16 Dec 2010

Difficult promises on poverty for the coalition

“We’re all in this together” is the Coalition’s favourite catchphrase. And it doesn’t seem like that from Pennethorne House, Wandsworth. A tough neighbourhood in a deprived ward in an otherwise wealthy London borough is bracing itself for chill winds that are more than just about temperature.

The austerity benefit and spending cuts will create poverty according to the first independent audit of how poverty will be impacted in the coming years. The Joseph Rowntree Trust and Institute for Fiscal Studies tonight issue an analysis forecasting a surge in one measure of poverty of just under a million within three and a half years time.

As Robert Joyce of the IFS told me: “We think that overall, taking all children of working age individuals together – relative poverty and absolute poverty will both rise by just under a million over the next three years, much of that happens in 2013/14. Much of it is driven by welfare cuts that are part of the current government’s deficit reduction strategy. Also a contributing factor is that the OBR is forecasting that earnings in real terms will fall in the future,” he said.

So this number does not include pensioners. The Treasury did a welcome analysis of this type after the Budget and Spending Review. But the analysis stopped in two years time, before key welfare cuts kicked in, and it also did not include some housing benefit cuts. The Treasury’s conclusion was that child poverty did not rise as a result of their measures, and the Chancellor included this fact in both his speeches. The IFS/ JRF study disputes this, slightly. child poverty will be 100,000 higher in 2012, as a result of those unmodelled housing benefit changes.

What do these definitions of poverty actually mean? Well this year the poverty line for a family with two children is £344 per week, 60 per cent of the average income. Reasonable people can disagree about this.

Policy Exchange director Neil O’Brien said: “The problem with what the IFS is saying is that the measure they use isn’t an indicator of real poverty; it’s a measure of inequality. It defines ‘poverty’ as being below 60 percent of the average income. This is a hangover from the Gordon Brown era.

“Real poverty isn’t the same as inequality. The IFS’s definition would mean that there are actually more people in poverty in Britain today than there are in Poland.”

Yet the Coalition Treasury itself has used the Gordon Brown definition of child poverty, specifically when it claimed child poverty would not go up as a result of its “Budget and Spending Review”. That the measures would not increase child poverty on the relative measure in the next two years. This report disputes that, saying that because of changes to housing benefit not included in Treasury calculations, even child poverty will rise a little in 2012.

The strongest defence the Government has here is that this report does not include the impact of the Universal Credit, which may reverse some of these poverty increases.

So far, however, this report is the fullest account of what will happen to poverty, on what is, still, the official definition.

9 reader comments

  1. PaulGlasgow says:

    Faisal Islam’s report and the Channel 4 news report were very poor efforts. The News even displayed ‘absolute poverty’ when they meant ‘relative poverty. Such confusion is no surprise since no one can make a credible case for the argument put forward by the increasingly suspect IFS and J Rowntree Foundation.
    It was unconscious irony that Faisal Islam chose an estate with so many satellite dishes stuck in the walls to make his point about poverty. If the UK was a land of billionaires swigging Bollinger ’57 every night and I was only a millionaire swigging Piper Heidseick NV every night, this would mean I was living in ‘poverty’ according to the twaddle we have heard. Relative poverty will always be so misleading. Today’s UK ‘poor’ have mobile phones , satellite dishes, broadband and designer trainers. Swap them for some third world folk to let them see actual poverty

    1. Roger Bater says:

      Defining poverty is difficult. Here is what Disraeli said:

      Two nations; between whom there is no intercourse and no sympathy; who are as ignorant of each other’s habits, thoughts and feelings as if they were dwellers in different zones or inhabitants of different planets… the rich and the poor.

  2. Philip Edwards says:


    Policy Exchange are just another gang of ultra right wing economists with an agenda to suit its Daily Mail evil. These people have never even acknowledged the concession by Friedman and Greenspan that their loony policies didn’t work, that their life work was a failure.

    When poverty inevitably increases they and others like them will once again insist on decreasing our support of our vulnerable citizens to “encourage” them. At the same time they will insist on subsidising the rich with tax cuts and other capitalist state gifts so they too are “encouraged”!

    All of it will be accompanied by propaganda attacks on “scroungers” and “the work shy,” the same old gutless bolt-hole.

    The formula is well known by now. This nation has suffered this corrupt, contemptible and cowardly system ever since decency and social conscience were finally abandoned in 1979. The ultra right has had its long rotten-to-the-core day ever since. The results are all around us.

  3. Savale says:

    How sadly typical to see disability being a trigger for poverty. We seem so uncivilized compared to many other European countries that have genuine social security.

    Neil O’Brien is clearly a confused man. It is not average, but median income that poverty measures are based on. Maths is not their strong point at Policy Exchange.

  4. Saltaire Sam says:

    I have £100 and no other income it costs me £10 a week to live.

    Under the government forecast, which is for the next two months, I don’t have a problem.

    By then, they argue, who knows what might happen – I might meet a rich widow, find a fiver in the street, get run over by a bus. Doesn’t pay to forecast too far ahead.

    Daily Mail headline: ‘Saltaire Sam is safe under the coalition’

  5. Y.S. says:

    Its not the amount of money you have its how you use it. You can use most of your £344 in the boozer , gambling, satelite tv or use it to house and feed your family. It about the choices people make.

  6. Ray Turner says:

    It is well documented that Southern Electric raised their gas prices recently. What is not so well documented, is that they’ve also changed the threshold to which their initial higher rate applies. It has been reduced to 625Kwh per quarter from the 1143 Kwh that it was previously. The unit rate has changed accordingly, from 4.92p to 7.23p

    Anybody stuck in the poverty trap will probably be using very small amounts of Gas in order to make ends meet. They will really feel the effect of this change by Southern Electric. It means that all light users of Gas will experience price inflation of 46.95%

    Even worse, that will not show up in the official inflation figures, because they’re based on average consumption. Southern Electric clearly set their price increases so that the headlines are no worse than they absolutely have to be, but some customers (usually the poorest) will really feel the pain of this change…

    So its corporate Britain as much as the Politicians that are fuelling poverty in the UK.

    This change to thresholds has absolutely nothing to do with wholesale markets. Everything to do with profit…!

  7. Kate says:

    Are you around, Faisal?

    Merry Christmas! And thanks for all your great work at Ch4 News. I can rely on you to explain what’s going on in the country economic-wise. God knows how anyone can make sense of it all! :)

  8. Andrew Dundas says:

    Of course poverty is a relative description within our country. Not only because measurements are always relative, but because it would be absurd for poverty to be measured otherwise.
    Suppose it were not relative to some measure of current average income. How would we define poverty? Would it be set just above the level below which people would die of starvation or cold? There’d be some sense in that. We know that people with the lowest incomes usually die younger than those with average incomes, and that those in the highest income categories live even longer. Both are also reasons why life insurance policies premiums are highest for households with the lowest incomes than where incomes are higher.
    The policy changes brought in be Duncan Smith and Osbourne are intended to reduce the real incomes of many of the people already on the lowest incomes, thus widening the income differentials in Britain. That is being done, it’s claimed, in order to fill the many jobs Duncan Smith and Osbourne say are available to low income people. As the lives of the poor are reduced relative to those with higher incomes, we shall know that those life changes were deliberate policy aims.

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