It was shocking to hear Prime Minister Rishi Sunak say again at Prime Minister’s Question Time on Wednesday, as he said before, that there are fewer people living in poverty in this country today thanks to Conservative governments. He will not face the fact that poverty is actually worsening for millions of people in the UK.
Last week an independent cross-party group called the Poverty Strategy Commission reported that six million low-income families are ‘surviving not living’, forced to endure unacceptable levels of poverty. The report, an interim one A New Framework for Tackling Poverty, states in its Foreword that:
Poverty in the UK is too high, and the experiences of many people in poverty are now getting worse.
In the Executive summary it continues,
Despite significant action from governments of all colours, particularly over the last three decades, the overall rate of poverty in the UK has remained stubbornly high, (with) a third of children in poverty, and 7% of the population in deep poverty.
It adds,
Deep poverty has become more prevalent.
They write,
… a social contract does not currently actually exist in the UK. However, broad principles of an implicit social contract can be inferred from existing government policy choices.
They also state that benefits are set at a level that are insufficient for those who rely on them to avoid poverty.
The Commission Report continues, that “there remains no consensus on whether and how to tackle poverty in the UK, and whose responsibility it should be.” But, it adds, “perfectly targeted interventions” resulting in an increase in resources of £36bn to give the 6m families in poverty £6000 a year each would eradicate deep poverty.
This will sound familiar to Liberal Democrats. We passed in the Spring Conference in York the Fairer Society motion F12, which plans to introduce a Guaranteed Basic Income for those in need with the aim of eliminating deep poverty within the decade of its introduction. We will do this by building upon and reforming existing welfare benefits to gradually raise the income of the poorest.
The Poverty Strategy Commission – a body including many ex ministers from the main parties including our own – states that the UK needs a new social contract: “This should commit to ensuring that no-one has to live in deep poverty in the UK.” Our party agrees with this and has planned the way to do it. The Labour Party has no such policy as yet, but we should surely make this an imperative for our future co-operation with their expected government, and to begin with, proclaim it in our pre-Manifesto policy at Bournemouth.
* Katharine Pindar is a long-standing member of the Lib Dems and an activist in the West Cumbrian constituency of Cumberland.
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32 Comments
It is an interesting report Katharine. In the summary the authors write
“Throughout its work, the Commission has been clear that this £36bn is not a spending ask of Government or business. Increases in resources can come through a range of ways including reduced costs, increased working hours, improved health, greater family stability, higher productivity and reduced debt. None of these necessarily require governments or businesses to spend money. In fact, as well as reducing poverty, many of them would simultaneously improve growth and profits and benefit the Exchequer.
Instead, the £36bn provides an initial benchmark of what an approach from actors across society might look to achieve. The key here is the idea of shared responsibility and a common purpose. This has been informed by our work with a broad range of stakeholders. We have heard from:
• Businesses already seeking to support their workforces and looking to do more;
• Policymakers in local authorities, Mayoral Combined Authorities, devolved administrations and the UK Government, who are looking to use the tools and convening power they have to improve families outcomes; and
• From people in poverty about their experience of being in poverty and action they believe they could take.
A common theme has been the need to look holistically at the issue of poverty, working cross-issue and cross-society as well as cross-Government to tackle poverty”
This holistic approach makes a lot of sense.
Interesting part of the Report summary that you quote, thanks, Joe. But I fear that looking to a range of ways of finding resources to limit poverty, some of them completely out of government control (‘greater family stability’ !?) would be to duck the problem, and keep the drive to reduce poverty comfortably ticking over with conscience allayed. No, I believe we do need a real drive to reduce poverty, and it’s our party that should hoist the standard and demand action now, after 13 years of Tory neglect.
The report rightly states that a new social contract is needed. Just what UN Rapporteur on Extreme Poverty Philip Alston suggested during his visit to Britain in November 2018, observing the levels of poverty here – and he could write that again now. It’s shameful that benefit levels are set too low for people who need them to have enough to live on, and the fact has become plain in this last year of soaring food bank usage. Let’s lead on this – we care enough and know enough and are ready to find that consensus to act.
