In the Guardian on Tuesday (February 27) Polly Toynbee wrote a powerful Opinion piece entitled (in the print version), ‘The Tories have miscalculated: Britons do care about poverty’. Quoting the Institute for Public Policy Research’s figures, that despite the increase in the local housing allowance from April, more than 800,000 renting households receiving housing benefit will still have to fund the gap between their rent and their benefit, Polly also cites a new Action for Children report finding that many families are falling below the breadline, even when both parents work full-time on the minimum wage.
‘The gap between what universal credit provides and what a family needs to survive is growing by the month’, she reports, with Citizens Advice apparently counting 5 million people trapped ‘on a negative budget’, with incomes that will never cover their bills, and 2.35 million going hungry. This ‘national emergency’, so named by the Child Poverty Action Group, has escalated sharply in the last two years.
It was in the York Spring Conference last year that our party passed motion F12, ‘Towards a Fairer Society’. This was based on the policy paper 150 of the same name, drawn up by a party policy working group in the previous winter. The motion states that Conference welcomes the paper’s proposals to ‘End deep poverty, including a radical overhaul of the welfare system, so no family ever has to use a food bank in Britain, by
- Taking immediate steps to repair the safety net, including restoring the £20 uplift to Universal Credit, introducing emergency grants (not loans) and stopping deducting debt repayments at unaffordable rates and
- Following this up in the longer term with fundamental reforms to the welfare system’.
Conference then decided to introduce a Guaranteed Basic Income by increasing Universal Credit to the level required to end deep poverty within a decade and removing sanctions. It was already party policy to remove the benefit cap.
Polly Toynbee’s article states that people cannot expect the Labour Party to put increasing Universal Credit sufficiently to raise people above the poverty line in its forthcoming manifesto, though ‘money must and will surely be found’ if and when a Labour Government is returned by this year’s General Election. But she cites the British Social Attitudes latest survey as finding ‘a seismic shift’ in public sympathy, with only 19% now thinking that people getting social security don’t really deserve any help, while Save the Children finds that 69% of Tory voters want benefits preserved, not cut.
However that may be, Liberal Democrats a year ago passed a policy to begin to eliminate the rising poverty in our country, as our Constitution demands we should. And for us to proclaim this policy, with the intention of its being accepted by the next Government, is not only showing that we do have the kind of ‘bold and distinctive’ policies that John Curtice recommended at York that we should have, but is one small step towards beginning to solve this dire problem of our country.
* Katharine Pindar is a long-standing member of the Cumberland Lib Dems
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50 Comments
Thank you for a useful piece on a pressing matter!
Might some of the best ways to relieve increasing, poverty, lack of heating, increasing chronic hunger/starvation etc, etc. Include:
1) Making it clear that HMG has to spend before it taxes
2) Ditto that HMG spending is not controlled by taxation but by the management of inflation and, one prays, equitable efficient management
3) The tax gap, the difference between what could/should be gathered and what is gathered is avoidably huge and could be minimised to avoided if the political will were there
4) That unless H M G spends more than it taxes back, there is no no money fof households and business
Might our party gain interest, votes and headlines by offering to reform, properly person and localise tax assessment and collection?
As usual, Katharine shines a light and puts her finger on the issue of poverty.
I would simply add it is necessary that the policies she describes should be a red line in any Coalition or Supply arrangement made by the Liberal Democrats after the coming General Election.
No one should be paying income tax or national insurance when their income is less than needed to cover basic living costs. Party policy should address this issue and state clearly before the next election what level of tax free income people should be allowed to earn before paying ether tax.
The party needs to put its policies aimed at tackling poverty front and centre in the General Election campaign. We also need to press hard for them in the new parliament particularly in the event of a hung parliament where Labour are relying on our support to get legislation through.
I have long argued for a 21st century Beveridge plan and although current Lib Dem proposals don’t quite match that they would make a real difference for millions of our fellow citizens.
Let’s shout them from the rooftops!
It’s good that so many of us do care about tackling the misery and hardship, and lack of freedom and personal fulfillment, experienced by the thousands of our fellow citizens living in poverty. Thank you for these thoughtful comments, so apt when this Tory government could even make life harder for the poor in its approaching budget. Yes, David Raw and David, let us indeed insist on the importance of our policies aiming to tackle poverty being in our GE Manifesto, and, as David suggests, will our leaders please shout them out now! There should be that understanding, I think, that a clear line for our party runs from the reforms of Lloyd George through Beveridge to today’s Guaranteed Basic Income proposal: the Liberal commitment to secure the welfare of all our fellow citizens.
@ Steve @ Katharine.
