However, our party is committed to poverty reduction by our Constitution and our policies. So it was good to hear that Deputy Leader and Treasury Spokesperson Daisy Cooper has spoken out not only about the depth of poverty left by the Conservative Government but also the inadequacy so far of our Labour Government’s approach to it.
This deep poverty is a scar on the nation made by the Conservative party, but the Labour government has so far just sat on its hands.
She highlighted the Government’s refusal to scrap the two-child benefit cap as well as the winter fuel pay cut for thousands of pensioners.
She could say much more, and hopefully will press the theme. The latest report of the Joseph Rowntree Foundation on poverty in Britain finds that relative child poverty rates are projected to rise this year, from 30.8% in England to 31.5%, and in Wales from 32.3% to 34.4%. Moreover, the JRF chief executive Paul Kissack was quoted in Wednesday’s Guardian as stating
“Any credible child poverty strategy must include policies to rebuild the tattered social security system”
Our party has recognised the need, stating on page 51 of our 2024 Manifesto our intentions to:
- Tackle child poverty by removing the two-child limit and the benefit cap
- Set a target of ending deep poverty within a decade, and establish an independent commission to recommend further annual increases in Universal Credit to ensure that support covers life’s essentials, such as food and bills.
- Support pensioners by protecting the triple lock so that pensions always rise in line with inflation, wages or 2.5% – whichever is the highest.
There is much more, some of which is set out on page 52. Such as, ‘Scrapping the bedroom tax and replacing the sanctions regime with an incentive-based scheme to help people into work.’
And now that our new government’s targets do not include any suggestion of reducing poverty, much less making it a priority, we must ask our leaders and our MPs to take this up continually. If poverty is not reduced under a Labour government, what hope can there ever be for our families, currently struggling with the cold weather and the energy price increases? We must hold the torch of progress for them now.
* Katharine Pindar is a long-standing member of the Cumberland Lib Dems
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34 Comments
@ Katharine,
I fully agree that the Labour Government is showing itself to be inadequate to the task. The PLP, with its cohort of new intakes, is also inadequate in holding the Government to its promises. The more radical, and often the more experienced Labour activists were side-lined in the selection process or even expelled from the Party. They were replaced by more inexperienced Labour Party members who have been prepared to obediently stay on message and not offer a critical analysis of the Starmer Govt’s obvious failings.
My own MP won’t ever say boo to the Starmer goose! For example, having been involved in the campaign to offer a decent settlement to the WASPI women all she could manage was an expression of disappointment at the outcome before meekly allowing herself to be shepherded through the Govt lobby.
The Labour Party is no longer a force for radical change.
You might want to add something about rents to your OP. I really don’t know how anyone on average wages is able to keep their children out of poverty if they are paying £1000 pcm or more.
By their big donors shall you know their policies?
Might the current L.INO party (Labour in Name Only) be an enthusiastic Neoliberal party?
“Neoliberalism is a program to produce helplessness and kill any alternatives.”(From David Graeber)
If we are to become a credible party of government, we need to become more realistic about the constraints on spending taxpayers’ money when we already have a significant deficit and a very high national debt.
The government is rightly focusing its priority on economic growth. The problem is that it rules out what would be the most effective policy to increase growth, which is joining both the customs union and the single market.
Thanks, Peter Yes, our Labour government isn’t living up to progressive expectations, or rather hopes, since we didn’t expect too much. Fortunately our own MPs are being very demanding of better – such as the Commons health and social care committee led by Layla Moran criticising the responses at a hearing about what NHS England may be doing to improve the dire Health Services situation, and several of our MPs as well as Ed Davey asking pertinent questions at PMQs.
You are right about the rental situation, though: no wonder so many young people aged from 24 to early thirties are still living at the parental home. We need far more social housing provision.
This Labour government is not going to do anything serious to tackle poverty because they are wedded to the idea that you get into and stay in office by not doing anything to upset the Thatcherite agenda that has dominated UK politics forover forty years. The first bit worked but only due to the Tories being so abysmal.
