Why the Government is right to want to improve the poverty target

Nov 15, 2012

“When sorrows come, they come not single spies, but in battalions.”

Shakespeare’s famous line explains why the Government has just launched a consultation on reforming the way the child poverty target works.

Bad things tend to go together, and people who are poor tend to have not just one problem, but several at once.

But the current poverty target looks at just one dimension of poverty. Instead of the current poverty targets, which are all to do with income, the government wants to broader set of measures, to look at a number of dimensions of poverty.

While they will still look at income, they want to track the other dimensions of poverty too: worklessness; debt; bad housing; parents with poor (or no) qualifications; children not getting access to childcare or a good school; family instability and parents’ health problems.

I’ve argued before for a multi-dimensional approach, because focussing on income alone has distorted policy.

For example, a number of left-leaning think tanks have argued that government should divert spending from housing benefit (which they think mostly lines landlords’ pockets) to spending on social housing. But such a shift would make “child poverty” go up under the current measure, because instead of giving people income (through benefits) you help them with a lower rent.

Likewise, if government tried to divert funds from the benefits system to creating jobs or rewarding those who move into work, that too would be likely to push up the relative measure of child poverty. Under the current measure, success in increasing employment doesn’t show up much in the target – in fact increasing the employment of non parents pushes child poverty up.

Education spending doesn’t show up in the target, nor do free hours of childcare, though both are important in tackling poverty. Nor does action to tackle the roots of really deep poverty, like addictions, mental health problems or the problems of children with abusive parents or no parents at all.

In effect, the current target says that cash benefits must always take precedence over other priorities. In contrast, the sort of target the government is thinking of moving to makes the inevitable trade-offs between different ways to fight poverty much clearer.

Gordon Brown used to always talk about the number of children that he had “lifted out of poverty”. We now know that the majority of children “lifted out of poverty” were in workless households.

Don’t get me wrong, giving workless households with very little money a bit more in benefits is a good thing. But it’s odd to say that a household has been “lifted out of poverty” if the parents are still not working, still living in bad housing, the kids still getting a worse education than everyone else, and so on.

And the effort to make workless households better off may also have hampered efforts to reduce the number of workless households by getting people working.

As the Institute for Fiscal Studies point out, “benefit and tax credit changes explain more than four times as much of the fall in relative child poverty over [the 1997/8-2008/9] period as changes in work patterns… there are separate questions about whether the trade-offs associated with relying heavily on fiscal redistribution in order to reduce relative child poverty (such as a potential weakening of work incentives for parents) make such a policy undesirable”

This bout of re-thinking isn’t confined to the right, or even the coalition. A series of Labour and centre left figures have argued that the government’s poverty strategy, should be reoriented to have a greater emphasis on helping people work more, rather than increasing benefits.

Ed Miliband says that: “The option of simply increasing tax credits in the way we did before will not be open to us”. John Denham has talked about “Shifting investment from tax credits to affordable child care.” The IPPR think tank has called for a “more strategic approach, focussed on universal childcare and ensuring that families who work are not in poverty. And the Resolution Foundation argues that “There is a clear imperative to rebalance income growth away from state support towards employment income. Repeating the growth of state support that took place in the 2000s seems neither financially sustainable nor necessarily desirable.”

I agree with this shift of emphasis.

A problem with the current income target is that it treated people in poverty like a big monolithic block, without thinking enough about why people are poor.

For some households the answer is more work – either to move into work, or to try and get a job with more hours. On the other hand, work is not going to be the route out of poverty for those who are so disabled they cannot work.

Government needs to break the problem into steps: to make sure that those who can’t work are cared for; that those who can work, work more; and that those who do work hard don’t end up poor.

The current measures don’t really make these distinctions.

Instead we ended up with a rather blunderbuss approach, in which policy has been too heavily weighted towards fighting poverty with cash benefits. We now spend about £22 billion a year on Child Tax Credit and £12 billion on Child Benefit (which reduce work incentives) – compared to £8 billion on working tax credit (which increases the rewards from working).

And as well as earnings, we need to think more about people’s costs. For example, housing consumed about a tenth of people’s incomes at the end of the 1950s, but eats up about a fifth now – and much more for lower earners. Spiralling housing costs are pushing people into poverty. The government measures this, but at present housing costs are not included in the target. Today’s consultation asks whether such costs should be included.

Under Gordon Brown the poverty target became disjointed from the wider poverty strategy. Many other departments were trying to do good things, but because of the nature of the measure, child poverty was often seen as something for the Treasury to fix, because the contributions of other departments didn’t really impact on the numbers.

It would be better to have measures that hold other parts of government to account too. If we fail to build enough houses, and that pushes families into poverty, the housing minister needs to be held to account. If childcare and early education let poor children down, or addicts and the mentally ill are neglected, then that should register in the headline poverty numbers.

When the last Labour government originally set the child poverty target, one wag described it as a “milestone round our neck”. A new and better way of measuring child poverty should have that same quality of holding the government’s feet to the fire, but make sure that all ministers are playing their part.

This article originally appeared on the Daily Telegraph’s website


Neil O'Brien

Neil O'Brien
Director, 2008-2013 Read Full Bio

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