A working knowledge of how the economy works is a good help but it’s not enough on its own to fix the poverty problem . This requires transferring resources from those who have too much to those who have too little. Economics can help to create full employment but we are already pretty close to that. The problem is that many jobs don’t pay a living wage or enough to keep workers out of poverty.
Unfortunately, fixing the problem isn’t on the agenda of any of the main party leaders at the moment. This is why Keir Starmer has moved the Labour Party far to the right. I doubt in Ed Davey will be any different if the Lib Dem emphasis is on winning seats in the Blue Wall.
I don’t agree that it would be electorally unpopular to have a party which was committed to a redistribution, and neither am I convinced that popularity is the main consideration for those like Starmer. The establishment will always move to squash radical movements.
The Lib Dem constitution may be admirable in its own righ t but unless this transfers into real political action, nothing is going to change.
@ Steve
“HMG has to spend before it taxes”
The first step has to be the issuance of tax demands. Otherwise the currency is worthless and no spending is possible. So, whereas Govt spending has to come before collection of taxes, it doesn’t come before taxation in the broader sense.
David,
If my memory is correct at the spring 2022 conference Ed Davey during his question and answer session said he would put fighting poverty and our draft UBI policy front and centre of the next manifesto and general election campaign. We have since replaced our draft UBI policy with a firm commitment to end deep poverty within a decade and establish a Guaranteed Basic Income. We need to ask Ed Davey if he will keep his 2022 commitment and put that front and centre of the coming manifesto and general election campaign.
@Peter Martin. I feel your pain, Peter, in that no party is committed to redistribution, since I also would like to see the ratio in industry between workers’ pay and that of top managers be more equitable. But perhaps current labour shortages will lead to better pay and conditions for some. Otherwise, to raise the basic rate of provision of welfare benefits seems the only public way forward to lifting poverty, which appears to be fended off meantime if at all only by proliferating community action in providing extensions to food banks as meeting places offering other goods.
This more public, evident, provision of assistance with the standard of living problem perhaps has contributed to greater tolerance of the need for sufficient welfare payments – however much both the Socialist and the Conservative mindsets are to want only adequate paid work for all healthy people of working age.
In her laudable and practical concerns for our deprived citizens and their children, might Katherine Pindar be indirectly drawing our attention to the dangerous deficiencies in our form of democracy?
The increasing deprivations of an increasing proportion of our citizens and their children are a consequence of the governance of our country/society?
These outcomes are neither equitable nor efficient and so our form of democracy is neither equitable nor efficient.
What might we, as individuals and groups, and our party do to improve/remove this set of obstructions to all our citizens living lives which are free from (created/tolerated deprivations?
Steve, Indeed.
Quite simply, we need to work on getting enough of us elected by focusing on issues relevant to the vast majority of the British people. With this, we can start change things and bring some much needed responsibility, competence and honesty to government at every level.
The alternative, of continuing with ill thought out, knee-jerk responses to the latest emergency, coupled with an endless pandering to a patchwork of vocal “good things” as practiced by Conservative, SNP and Labour alike is too horrible to imagine.
@ Katharine,
“….however much both the Socialist and the Conservative mindsets are to want only adequate paid work for all healthy people of working age.”
I can’t speak for the Tories but this isn’t the sentiment on the left. I had a discussion with a few regulars in my local the other day about the provision of statutory sick pay. Apparently some workers get nothing for the first 3 days then are on statutory sick pay of £109 pw after that. Having spent my working life being paid as normal whenever I’ve been off sick, happily not very often, I would say this shouldn’t be regarded as acceptable by anyone of any political complexion. I’m pleased to say that everyone else agreed too.
The difference between Liberals and socialists could be that we do recognise that it isn’t money per se which “makes the world go around”, it’s human labour and the benefits it brings to all. So we do think just handing out ‘money for nothing’ in schemes like UBI is going to create more problems than it solves.
We want everyone who can, to make a contribution and be properly paid for it. Those who are too sick to work need to be properly looked after, of course.
@Peter Martin: You are correct, but I’m not sure that’s a difference between liberals and socialists – more a difference of economic understanding. This liberal despairs of the number of articles that appear here demanding that we attempt to eradicate poverty by taking money off people who work in order to give it to people who don’t work – articles written by people who appear unable to grasp the importance of economic output and therefore (a) how economically disastrous, (b) how ineffective, and (c) how unpopular with almost any voter outside the LibDem membership bubble (plus I would say some on the socialist left) such a policy would be. 🙁 It really baffles me that so many people here seem to think that making something so obviously both unfair and economically illiterate the key LibDem policy is somehow going to get masses of people voting LibDem.