I agree with Katharine, that the Poverty Strategy Commission’s report should remind us of the appalling state of working-age benefits in the UK and our policy to ensure within the decade that no-one in the UK lives in deep poverty. It is terrible that this government thinks it is fine to set the level of benefits at such a low level that people receiving them are living in poverty and some in deep poverty.
Joe Bourke,
Part of the new Social Contract that they are calling for includes putting more of an emphasis on employers playing a greater role in reducing poverty. This seems to include employers paying more than Statutory Sick Pay to their workers when they are not well enough to work, and it is implied that they should pay their workers more to lift those working part-time and receiving benefits out of poverty.
I have personally found 2023 to be the most difficult year financially I have been through while employed. Myself and my wife are not technically poor. But our disposable income is very thin and we are finding it very difficult to save in this financial climate. Every month I am nervous that our second hand car will need something fixed one month and there goes our chance of doing anything that month. I am having to work 6 days weeks every two weeks to make ends meet because my salary isn’t great, and due to my wife having ME she can only work part time. There is no government support. My wife had to go through a humiliating health assessment just to get turned down for Personal Independence Payment. We can afford to go out and eat more rarely, same with going to the cinema.
Despite all of this I want to make clear that it isn’t all doom and gloom. I do enjoy my life. But I have frankly had it up to here with this sort of thing becoming normalised in Rishi Sunak’s Britain.
Poverty of any kind is unacceptable. But what is more chilling is that those in the middle don’t feel that far away from it anymore.
Poverty needs to be addressed from a number of angles. Welfare Benefits, how the tax burden is distributed, childcare including employer provision of creches or childcare support, full employment and particularly the levels of housing benefits and rent.
We have developed a number of policies that need to be brought together in a comprehensive manner.
Having to go through a humiliating health assessment, just to get turned down for Personal Independence Payment as Zachary mentions, highlights the continuing problem with means tested benefits. This kind of support should be made readily available to those who need it, certified by a GP with a bias in favour of those suffering disabilities and not an obstacle course that becomes ever more difficult to navigate. To qualify for adult social care these days you need to be virtually incapable of holding a cup, With escalating mortgage payments, rents, energy costs and food prices many more families are living on the margin with no savings to fall back on.
Zachary, I know exactly what you mean. The standard of living has fallen so much, though gradually, during the 13 years of Tory rule that it is no wonder so many unions have drawn attention to it with necessary strikes. And the last year has compounded the deprivation, with the steep rise in the price of household fuel and the increase in the cost of basic foods, which is continuing. As you say, having to get the car fixed will mean having to put off getting other things done for that month. Jobs in the house have to wait, and as for holidays, while it may seem that the entire population went abroad recently, plenty of us will be cutting back on the number and extent of trips, if we take them at all. But a decent home and a reliable job are the first needs, after health care, and too many of our fellow citizens just don’t have them.
Joe, thank you for spelling out many of the problems of poverty that need to be addressed, as you suggest, by bringing together many good policies that we have developed. To me, one of the chief needs is to point out that the benefits we demand, especially welfare enhancement and the introduction of a GBE, can be paid for, and the Labour Party doesn’t need to shy away as they do from demanding taxation reform. Land value taxation and taxing capital as well as wealth are surely policies of ours that need fulfilment .
” Land value taxation and taxing capital as well as wealth are surely policies of ours that need fulfilment .”
Yes there’s no reason why we shouldn’t do both. LVT is just another form a tax on capital, or a wealth tax, in any case.
However I’ll just give you this quote to think about from Matthew Green who is one of your own.
“The problem is that taxes on “work” (or spending, such as Value Added Tax) are much more effective at this demand management job than are taxes on wealth, as the wealthy spend a much lower proportion of their assets on consumption. So taxing more on wealth to tax less on incomes is in practice a much trickier exercise than it might first appear.”
In other words we could raise a sum of money from a LVT or wealth tax, say £N bn, but it doesn’t necessarily mean that Govt has an extra £N bn to spend. Advocates of all kinds of wealth taxes including a LVT, usually fail to appreciate the point Matthew is making though.