The Liberal Democrats need the radical opposition setting out a set of policies similar to those laid out by Lloyd George and later William Beveridge all those years ago. We need a 21st century vision of society based on our core philosophy which could reap massive electoral benefits.
@ Mohammed Amin. The point about having sufficient funds for reform is that we have better policies for taxation than the Chancellor has produced so far, and we wouldn’t have penalised small businesses as she has done.
@ Steve Trevethan. Thanks, Steve, I’m sure the Labour government must believe it has left Neo-liberalism to the Conservatives, but it does appear short-sighted and blundering in many of its initial moves.
David (Warren) – hear hear! We do indeed need a radical opposition now, David, following on as you say from Lloyd George and William Beveridge, as well as Maynard Keynes, to begin to build the Liberal Britain we believe in and are committed to by our Constitution. I am hopeful that the Social Liberal Forum, led by its Council which will be holding relevant Fringe meetings at the Spring Conference next month, will lead us in this, along with many of our Parliamentarians.
Mohammed Amin,
It is generally accepted that the fiscal rules are not fit for purpose, therefore we as a credible party of government, need to have realistic fiscal rules that allow the government to borrow more for investment and tax more to cover the cost of public services especially fixing social care and providing the funds for the NHS to get those not well enough to work fit again to work.
The Labour Government says its priority is economic growth, but Rachel Reeves budget is forecast to reduce economy growth over the short-time and do nothing long-term.
I’m afraid @Mohammed Amin is completely correct about the constraints on taxpayers money. Those monetary constraints really reflect that we only have finite resources (energy, people working, houses.) available with which to provide the things we all want. Yes, it would lovely to completely eradicate poverty and give everyone an amazing life (and don’t get me wrong, those are noble aims) but if we are to be credible, we need to be realistic about what can be achieved and how to do it. Borrowing can be justified when it’s for investment that will increase our ability to create wealth, but it almost always leads to bad consequences if borrowing is used to pay for current spending. Raising taxes may well be the least bad option, but we mustn’t forget that raising taxes means we are taking more money from some people (who may themselves be struggling) in order to give to others. We will (rightly) never be able to sell that to voters if we are too blase about the hurt that the higher taxes will cause to those who have to pay them.
Like Katharine, I would love to see poverty banished. But it’s really not realistic to just keep demanding the Government spend ever more money. We need to be a lot more thoughtful about what the solutions may be.
“Raising taxes may well be the least bad option, but we mustn’t forget that raising taxes means we are taking more money from some people (who may themselves be struggling) ….”
So the focus needs to be on taxes on the better off, not on the less well off.
And not focussed on taxing income – rather wealth – especially unearned wealth.
@ Simon R,
“I’m afraid @Mohammed Amin is completely correct about the constraints on taxpayers money. Those monetary constraints really reflect that we only have finite resources (energy, people working, houses.) available with which to provide the things we all want.”
It depends on what the constraints are. Everyone would agree that spending constraints do have to be applied to match economic activity with available real resources.
However this isn’t the basis of Rachel’s fiscal rules. She doesn’t say that she has to cut spending on such things as the WFP because there are insufficient real resources in the economy to support it. Instead she comes up with a lot of nonsense about ‘black holes’.
It would be good if she even thought along the correct lines, but prefers to tell the electorate fairy stories. I haven’t seen any evidence that she does though! So I’m really not sure. What do you think?
Nonconformistradical puts their finger on it, Simon R, in suggesting we need taxes for the better-off and on wealth rather than capital. And Michael BG and myself are well aware, Simon, that government borrowing should be for investment, and we are in favour of different taxes to provide for the NHS and other services. I am surprised that you can suggest we need to be ‘a lot more thoughtful’ about the solutions, when these are problems on which our party spokespeople and ourselves offer constant attention and renewed thinking.
Hi Katharine,
In your comment you say “Nonconformistradical puts their finger on it, Simon R, in suggesting we need taxes for the better-off and on wealth rather than capital. However, Nonconformist didn’t mention capital. Is that a typo on your part, or is there something else I’m missing?