@ Simon,
You’re right that some who consider themselves to be on the socialist left are attracted to what could be described as “hare brained” schemes. They’ve even latched on to the MMT line that Governments can “never run out of money” to suggest how to pay for them. I don’t agree that they are either truly socialist or have a correct understanding of MMT.
Both Adam Smith and David Ricardo stated that labour is the source of all wealth. Marx argued that they were overlooking the contribution made by nature. It is both labour and the environment. Marx is obviously the more correct. If the sun doesn’t shine and rain doesn’t fall then crops won’t grow no matter how hard anyone works.
Whoa, colleagues, what a mixture of ideas now! Steve, and David Evans, I agree we do need to be concentrating on getting a government focused on delivering what is most needed to the majority of the British people. As you know, Lib Dems call it ‘a fair deal’. and our leaders are developing that idea by concentrating on the problems of the NHS, the cost of living crisis that has affected most of us, and the demands of climate change. What we can’t do, I believe, is forget about the needs of our poorest citizens, who are often the most inarticulate, and I want our leaders to speak out for them, address the increasing hardships, and promise our remedies.
No, Simon R., we can never accept that economic rectitude would demand that ‘taking money off people who do work to give to people who don’t’ is wrong. Hopefully we can still rely on government to crack down on the crooks and money-launderers and thieves, all working away hard for ill-gotten gains, and distribute some of our shared created wealth to people caring for sick and disabled family at home, or quietly rearing the next generation of well-educated productive workers.
Might it be that Lib-Dems as individuals, branches and as a political party, have these interrelated tasks/opportunities?
1) work to have no one, adult or child, forced to exist in a deprived state or fear of such
2) work to make our society truly democratic in its outputs, which is part of task/opportunity one
3) work to make our nation’s spend and tax theories, expectations, education and practices fully transparent, equitable and effective/efficient
Might achieving such make our economy effective, efficient and sustainable for all?
It seems to me that our party, unlike the big two, should be representing the unheard, the quiet people. I think for instance of parents needing to stay at home looking after family members, who may be anxiously working out if they have enough money left this week to top up the groceries. They haven’t opportunity to go on marches or time to write to their MP. We want to empower people, but there are many who need a helping hand to be able to get on at all.
Steve, I absolutely agree with your first point, thank you. Peter, you people are pre-occupied with ‘human labour and the benefits it brings’, with the masses of people you can identify as ‘workers’, and can’t relate to the rest. The Tories are preoccupied with ‘economic growth’ so that the masses are contented enough to let the rich keep their riches to themselves, and hopefully get more. So it’s surely up to us Liberal Democrats, only us at least in England, to look out for the left-out individuals who could do with a helping hand.
@Katharine The reason some of us value (or to use your words: are preoccupied by) economic growth and supporting people to work is that without both of those things, it becomes impossible for most people to have economic prosperity and the kind of decent life that we all want everyone to be able to have. You can redistribute money all you want in an attempt to solve poverty, but if you don’t have people working to support growth and provide all the things people need, then your efforts are doomed to failure because there simply won’t be enough stuff to distribute to people. That’s a not a moral value judgement: It’s a statement of – basically – the laws of physics!
Regarding representing the quiet, unheard, people – my feeling is that we should be representing everyone as best we can. Every human being is important. Just about human being, no matter how financially rich or poor, has problems and difficulties in their life, and has a need to be heard and valued. And every human being deserves at least the chance to make a decent life for themselves. It doesn’t seem right to me to start going down the road of saying we should represent any one group of people (implied: to the exclusion of others), no matter how deserving we think that group might be.
@ Simon R. I don’t know what party you can support, Simon, but I do observe that the Conservatives have made a poor shot of growing the economy, for all their years in power. As for your main statement, it sounded good until I saw you were accusing me of wanting to representing one group of people to the exclusion of others. That is nonsense, of course, since I was simply suggesting that my party should look out for the people not represented by either of the great monolithic parties (or perhaps by a fervent faith group) who can be missing out on the handouts of the powerful. That they are all among us is shown by the unrelenting prevalence of poverty in our rich country.
Peter Martin,
I remember Ed Davey writing to the Chancellor of the Exchequer in March 2020 calling for Statutory Sick Pay to be increased to £220 per week and in spring 2021 we passed policy to set SSP at the equivalent of two-thirds of the National Living Wage, which is about £278 a week now.
It seems odd to me that you recognise that £109.40 a week SSP is not enough, but you think £85.09 a week Universal Credit is sufficient.
Simon R,
New Liberalism set out that people should pay more tax so those who don’t have enough to live on can be helped out. Beveridge built on this. However, since the 1970’s the real value of unemployment benefit has declined.
