For all their talk of tackling the root causes of poverty, Cameron, Clegg and Osborne threaten to leave more children and their working parents slipping further into deprivation writes Larry Elliott in today’s Guardian.
“In many other countries it would be a recipe for civil unrest, perhaps even revolution. Britain, though, is a placid place and it takes quite a lot to get this country's dander up. Sure, we've had protests from students this autumn but the latest forecasts of expected trends in poverty were greeted with a resigned shrug of the shoulders.
Make no mistake, the findings from the Institute for Fiscal Studies (IFS) make depressing reading. Child poverty? Going up over the next three years. Poverty from working-age adults with children? Going up. Poverty for working adults without children? You guessed it. Going up also.
And these – lest you get the wrong end of the stick – are not increases in relative poverty. They are increases in absolute poverty: the number of people living on less than 60% of the national income adjusted for inflation. And they are not nugatory increases either: by 2013-14 an additional 900,000 people will have slipped below the breadline.
There is a stock response to findings of this sort. The first line of defence is to say that there is something wrong with the methodology – this has indeed been the default setting for David Cameron and Nick Clegg. Funnily enough, they found little to complain about when the IFS was using the same approach to question Labour's record on poverty.
A second line of defence is to say that even if the figures are right, an income of 60% of the national median is not real poverty in the sense that it is for someone living on less than $2 a day in sub-Saharan Africa. This, it has to be said, tends to be trotted out by those with little personal experience of rubbing along on benefits or the minimum wage topped up with tax credits.
Finally, it is argued that the UK needs a complete rethink of its approach towards poverty because the approach of the Blair-Brown governments between 1997 and 2010 failed by concentrating on state handouts rather than tackling the root causes of the problem: worklessness and dysfunctional families.
This is a more serious critique, though it ignores a few inconvenient truths. The first is that Labour did try to get the poor into work: employment reached record levels of above 30 million during the boom years. The second is that poverty did come down, if not by nearly as much as Blair and Brown hoped.
If the IFS is right – and, frankly, its record of sticking it to governments on both left and right gives it credibility – the encouraging progress made by Labour in its last couple of years in office is now about to go into reverse. After 2013-14, poverty will need to fall by 1.5 percentage points each year until 2020-21 to meet the legally binding goals in the Child Poverty Act. The IFS notes drily that this has not been accomplished in any period since comparable records began in 1961.
Tackling poverty is tough but it has been done before. The chronicles of Britain between the wars show that deprivation was deep and widespread, prompting the social reformer William Beveridge to identify the giants barring the way to progress: want, disease, ignorance, squalor and idleness.
The subsequent sharp fall in poverty after the second world war was the result of five interlocking policies. Expansionary macro-economic policies and a commitment to full employment meant there was plenty of work. Strong trade unions and a relatively protected economy meant that real wages rose in line with productivity, allowing workers to enjoy rising living standards. High levels of growth allowed governments to increase public spending on the NHS, schools and housing; an investment in the so-called social wage that particularly helped those on lower incomes. Fiscal policy redistributed higher taxes on the rich to the poor. These four distinct policies combined to create greater social mobility: working families could see that they were better off than their parents and had higher aspirations for their children.
How do recent governments match up to this record? Labour under Blair and Brown had an expansionary macro-economic policy of sorts, albeit one far too dependent on the build-up in personal debt and the financial bubble in the City. They did far less to boost the level of real wages, which, as the International Labour Office showed last week, were falling in the last full year before the election, but they did boost public spending substantially. Tax and benefit policy involved quiet redistribution from rich to poor and that helped blunt the increase in inequality. There was, as far as can be established, no improvement in social mobility. At best, therefore, Labour scores two and a half out of five.
The coalition government has begun the biggest fiscal squeeze since the second world war – a move that will cut national output by 0.5% in each of the next four years. The freeze in public-sector wages coupled with rising VAT means that real wages are set to fall. Departmental spending is being cut, with the austerity at local government level likely to have a particularly harsh impact on the poor. Tax and spending measures introduced by George Osborne (as opposed to the ones inherited from Alistair Darling) hit the poor harder than the rich. Apparently, though, this – coupled with the scrapping of the educational maintenance allowance and higher tuition fees – adds up to a recipe for greater social mobility. These people must take us for mugs.
Cameron and Clegg have all the right progressive talk about tackling the root causes of poverty but, as the IFS shows, threaten to make the problem worse. These are, of course, early days. Maybe George Osborne will do something in his budget to tackle poverty. Maybe the Universal Credit will be the answer when it is finally introduced. Maybe, though, this is simply a case of what you see is what you get: a deeply conservative government with a 1930s-style social policy to go with its 1930s-style economic policy.”
Larry Elliott is the economics editor of the Guardian