But, just to repeat, we should still do it.
https://thinkingliberal.co.uk/tax-reform-must-be-properly-thought-through-before-going-to-the-country/
” benefits are set at a level that are insufficient for those who rely on them to avoid poverty.”
This is true.
Public opinion isn’t in favour of anyone living in poverty but neither is it in favour of a simple increase in working age benefits with no strings attached. I’d say this is very much the view in working class communities, which traditionally vote Labour, so it’s not simply an indication of right wing opinion. You may well disagree that there should be ‘strings’ but, as we live in a democracy, you’re unlikely to get anywhere if you’re aren’t going to be taken seriously. You’ll know already what will be said.
So how about looking at what conditions the electorate may be in favour of imposing?
We should remember that the Work Capability Assessment was introduced by the Labour Party because they wanted to reduce the number of people entitled to benefits because of health issues. GPs were not seen by them as good at being the gatekeepers for these benefits. The Tories are talking about making Employment and Support Allowance even more difficult to get by using the same criteria as is used currently for Personal Independence Payment.
Peter Martin,
If public opinion ‘isn’t in favour of anyone living in poverty’ then the public would support everyone with not enough income receiving an amount set at the poverty level after they have paid their rent. The public should therefore be happy with our policy to increase benefit rates to the deep poverty level within the decade and end the sanctions regime.
The conditions for receiving working-age benefits should be:
not well enough to work; or
caring for someone and not having the time to work; or
looking for work and prepared to start work next week.
Those working in Jobcentres are not the right people to help the unemployed find suitable work. That is why it is our policy to move the responsibility to local government.
I would like us to go further and give incentives to employers who take on people who were receiving working-age benefits.
If working-age benefits ensured a person wouldn’t be living in poverty this would end people in-work living in poverty.
Peter Martin,
Land Value tax is neither another form of tax on capital, or a wealth tax. It is a tax on income (economic rents) derived from land in whatever form that may take, whether it be commercial or residential rents, mortgage interest from lending on land, capital gains or imputed rents where land is owner occupied. LVT does not impose taxes on buildings, improvements to land or other forms of produced capital.
LVT is basically an alternative tax base that seeks to substantially shift the burden of taxation from employment income and profits derived from produced capital to unearned income derived from the rental of land and lending for land. LVT on owner-occupied property additionally seeks to shift the tax base for consumption taxes such as VAT from produced goods and services to housing consumption.
The same or higher level of taxes are raised, but the incidence of taxation is shifted to become far more progressive with those owning the most valuable land paying a greater proportion and wage earners and smaller business owners paying proportionally less.
Importantly, the incentives for capital investment and or working additional hours are increased by reducing the deadweight impact of taxes on these sources of income, while landowners and the big housebuilders are incentivised to bring undeveloped into productive use as quickly as possible.
I would agree that a mix of direct, indirect and wealth taxes would be a more efficient and fair system than a single tax base, ideally integrated with the benefits system.
We just must do it. Stand up for everyone having enough to live on, as well as a decent home and suitable work when able to work. It’s called a Fair Deal, and only the Liberal Democrats are offering it. It’s what I believe we have to fight for, especially now when the prospect of a government we can work with is becoming a realistic possibility.
Joe Bourke
Please explain why a shift of taxation from income to land ownership would be more progressive? Surely progressive taxation is ‘progressive’ precisely because it taxes those with higher incomes proportionately more – reducing their taxes and transferring the burden to those who may own assets but have lower income seems the opposite of progressive. I’d appreciate your comments on this.
@ Joe,
I notice you have included the concept of an “imputed rent” in your explanation of what a LVT might be. Pretty much every other wealth tax can also be classed as tax on income if we do the same. For example a mansion tax can be framed in terms of an “imputed rent” on the property. Some ownership of wealth is already taxed as an income. We pay income tax on bank interest payments and company dividends, then there is capital gains tax of when assets are bought and sold.
So we can and do have wealth taxes even though we might not term them as such. Arguably we could tighten up the rules on unearned income to make them more effective.
Having a policy of classing an imputed rent as income might not do much for your vote in the leafy wealthy London suburbs. Actually owning a property, building and land, which could fetch a rent of several thousand pounds a month could mean a substantial increase in tax bills.