Since Covid many more people recognise that the current benefit levels are too low. As Polly Toynbee points out those on benefits next year are receiving a £900 cut in support.
Steve Trevethan and Simon R,
The Liberal Democrats believe that no-one should live in poverty. Indeed, fear of living in poverty reduces a person’s liberty too.
Simon R and Peter Martin,
Increasing benefit levels is not an alternative to increased economic growth. Liberal Democrats would like to see the UK economy grow and I have written articles on LDV on how Chancellors of the Exchequer could achieve higher growth rates. We have environment investment policies worth £200 billion and a policy to create a £50 billion regional capital investment fund.
Peter Martin,
I don’t consider 3.8% unemployment with 1.32 million people unemployed ‘pretty close to’ full employment. Also in August 2023 there were 1.7 million people on Employment and Support Allowance (ESA). I have always advocated full employment and economic growth. If we had true full employment wage rates would increase.
@ Michael BG,
I don’t live in a particularly prosperous part of the country but I do see small businesses (pubs, cafes, shops, nursing homes etc) advertising for staff. Wage levels are hardly ever mentioned! Presumably, they are only minimum rates and also presumably there aren’t too many takers because the businesses are advertising again shortly afterwards.
If they were paying more they would no doubt be more successful in their recruitment efforts.
The point I was making is that there is pretty close to full employment in terms of % of the available working population but wages at the lower end aren’t high enough to keep workers out of poverty.
We aren’t every going to have 0% unemployment under the present system. There will always be workers entering the jobs market, those in the process of changing jobs and those who are difficult to place for a variety of reasons.
PS
@ Michael BG,
“but you think £85.09 a week Universal Credit is sufficient.”
You’re being rather naughty now! I’ve never said this.
@Katharine: As you say, economic growth under the Conservatives has been awful. And I’d argue that is quite consistent with what I’m saying: We’ve had very little growth and – surprise – poverty has become rampant: Because you generally can’t solve poverty without growth. A related example: In recent years, the minimum wage has practically doubled from around £6 an hour 10 years ago to not far off £12 an hour (£11:44 from 1 April). Yet despite that astonishingly large increase, working age poverty is still just as common: Once again that’s because you can’t solve poverty by just giving out more money when the cause of the poverty is actually lack of supply in the economy. You just end up with more money chasing insufficient goods causing inflation. Your passion for eradicating poverty is amazing and lovely – but you’re focusing it all on a proposed solution that simply won’t work 🙁
Apologies if I misunderstood you about not representing and looking out for all people equally.
Actually, given we use a relative definition of poverty, growth can easily increase the number of people in poverty. That is a reason to change our definition of poverty rather than a reason to eschew growth.
Simon, thank you for the polite words, but you do write some strange things. For example, ‘You generally can’t solve poverty without growth.’ Doesn’t it depend on the products of the growth being more fairly shared? And ‘near doubling of the minimum wage could not solve poverty’ – obviously not when the rising costs of energy and foods were keeping people poor. And I can’t follow your bold statement, ‘The cause of poverty is actually lack of supply in the economy – more money chasing insufficient goods causing inflation.’ The second part of that statement may well be true, but I don’t see its relation to the first part. Supply of what? and how can that ’cause poverty’? I will leave this now to the economists among us! Interesting take next from Peter Davies …
Interesting point I think came from a commenter on the Laura Kuernssberg show on BBC 1 this morning; less than 30% of hotel workers on two major Forte hotels being British-born. How is it that the Tories, happily excluding the EU workers from Britain after Brexit, and utterly opposed now to so-called ‘illegal’ immigrants, have allowed so many thousands of legal immigrants to arrive? Welcomed by us, of course, especially the much-needed care workers, nurses and doctors, but only showing up the lack of house building which our party wishes to remedy, and also the completely insufficient pay rates that Peter Martin mentions.
“In recent years, the minimum wage has practically doubled from around £6 an hour 10 years ago to not far off £12 an hour (£11:44 from 1 April). Yet despite that astonishingly large increase, working age poverty is still just as common: Once again that’s because you can’t solve poverty by just giving out more money”.
Raising the minimum wage isn’t giving out money. It’s trying to make other people give out money. It has had some effect in raising living standards of the poor though in most cases that will not have caused them to cross the threshold we define in poverty. In many cases, however, empoyers are not paying any more. Some low paying employers have gone out of business. Unemployment hasn’t gone up so they won’t be missed. Some have automated. They employ fewer people at higher productivity. In the long term, that’s a good thing. Some though have found ways of getting round the minimum hourly wage by moving people to self-employment or zero hours contracts or by reducing their nominal hours and expecting them to work unpaid overtime. All in all, a mixed result, slightly positive. Actually giving the poor more money certainly does make them better off.