Thanks,
David
While agreeing, I would approach the issue of poverty and inequality from a work based perspective. There are many reasons to enable more of the population to find worthwhile, rewarding and long-term work. There are many opportunities in the green economy such as in nature, sustainable farming and insulating our homes quite apart from the high tech and modern industries of the future.
@ Peter Hirst. Thank you, Peter, for that relevant perspective. Full employment was, I understand, a Keynesian ideal, and I hope you are right that there can be many opportunities to be found for ‘worthwhile, rewarding and long-term work’ in the Green economy. At present there are too many people in work in this country who have to draw on insufficient Universal Credit payments to supplement unstable low-paid jobs.
David Evans. Hi, David, thanks for joining in. Our colleague did indeed mention ‘unearned wealth’, but I was referring to the general principle we have adopted of proposing to tax capital as well as income. However, the Patriotic Millionaires assure us that ‘extreme wealth is a threat to democracy’ according to a report in the Guardian on January 22.
Peter Martin. Thank you, Peter, for your helpful comment about Rachel Reeves’ fiscal rules
@Peter Hurst
“There are many reasons to enable more of the population to find worthwhile, rewarding and long-term work”
Any thoughts on what proportion of theworking age population who are not working might be able to benefit?
How do you define ‘long term work’?
Do you expect people, in order to obtain such work, to uproot themselves and move to another part of the country – which might be difficult and/or expensive?
@Peter Martin: To answer your question, I would say you’re correct to the extent that people sometimes think too much in terms of money rather than available resources – which is the real constraint. But at the same time trying to avoid borrowing to spend is a good approximate proxy for taking account of that resource restriction, since if you borrow to spend, you’re in effect trying to consume extra resources (through your spending) without providing any means to generate those extra resources. So I don’t think Rachel Reeves is wrong in principle to try to cut the deficit, but she is going about it in ways that are damaging.
Where reasoning only in terms of deficit/money can go wrong is if it leads you to you forget that resources are more specific than money. As a hypothetical example – say you propose taxing wealthy people in order to subsidise household energy costs for poorer people. That’s fiscally neutral but still problematic because you’re trying let people use more gas/electricity when the real restriction that keeps energy prices unaffordable is the limited supply of energy (thanks to historic underinvestment/relying on Russian imports/etc.).
Is there a difference between “wealth” and “capital”? What is it?
@Jenny: The difference is a bit subject to interpretation. My understanding is that wealth is considered capital if its intended purpose is to generate more wealth/profits, rather than being there for direct consumption. So the furniture in my house is ‘wealth’ but if I happened to own a factory, that would count as ‘capital’ (since I probably don’t own the factory just for the pleasure of owning it 😉 )
Investopaedia describes capital thus
“Capital is a broad term that can describe anything that confers value or benefit to its owners, such as a factory and its machinery, intellectual property like patents, or the financial assets of a business or an individual.”
Wealth, on the other hand is the value of everything an individual or business owns. This might include cash at the bank, a house, manufacturing capacity, , stocks and shares, land – anything if fact that has a monetary value. Capital is a subset of wealth.
Is there really a difference? I might have furniture in an airbnb rental (capital?) or at home (wealth?) Money in the bank (wealth?) or shares in an industrial enterprise that owns factories (capital?) Few people directly own factories – they are run by managers. How would you tax one and not the other once a clever accountant gets to play with it?
@ Mick,
Thanks for the Investopedia quote but I’m still none the wiser. If Capital is a subset of Wealth it must follow that something could be classified as Wealth but not Capital. But, looking at the examples given of each I can’t think what that might be. Any suggestions?
@ SimonR,
There are a couple of difficulties with your interpretation of Govt borrowing. Firstly the Government can, with one exception, only borrow if someone else wants to lend. The exception is when the borrowing is effectively from the BoE which in effect means it is borrowing from itself. I agree that we have to be extra careful about this. So, if someone wants to lend to Government it can be classified as temporary and voluntary taxation. It should, as always, do what is right for the economy to maintain a sensible middle course between overheating it and having too much spare capacity and unemployment.