@ Michael BG,
“The public should therefore be happy with our policy to increase benefit rates…..”
You might think they should be. However, what you and I might think isn’t going to count for anything if the public isn’t happy. I can only suggest you start a dialogue and try to come up with a mutually agreeable solution to the poverty problem.
This discussion is relevant to our forthcoming Conference in Bournemouth, for this reason. When we focus on tackling poverty by bringing in Guaranteed Minimum Income by gradual welfare increases, we will be asked how this is to be paid for. And we have answers, because of our policies on taxation reform, such as taxes on income from capital, Land Value Taxation and other reforms mentioned by Joe Bourke and Peter Martin above. We mustn’t therefore shrink from promoting our progressive policy to tackle poverty in this country.
At a time when Keir Starmer refuses to accept taxing wealth, or even doing away with the two-child policy which helps to keep many poor families poor, because he wants to avoid Labour being accused of profligacy and extravagance, we should speak out on what is needed from a progressive government. And go on to press the next government to tackle growing poverty and deep inequality, as a centre-left government must do.
Sandy,
According to the latest ONS report Median household income in the UK before taxes and benefits was £35,000 in the financial year ending (FYE) 2022, increasing to £38,100 after taxes and benefits. The richest fifth of people’s average household income before taxes and benefits (£117,500) was 14 times larger than the poorest fifth (£8,200); however, this gap reduced to 4 times larger (£83,900 and £22,300, respectively) after taxes and benefits.Effects of taxes and benefits on UK household income: financial year ending 2022
Wealth in Great Britain is even more unequally divided than income. In 2020, the ONS calculated that the richest 10% of households hold 43% of all wealth. The poorest 50%, by contrast, own just 9%. More than that, for the UK as a whole, the WID found that the top 0.1% had share of total wealth double between 1984 and 2013, reaching 9%. The Scale of Economic Inequality in the UK.
Redistributing the allocation of taxation closer to the proportion of land wealth held will enable a more progressive system of taxation and significantly reduce the burden of taxation for those owning no land or low cost housing.
Peter Martin,
the Mirrlees Review on reforming the tax system set out a range of proposals designed to improve the current “overly complex and frequently unfair” system.
The report concluded that stamp duty land tax (SDLT) should be abolished and replaced with a reformed council tax system. This new Housing Services Tax, based on real property values, would “effectively stand in place of a VAT on housing”, it said.
The owners of property in leafy London suburbs typically have kids, many of whom have no prospect of been able to buy a home where they grew up and are now working. This younger generation faces two currently insurmountable problems. Inability to save a deposit while paying rents absorbing 40% to 50% of their net income and insufficient earnings to qualify for a mortgage in an area where average house prices are over £500k. Reducing the tax burden on this younger generation (along with other measures to bring down the cost of rents and housing) can aid in giving them a better chance of making some headway.
Imputed rents form the majority of household final consumption expenditure recorded for GDP calculations. The UK did tax imputed rents in the past, but it was abolished in 1963. A few countries continue to tax imputed rents (Iceland, Luxembourg, the Netherlands, Slovenia and Switzerland).
@Joe Bourke
“This new Housing Services Tax, based on real property values”
How would properties be valued? Sounds like a mammoth task and one which would need repeating at intervals.
The VOA (Valuation Office Agency) are currently producing spreadsheets of residential land values for each English local authority for Michael Gove’s levelling up department.
The primary value of land is its rental value. Rental values are routinely collected by Local authorities across the country. Uniform Business Rates based on rental values as are domestic rates in Northern Ireland (the antecedent system to council tax).
@ Nonconformist,
“How would properties be valued? Sounds like a mammoth task and one which would need repeating at intervals”
A house is typically bought and sold every ten years or so. In the interim any revaluation can be calculated on the basis of a local house price index. There will only be a small number which do require an arbitrary valuation which might provoke some disagreement.
Having a tax based on a house’s market value will encourage residents not to live in a bigger property than they might need. So it’s efficient from an economist’s POV but problematic from a politician’s.
Politically, it will raise problems for local governments. There will need to be a transfer of collected taxation from the richer higher cost areas to the poorer lower cost areas. There’s bound to be plenty of opposition which will lose any party proposing anything too radical more votes than they will gain.