@Peter Martin
“ If they were paying more they would no doubt be more successful in their Recruitment efforts”
But…..Will they have customers to cover the higher wages?
“Will they have customers to cover the higher wages?”
Possibly. A customer is often a worker too. If their wages are higher they can afford to buy more.
We can visualise the economy as a giant supermarket. We all contribute to making the items for sale on the shelves. We all buy what is for sale. So purchasing power and wage levels have to balance. This isn’t saying anything about equality of purchasing power. It can be as equal or unequal as we choose it to be.
This comment is actually from Roger Lake. He’s had trouble posting it himself, so I offered to do it for him. He wrote an article on the subject of UBI in December.
https://www.libdemvoice.org/ubi-and-pr-will-work-together-74302.html The first two paragraphs read:
“UBI” has staggered and lurched in Lib Dem Land. I believe most arguments against it are the prejudices of ignorance or the handicaps of Expertise. I shall try to explain why — andhow the pair could work. I shall not here consider objections to it, but I do hope others will.
UBI is not too expensive — it should be managed by the Inland Revenue and subject to Income Tax — simply one more thing to add to each taxpayer’s total Income Tax bill.
Everyone receiving UBI would pay Income Tax at the rate appropriate to his or her means. Say 10%, perhaps, for those without any other Income at all? Enough for everyone to recognise that everyone getting UBI is a payer of I.T. — and well aware of the fact!
Roger says:
I think there’s plenty there to think about, Caron. Most of what follows
is more about the huge difference PR will make, with about ten parties working
collaboratively.
But the drive behind my asking for your help is that the energetic discussion
going on which has has disappeared from my screen — and to which I do very much
hope to contribute — very much exemplifies the “handicaps of Expertise” mentioned in line 2 or 3. Briefly, the group of experts all know each other too well, and have settled back too comfortably on a couch of the recent past.
So I shall be extremely grateful, Caron, if you can drop this into the pudding, for two reasons: it will give a shove to good old UBI; and they may put 2 and 2 together and contemplate how everything may change astonishingly SOON, when we suddenly all find ourselves confronting Proportional Representation, and the fact that suddenlythe Lib Dems have less clout than the Greens.
The man I cannot forgive is Keir Starmer, intent on hogging one more Big Boys’ match with what remains of Boris’s chaps.
Forgive me. But I believe the LD team must cease to review what happened 2 and moreyears ago at conferences. Have they thought how much cash will be saved, when no hapless Civil Servants will need paying to check entitlements to many “Benefits”. Sorry – I’m wandering a bit!
Roger, I do hope you are right, and Proportional Representation will get through the great obstacle of Sir Keir Starmer: if so our Liberal Democrats have no reason to fear competition from the Greens or any other small party. There are three organisations who write to me on email, all on the hunt for supporters of voting reform, so let us hope their combined voices will eventually prevail. I will take a turn on a publicity stand for one of those groups in a local market place soon.
Perhaps you have a point in urging us also not to review what happened ‘two or more years ago at conferences’, but I think if we did that we might forget (as I find it easy to do!) some valuably detailed policies, for instance on welfare reforms. And certainly I think as Democrats we can’t ignore what was decided by Federal Conference just a year ago, in March 2023 – that a GBI, a Guaranteed Basic Income, would be preferable to a UBI. But thanks for writing despite your difficulties.
@Peter Davies: Totally agree about the definition of poverty. When I talk about poverty, I generally mean the intuitive sense of people struggling to buy necessities of life. Others here seem to favour the 60%-of-median income definition – but that doesn’t measure poverty in the sense most people would understand poverty: Rather, it’s a very crude measure of the level of income inequality amongst the bottom 50% of the population.
Worse, by equating that definition with poverty, we end up thinking it’s awful that anyone earns less than that. Reality: If we want a liberal society where people can build their lives how they wish, then it’s inevitable that lots of people will build an income well below the median. Rather than act horrified at the inevitable consequence of giving people economic freedom, what we should be doing is seeking to ensure that an income well below the median is still sufficient to provide the essentials of life – which takes us back to importance of growth.
@Katharine: Hard to explain stuff in 250 words but: Yes, ensuring everyone has a reasonable standard of living requires two things: Primarily you to make sure the country is producing enough for everyone – which is where growth and capitalism are crucial; and then secondarily you may need some redistribution of who is getting the wealth. The problem is – roughly speaking – too much redistribution is self-defeating because it almost inevitably harms growth and total economic output.