Secondly, we tend to look at debt too narrowly. We know from our own experience that it is usually better to take the plunge and borrow to by a capital acquisition like a house. Renting is not a good long term option. Yet, PFI schemes are set up for the Government to do exactly this. So instead of building a hospital, bridge or even a motorway we end up renting them off the private sector in some crazy PFI scheme.
Jenny, I think we should be aiming to tax more both the big capital-accumulating enterprises, and the wealth of individuals and their wealth-concealing private companies and offshore accounts. I hope our party will pursue this, and press it on the Chancellor, since the government seems rather inclined to cut departmental costs and the welfare budget rather than taxing capital. If even the Patriotic Millionaires are asking for a 2% tax on the wealthiest individuals, and saying they think extreme wealth is a threat to democracy, why would the government hold back?
There is a difference – because wealth is what people generally ultimately want. An armchair that you use yourself (wealth) is very useful to you and enhances your quality of life. An armchair that you own solely to use in your AirBnb business probably has no value to you other than the money it generates, because you can’t get to use it yourself. (Which is why if you buy the furniture for business purposes, you may be able to claim the cost against tax, but you can’t if you buy it for personal use).
There’s a very similar distinction for income already in the tax system: The profits a company make are comparable to capital – because no-one is allowed to directly enjoy those profits – they are only allowed to be used by the company for business purposes. But when those profits get paid as dividends to individual people, they become wealth (and as the money gets converted from capital to wealth, it gets taxed via dividend tax).
However as you hint at in your question, in practice the distinction gets a bit blurry. Is the car that you bought in order to run your business, but which you also sometimes use for personal stuff really capital or wealth? It’s probably a bit of both. And your own example of AirBnb furniture is likewise blurry if you sometimes use it yourself (when the room isn’t being let). That’s one reason why business taxes get so complicated.
Given that many in this country own mortgaged properties worth considerably more than their net wealth, the question of whether your home is capital is important. You don’t get any income from it but you may well get capital gains and you will certainly save a fortune in rent.
@Peter Martin. Your income is not capital and is taxed as income. Everyday things you buy like food and drink are not capital. The season ticket or Oyster card you buy for travel to work or leisure activities are not capital and neither are holidays. Just a few off the top of my head.
@ Mick,
I was asking about the difference between wealth and capital. I understand the difference between income and capital.
For example, if I understood correctly, people were saying that a house which was a primary residence wasn’t capital because there is no income associated with it. However, there is always an imputed income associated with house ownership which is equal to the rental value. I think this is even included in the way GDP figures are calculated. Similarly we could make the same argument for a car or even a TV set. In fact Simon R’s chair could be included too!
@Peter: Well yes, for the Government to borrow, someone must lend the money, but that’s not an issue because, in normal circumstances and provided there’s some confidence you’ll repay the loan, you can always find someone willing to lend provided you offer a high enough interest rate. Since the Government must borrow to fund its deficit, in practice the more it borrows the higher the interest it pays in order to match supply and demand for the loans (although the detailed process will be buried in the bond market mechanisms etc.).
I agree with your second point. I’ve hopefully made it clear that my objection is borrowing to fund current spending, not borrowing for investment that will secure a return.
@Mick: To be pedantic, I don’t think Peter’s income would count as wealth either, since
that’s money that’s in the process of being transferred from his employer. As soon as it’s in his bank account, then Peter might consider it wealth, although I’d argue the money is merely a claim to wealth, not actual wealth. Actual wealth is all the things you might buy with the money. (Consider that if the Government suddenly ‘printed’ enough money to double the amount of money in circulation: That action wouldn’t increase the actual wealth of the UK at all).
Likewise I’d argue the rail season ticket isn’t actual wealth – it’s a claim to wealth, although the owner probably feels like it’s wealth. No wealth is created by the rail company selling the ticket. The train that carries you is capital (and wealth because all capital is also wealth), and the food and drink you mention is capital when it’s in the shop, but ceases to be capital and become straight wealth as soon as you’ve bought it.