@ Katharine,
You haven’t mentioned the working poor who are fully part of the system too. They receive a minimal share of the wealth they help produce and are exploited to the maximum.
All goods and services are the product, combined with the availability of natural resources of those who work to produce them. The old clause 4 of the Labour Party calls for a system which allows for workers to receive the “full fruits of their labour”.
One possible objection to this is that this doesn’t allow for some of the produce of workers to be redistributed to those who cannot work because they are too young, too old, or too sick. The prose of the Sidney and Beatrice Webb version is far more eloquent than the new Blairite version but even so I would say it still does need a slight tweak in the interests of accuracy.
The difference in emphasis between what the Socialist Webbs and modern day Liberals are proposing is still very obvious though. For Liberals it is about social benefits which might even include a UBI. For socialists the importance is in having “the most equitable distribution thereof that may be possible” of the goods and services produced. In other words it is about fair wages and jobs for all who are capable of doing them.
Land Value Tax can be the tax base for both local taxation and as part of the national taxation system. As a replacement for council tax it would remain a local tax. There are typically at least two tiers of local billing authorities. In London this includes the London Boroughs and London Assembly. The London assembly levies a precept on top of council tax. As a consequence, redistribution of local taxes typically occurs both internally within tiers and across regions. London has much of the highest value residential property in the UK as well as the greatest numbers of households living in poverty, primarily as a consequence of housing costs. Local taxes are set by councillors and Mayors who are judged principally by the quality of local services they are able to provide.
On a national basis, LVT could be collected as part of the tax system via income tax on imputed rents (net of housing personal allowances). It is not a hypothecated tax. Redistribution within the tax system would be as now i.e.from higher earners/higher value property owners to lower earners/lower value property owners.
Addressing growing poverty and the housing crisis requires radical solutions. That is what Liberalism is for. To campaign for societal change that will make a real difference to inequality and freedom from poverty.
Sandy Smith,
Party policy is to have a land tax on commercial land which we call the Commercial Landowner Levy. As you point out having a land tax on homes is problematic because there will be those who own a large home but have a small income. We should have a policy of making Council Tax proportional to the value of the home (as suggested in the Mirrlees Report, Joe) and re-instate the pre-2013 national council tax benefit scheme so those of working age are entitled to 100% discount on their Council Tax if their income is equal to or lower than the Universal Credit rates.
Peter Martin,
Council Tax is based on property values of about 1990 and there are no direct transfers from areas with higher valued property to areas with lower valued property. Having a Council Tax which is proportional to current house prices will not change this. The government is supposed to provide areas of lower valued property with funds to make up for the different rates of Council Tax.
Joe Bourke,
I am glad it is not party policy to tax homes on their imputed rents. I wish it were to reform Council Tax to make it proportional to home values instead of just reviewing the case for it. I included such a policy in one of my motions to Autumn Conference, but it was not selected.
Peter Martin. We are certainly concerned with the ‘working poor’, which you wrote I hadn’t mentioned – because a large proportion of people on Universal Credit ARE working, but aren’t paid enough. On part-time jobs because of family caring commitments, with children or frail relatives at home, they can’t earn enough, even though many single parents will be fitting extra jobs into evenings or when the children are at school. I have friends like some of those, and I know the struggle it is to get new school uniforms and trainers for example.
@ Katharine,
You wrote there were “six million low-income families…. ‘surviving not living’ ” so it was, to be fair to you, implicit in what you were saying that most were actually the working poor. Nevertheless your favoured remedy is improved benefits rather than improved wages. You don’t mention these at all. An increased minimum wage will certainly help a lot.
The people I talk to are generally far more supportive of fair wages than they are of increased social benefits. They particularly don’t like the idea of what they might refer to as “taxpayer money” being used to subsidise less than living wages by major employers. A majority of the public do believe, and rightly so IMO, that employers should be responsible for paying wages that cover the cost of living.
There’s no point in proposing a solution if the electorate aren’t going to vote for it.
@ Michael BG,
“I am glad it is not party policy to tax homes on their imputed rents. I wish it were to reform Council Tax to make it proportional to home values instead of just reviewing the case for it.”