You correctly say that in recent years price rises roughly destroyed the the impact of the vast minimum wage increases, but the point is, it was to some extent the minimum wage increase that caused many of those price rises (Yes, other things too. Covid. Ukraine. etc.). Peter Davies correctly identifies other things the minimum wage increase causes.
When I talk about supply, I’m referring to anything people need – but the key restrictions on supply in the UK are housing and to some extent energy. If the country doesn’t have enough of those, then it doesn’t matter how much money you give people – there still isn’t enough of those things for everyone! So the extra money you give people will just get absorbed by price increases as the market tries to match supply and demand (which to some extent is what happened with the minimum wage). That’s the problem you have to fix if you want to deal with poverty.
Peter Martin,
As you know full employment is not defined as 0% unemployment for the reasons you gave. In the past it was defined as 2.5% unemployment.
You have always given the impression that benefit levels for the unemployed should not be increased as Katharine and I advocate.
Simon R,
Median earnings in 2014 were £26,936. Since then it has increased by nearly 32%. The National Living Wage has increased by nearly 45% from £7.20 in 2016 to £10.42 now.
The reason people are living in poverty is because they don’t have enough income. Therefore to remove them from poverty they need more income and the richest should have less. It is a well-known fact that the poorest in society spend their money while the richest spend less of their income. Inequality in the UK is greater than it was 50 or so years ago. Our current inflation is not caused by too much demand in the economy.
It is the Conservative Party which believes in cutting taxes to stimulate the economy which could result in inflation. See my comment of 3.25am 3rd March regarding £250 billion of investment which would increase supply and jobs.
@Michael BG
Poverty is not just caused by too little income. It is also caused by people with enough income who choose to spend that income in such a way as to leaving them unable to afford the essentials in life. My cousin works as a volunteer in a food bank run by a local church and she is shocked by the numbers who turn up looking for food as a result of just having spent all their money, when the things they are spending on range from upgrading their mobile phone to the latest version, adding extra channels to their Sky package or even paying for a season ticket to support their football team! This is in addition to the numbers who can’t afford to pay their bills because smoking cost them £750 per month (20 a day for a couple for a month). So, ensuring adequate income for everyone is an absolute priority, but it will only reduce – not end – poverty.
Simon R. ‘Too much redistribution’ is a rather problematic idea, it seems to me. You appear to find benefit payments to the poor ‘too much’, where taxation of the wealthy would presumably not be. The new G20 idea that perhaps the world’s billionaires could pay more than the present 0.5% of their wealth annually may fill you with alarm. I think we need fair taxation in this country to keep the economy healthy, and sufficient income for everyone so that (Mary) they can keep spending on goods that businesses are producing and the government will be able to gain from due taxation.
Simon, there is no ‘economic freedom’ for people having to scrat about for extra zero-hours work to keep going, or perhaps choose between another hour’s work at less than the minimum wage or going to the food bank today to keep food on the table.
@Katharine: Why do you think ‘too much redistribution’ is a problematic idea? Almost anything the Government does that is desirable to some extent becomes counter-productive if continued beyond a certain point. That’s all ‘too much’ is saying. Surely even you would accept there is a limit to how much redistribution is desirable, even if we might disagree about where that limit is.
I hope I’m not misunderstanding you, but it seems to me you’re thinking of the solution to poverty in purely accounting terms. People don’t have enough money. So give them money. Problem solved! If only the World was that simple! But it isn’t. Almost everything the Government does has knock-on effects on the economy and on how people behave. If you don’t take that into account, you risk devising policies that sound great on paper but will never work in practice. I’d argue GBI is a perfect example of that: Its likely economic impact will include: Sharp price rises affecting the goods poor people need to buy, plus reducing the UK’s overall economic output by disincentivising wealth creation. Reducing economic output harms everyone – including the very people you are trying to help! And that’s even before you start thinking about things like how some poverty is actually caused by lifestyle choices, as @Mary Fulton highlights.
We all agree that living in poverty is an awful thing. But workable and effective solutions are going to be much more complex than just, giving money to people.
Simon, I have yet to see ‘workable and effective solutions’ to the dire problems of poverty in our country suggested by you. And to suggest that GBI may lead to ‘sharp price rises’ is frankly ridiculous, since it will be brought in over ten years with gradual rises in Universal Credit. Moreover, your ‘disincentivising’ wealth creation idea is surely absurd: poor people given extra money may have greater opportunity to develop businesses, whereas the poor without adequate benefits – as is currently the case – have to spend their time taking bits of jobs to make ends meet and keep food on the table.
