than supporting Opportunity Lost, why not make a donation to the Trussell Trust  instead: https://www.trusselltrust.org/make-a-donation/