It could more or less be the same thing. Imputed Rents are going to be approximately proportional to a house’s value.
There once was, as I think Joe has pointed out, what I believe was called a Schedule A tax on Domestic property which classed an imputed rent as income. This was a recognition by the tax system that a renter living next door to an owner occupier had a lower de facto real income. There would need to be also some recognition of the interest cost of any mortgage paid by the house owner.
Even though it wouldn’t suit me personally, I do have to accept that it would be a fairer system. I doubt whether your voters in the leafy suburbs would agree though.
Incidentally with regards to fiscal transfers at local level, it doesn’t matter if the central government is involved. It is difficult to see how it wouldn’t be. However it is done the net transfers do have to be made.
What’s in a name? Quite a lot of importance, actually, when our party agreed in the spring to support GBI rather than UBI. Guaranteed Basic Income, to ensure that the poorest people are guaranteed something to live on, rather than Universal Basic Income, when everyone would have a small sum. A safety system, such as William Beveridge would have approved, so that no-one will be left destitute or in deep poverty, with a commission set up to decide what the minimum should be each year. As politicians, we can see that GBI will be much more possible to ‘sell on the doorsteps’ that UBI, and it is a national policy that we can now proclaim proudly.
Peter, of course you are right that employers should ideally pay enough for people to live on without their needing benefits. But with part-time jobs and zero-hours contracts, all the uncertainties of work for the unskilled today, even employers paying a decent wage can’t help all workers. And is the minimum wage adequate for today’s expected standard of living?
@ Katharine,
You asked:
“And is the minimum wage adequate for today’s expected standard of living?”
No. That’s why I’m suggesting it should be increased and also that the law on it should be properly enforced. There’s plenty of evidence of abuse in sweatshops and the agricultural sector with the employment of migrant workers. The usual dodge is to put something like 35 hours on the payslip but require many more to be actually worked.
No-one is suggesting that social benefits for those of working age, and are able to work, can be phased out immediately but it should be a goal we should be working towards.
Social benefits paid to indirectly to children, such as child benefit, shouldn’t be regarded as a working age benefit BTW. So we could direct more help to struggling families by increasing that. Child benefit is also relatively free from any form of social disapproval. We both may say there shouldn’t be any but many who are entitled to social benefits won’t take them for this reason.
Do you have any policy on what you would like the minimum wage to be? It doesn’t sound like you have. Is it that LibDems see this as the province of the Trades Unions and so not for you?
@Peter Martin: ‘Having a tax based on a house’s market value will encourage residents not to live in a bigger property than they might need. ‘
Sounds like the (flawed) arguments for the bedroom tax.
Rating all older homes upwards would simply push millions more people over the financial edge. It’s not like there is a great supply anywhere of smaller, suitable homes (in equal locations) for people to downsize to. Even if they want to leave their communities and go through the massive cost and upheaval of house-buying/moving.
(New buyers buying older properties are already ‘discouraged’ from bigger properties by the price).
Peter, to suggest that the ‘province of the Trades Unions’ is not for Liberal Democrats is quite wrong. At our Spring Conference in York this year, in the Fairer Society motion, we agreed many clauses to support workers, from introducing a Universal Work Service to replace the flawed support service of Job Centres, to proposing a new Workers’ Charter which would include a new streamlined Worker Protection Enforcement Authority and make flexible working generally open to all. And specifically on Trades Unions, we agreed on ‘Strengthening the ability of unions to represent workers effectively by broadening the right to collective bargaining in pay and conditions, including pay and pensions, working time and holidays, equality issues, health and safety, training and development, work organisation and the nature and level of staffing.’ This wasn’t a new field of concern and policy-making for us in any way.
@ Katharine,
My question was specifically about the minimum wage. If you have a policy of wanting to eliminate poverty then also having a policy on what the minimum rate of pay should be would seem sensible.
Just wondering why you don’t have one?
The other policies you mention on TUs are all very well but the primary objective of most TU members is to get better wages and conditions. The best WPEA as far as most are concerned is the TU itself. That’s why they were set up in the first place.