The point is, I believe, that further taxation should be brought in by the government so as to avoid cutting departmental functions and local government services in the spring. One obvious way forward would be to tax the dividends given to executives of water companies which have been failing to prevent sewage pollution, such as our northern United Utilities company. But there are surely huge capital enterprises which could be taxed further than at present, a subject surely to be discussed at our Spring Conference.
At Prime Minister’s Questions today it was good to see several of our MPs asking questions to which the Prime Minister gave broadly affirmative replies, such as when Ed Davey asked about our country’s continued support for a two-state solution for the Palestinians, as well as asking again for more rapid action for social care cross-party discussions. I believe our present role in Parliament should be as it is as present, a critical friend spurring the government on to do better. However, our distinct Liberal voice must be heard more in future and made better known.
Simon R,
‘trying to avoid borrowing to spend is a good approximate proxy for taking account of that resource restriction, since if you borrow to spend, you’re in effect trying to consume extra resources (through your spending) without providing any means to generate those extra resources.’
A government is not consuming resources that don’t exist when it borrows in its own currency. It is just borrowing money (a resource) that was standing idle. You seem to accept this in your comment of 10.50pm on 4th Feb. If there is a large amount of spare capacity in the economy there is likely to be the resources for the government to borrow to create the demand in the economy so more resources come into production. This is why austerity is generally accepted as being the wrong policy for the UK after the 2010 general election.
There is currently spare capacity in the UK economy but the problem is how to get it to become productive. In the 2010 there was talk of government spending crowding out private investment now there is talk of public investment attracting private investment.
The question for the party and the government is how to get the spare capacity into production. Why would a company invest in the UK if there are not people able to work for it? The government needs to provide help for companies to employ the people available for work and help for the people available to maintain themselves in work that they can actually perform.
To be practical, if Ms Reeves wants to increase taxes, the obvious candidates are capital gains tax alignment with income tax. road fuel duty escalator and remove the “temporary” 5% fuel duty cut, and increase Airline Passenger Duty – especially on domestic flights.
But as she’s listening to the “Non-dom community” I doubt it. The “Patriotic Millionaires” remind me of the “Well-behaved orphans” in Lord Bonkers diary 🙂
There’s a problem with a term like “Government Borrowing.” It gives the impression that the government needs to go off to somewhere like the IMF or some World bank and ask if it can borrow some money in the same way as you or I might if we need to buy a new car.
Occasionally it might choose to do this but most of the time it doesn’t. It’s actually its own bank. People, Companies, Corporations, etc, both in the UK and overseas choose to lend it money whenever they buy gilts, or even invest in National Savings or Premium Bonds
So what does it do with the money? It has the same decision to make when we pay our taxes. How much of it should it spend? It depends on the state of the economy. If it needs a boost it should spend more. If it needs to prevent it overheating it should spend less.
The BofE has announced a 0.25% cut in interest rates today to 4.5% as anticipated by gilt yields. However, the Bank has halved its growth forecast for this year. The economy is now expected to grow by 0.75% this year, down from its previous estimate of 1.5%. The UK unemployment rate was 4.4%, and 1.57 million people aged 16+ were unemployed. Unemployment levels increased by around 190,000 over the last year, and the unemployment rate also increased.
The number of vacancies fell in the last quarter and over the year to 812,000 in October to December 2024, but remains above pre-pandemic levels.
Average wages increased in real (inflation-adjusted) terms in the three months to November 2024, with an annual change of 3.2%. Nominal wages continued to rise, at a rate of 5.6% UK Labour Market Statistics
The interest cost on government debt is the major source of increased government spending in recent years running at around £100 billion per year and rising. That interest has to be paid for from taxation or alternatively by way of an effective inflation tax which is disproprtionally borne by lower and middle-income earners while simultaneously inflating the asset values of the wealthiest in society.
Perhaps a fairer approach would be to assess annual public interest charges separately from general taxation proportionate to the UK property equity held by companies, individuals and overseas trusts.