Simon R,
You have no evidence that restoring the value of benefits would cause inflation or reduce economic output.
While a tax cut could be inflationary even a £7 billion increase in benefit spending at this time is unlikely to be inflationary because of the things this extra £20 a week would be spent on – food, gas and electricity and other essentials. Also it is less than 0.0035% of GDP.
As Peter Martin pointed out people think £109.40 a week is not enough for Statutory Sick Pay, therefore people are unlikely to give up work to receive only £105.09 a week.
Currently the National Living Wage is 67% of median earnings. Having the benefit level at 50% of median earnings by 2035 when the National Living wage will be at least 70% of median earnings is not likely to reduce output. Even at this level people living on just benefits will be living in poverty.
I don’t understand why you think many people would choose to live in poverty, if they could get a suitable job which would lift them out of poverty.
Not having enough money for essentials because of bad spending decisions is not the same as living in poverty, while the short-term effects can be the same.
A couple on Universal Credit only receives £578.82 a month if both are over 25 and they don’t have a UC loan to repay because of the five week wait, so they wouldn’t have the £750 Mary Fulton says 20 cigarettes a day cost for a month.
Simon R,
You should read the Trussell Trusts recent Social security briefing (https://www.trusselltrust.org/wp-content/uploads/sites/2/2024/02/social-security-building-block-briefing.pdf).
In it they point out that:
‘Even before the cost of living crisis, inadequate payment levels meant people were going without essentials such as heating or food. The more recent sharp increases in costs have made this even worse, and we have seen record levels of need for food banks in the Trussell Trust network.’
‘Reductions to social security payments are making things significantly worse, decreasing already inadequate rates of social security. Such as:
the benefit cap…
repayment of debts owed to the government …
other rules … ‘bedroom tax’ …two-child limit …’
‘Beyond their immediate financial impact, sanctions can be detrimental to employment outcomes, …’
Interested to note Michael BG highlighting the work of the Trussel Trust. After I decided to step down as a Liberal Democrat Councillor (and Convenor of Social Work) back in 2012, I moved on to become Chair of my local Trussell Trust Foodbank.
Michael’s comment nudged me into looking up a Trussell Trust Report from that time. It’s worth recording, and I quote,
“346,992 people received a minimum of three days emergency food from Trussell Trust foodbanks in 2012-13, compared to 128,697 in 2011-12 and up from 26,000 in 2008-09. Of those helped in 2012-13, 126,889 (36.6 percent) were children”.
I’ll leave it to others to work out how this correlates to the policies and actions of the then Con-Lib Coalition government.
May I offer two pieces? The first is to thank Caron for her helpfulness in sliding my offering into the current discussion. What I had bungled, that extinguished the whole day’s LDV on 1st or second December, I don’t know. Both my laptops [one the great grandson of the other] had utterly obliterated the entirety of the day’s LDV.
I ought to have been more careful, though, to separate what I hope to see in print, from my waffling signing off. So thank you ,Caron, saving my day.
I also welcome the opportunity to say Thank You to Ann Reid, who spotted my December
draft, and gave me much very needful advice licking it into shape till it appeared as “UBI and
PR will work together.”
So my doddery thanks to Ann and to Caron: thank you both, indeed!
I hope now to tackle Katharine Pindar’s rejoinder to Polly Toynbee.
“Even before the cost of living crisis, inadequate payment levels meant that people were going without essentials such as heating or food”, Michael BG quotes from a Trussell Trust social security briefing. How many know that our GBI policy aims to eliminate the need for food banks within a decade? On another worthwhile thread here the present ills of 3.9 million children being brought up in poverty are cited. I am now asking our leaders to speak out on these ills and on our policy which will begin to tackle this great evil. For all the leadership emphasis on health and social services and on the cost of living crisis, our party is not yet known for this unique policy, which we will need to bring the next government to carry through. Hopefully the pressure of public opinion will be on our side in this. The cost of living crisis, after all, must be most painfully felt by the poorest citizens among us.
@Michael: By saying prices will rise, I’m simply pointing out how markets work and have always worked. Basic and very well tested laws of supply and demand tell you that when people are able to spend more on basic commodities but nothing else changes, prices rise. It is you who, by presuming that GBI won’t have any impact on prices, are making an extraordinary assumption that runs completely against everything we know about how business and the economy works. I would therefore say the onus is on you, not on me, to provide evidence. But if you do want evidence, I refer you back to the way the massive increase in the minimum wage over the last 10 years has failed to give significant improvement in the lives of people on the minimum wage. What makes you think that if you try roughly the same thing with benefits, you’ll achieve a different result?
The Trussell Trust report you link to is interesting, and does make good points that illustrate the need for reforms – such as ending the 5-week wait for UC and reforming (NB: Reforming – that doesn’t necessarily mean abolishing) the sanctions system. But it is a report aimed at pointing out the difficulties people on low incomes face: It’s not an economics text and it does not attempt to look at the impact of any proposals on the wider economy, so it doesn’t contradict anything I’ve said.
Simon R,
There is a difference between Micro and Macro economics and any assumption about what will happen when a change is made is dependent on your assumptions. The temporary £20 a week increase to Universal Credit was not inflationary. This is because your assumptions are wrong. In Macroeconomics more demand does not necessary lead to inflation, it can lead to economic growth. This is why Jeremy Hunt has cut National Insurance rates, because he believes this extra demand will lead to economic growth and the OBR agrees with him as do economists. Your extraordinary assumption runs against everything we know about how the economy works. It is only if the increase in demand is greater than the increase in production that an increase in demand would cause inflation. A small increase per year in benefit spending say £7 billion [less than 0.0035% of GDP] is not large enough to cause inflation. Also if people can buy the food they were receiving from a food bank this will not increase aggregate demand.
Simon R,
You seem very pessimistic about whether anything can be done to remove people from living in poverty. Liberalism is optimistic and believes that the government can take action to remove people from poverty. History gives us hope this can be done, poverty levels and economic inequalities were reduced in the UK after the Second World War but after 1979 have risen since (See Gini coefficient https://upload.wikimedia.org/wikipedia/commons/9/97/UK_Gini_coefficient_1961-2017.png). The Labour Party introduced Tax Credits and this reduced poverty especially child poverty as can be seen in this graph https://images.theconversation.com/files/230755/original/file-20180806-191022-9qidfd.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip .
Increasing minimum wages is not going to remove people from poverty if their salary plus benefits is still below the poverty level. However, if the benefit level is set at the deep poverty level then people have to work fewer hours for their salary and benefit income to be above the poverty level.
I see on social media that our Federal Policy Committee was busy meeting at length in February to discuss the forthcoming GE Manifesto and ensure that it is properly costed. I have posted a comment trusting that the Fairer Society policy passed at the Spring Conference in March ’23, with its GBI proposal to begin to tackle poverty and to end deep poverty and the need for food banks within a decade will be included in the Manifesto, and asking that the costing of the proposal be noted to cover ten years. Our aim must be to proclaim this new policy and get it, through voter approval, accepted by the next, probably Labour, government to carry through.
@Michael: I don’t believe I’m pessimistic. I’m convinced it’s perfectly possible to end the current awful situation where so many people struggle to afford the essentials of life. I just don’t believe that it’s possible to do it the way LibDem policy currently proposes. To achieve near-eradication of poverty, you need to focus on growth and on making sure that (a) the country is producing enough of the essentials – particularly housing – for everyone, and (b) everyone has the opportunity to lift themselves out of poverty. You’re never going to succeed if your entire approach is to just have the Government redistribute money around.
The only bit where you might see me as pessimistic is that I recognise some poverty is caused by lifestyle choices, and I doubt it’ll be possible to eradicate that portion of poverty.
The Gini coefficient doesn’t measure poverty – it measures inequality.
You say “It is only if the increase in demand is greater than the increase in production that an increase in demand would cause inflation”: That’s not really correct. More correctly, an increase in demand will usually cause in increase in both supply and prices. But if supply is very inflexible (True of housing and since Ukraine somewhat true of energy – both things that poor people spend a large proportion of their income on), then the main change will be an increase in prices, because if supply can’t increase, that’s the only way to match supply and demand.
Simon R,
Growth on its own will not end poverty. Even after the Second World War benefit levels had to be adequate to assist in poverty being reduced. However, as I have said before I would like to see full employment and good economic growth. We do have policies which would increase both, but not by enough. We do have policies to build more homes.
I wrote, “poverty levels and economic inequalities were reduced in the UK after the Second World War but after 1979 have risen since (See Gini coefficient …)”. So of course I know that the Gini coefficient measures economic inequality. I linked to a poverty graph after the Gini coefficient one.
If you asked Jeremy Hunt, the OBR and most economists if the 2% cut in NI will increase inflation or increase economic growth they will all conclude that it will increase economic growth. Marco economic theory states that increased aggregate demand will increase production if there is enough spare resources to produce them. Increasing benefits as I have said is so small faction of GDP that there is always likely to be spare resources to meet the demand. If we had full employment then increasing benefits could increase inflation again depending on how full employment is defined and what spare resources are still available. In this case the amount of extra demand would be even less with fewer people not working and on benefits.