UK Leaders Clash Over How to Define Who's Poor, by Michael White     Print

UK Leaders Clash Over How to Define Who's Poor

By Michael White, London

UK Opposition Labour leader, Jeremy Corbyn, recently took time out from Brexit to challenge Prime Minister Theresa May over official data’s confirmation that UK poverty levels are rising—despite her government’s promise to prioritise the concerns of the struggling poor in Rust Belt regions and throughout the UK. The Joseph Roundtree Foundation reported increases in poverty in the last five years, including increases of 15 percent among both working parents and children.

Poverty

May’s reply was familiar: a strong economy and access to jobs are the best way out of poverty. And it is true that uncertainty over the terms of Brexit has not prevented record levels of employment (76.1 percent), with jobless totals down to 3.9 percent (the lowest since 1975) in Q1 2019, as well as a modest hike in the national minimum wage (from £7.83 per hour to £8.21 on April 1).

But May’s upbeat selection hides a more disturbing picture. Although long-stagnant wages are finally rising again in Britain (by 3 percent last winter, slightly ahead of inflation), real-terms pay for the lowest income groups will be the same in 2023–24 as it was 20 years earlier—before the Great Recession when Tony Blair and Gordon Brown committed the then-Labour government to eradicate child poverty by 2020.

By 2015, a simmering controversy within the governing Conservative party’s ranks resulted in a re-ordering of the way UK poverty is measured. Replacing Labour’s threshold of relative poverty—those living on less than 60 percent of median household income of around £25,000 a year—Iain Duncan Smith (IDS), the work and pensions secretary, shifted the focus from cash to what he deemed to be behavioural causes of poverty: poor education, family breakdown, joblessness, and drug or alcohol dependency.

Most analysts agree that disposable income, not circumstance, is the chief determinant of poverty. After all, an increasing number of poor families are in work, contending against fast-rising costs, notably rents which account for up to 49 percent of gross income in London. But many assert that the number of children in poor families is again rising and that IDS’s focus sidestepped the impact of nine years of austerity in public spending intended to pay down the budget deficit and debt arising from the 2008–09 bank bail-outs. Another criticism is that the recession curbed top incomes and appeared to create “less” inequality, while a state pension hike had the opposite effect. Was IDS trying to hide awkward facts on his watch? Both sides share a declared goal: to better understand poverty and how to ease it.

Although not the sole driver of diminished income, a range of benefit cuts and caps had cut the income of already poor families by £1,500 a year, according to the non-partisan Resolution Foundation, and shrunk the public services—schools, hospitals, buses, youth clubs—on which they disproportionately depend. Some see the surge in teenage knife crime, often drug gang-related, as a collateral result. Though ministers promised to share the pain (“we’re all in this together”), 70 percent of the squeeze came in cuts, while only 30 percent came in the form of increased taxes and user charges.

More hardship was inadvertently caused by IDS’s ambitious plans to replace myriad personal and housing benefits with a simpler, more flexible “Universal Credit” (UC) system, a negative-tax-and-benefit mechanism that would “make work pay” by avoiding dramatic benefit loss among those exceeding the 16-hours a week cap. Badly designed and managed, UC pilot programs left some claimants dependent for weeks on food banks. For the disabled poor, parallel “reforms” were also painful.

Using data from the UK Treasury’s Office of Budget Responsibility (OBR) the Resolution Foundation predicted that child poverty—estimated at around 30 percent or 4 million children in 2016–17—would soon pass the 1990s peak of 34 percent. As usual there are rival figures, some of which suggest that UK poverty overall is around the EU average of 17 percent—though few believe Brexit will do anything other than make matters worse for the poor, at least in the short term. If so, Britain’s comprehensive National Health Service (NHS) and private welfare, which come to an efficient 9.7 percent of GDP (the US figure is 17 percent), will face further pressure for years.

The broader point is that political choices that lead to dramatically widening inequality of wealth and income have political consequences, not the least of which was the disaffected “left behind” vote, which contributed to the 52:48 percent majority for Brexit in June 2016. So, last September, the Social Metrics Commission (SMC), an independently-funded, non-political group of specialists devised a new model for measuring poverty in Britain.

It did so by building basic costs like housing and child care into its calculations, along with measures of the depth and severity of deprivation, as well as poverty’s persistence and any wider family networks which may mitigate life for those on either side of the poverty line. The SMC found that marginally more British people are poor than previously thought (14.4 million, including 4.5 million children [or, 33 percent of the total]), while half a million fewer old people are. Apparently, efforts by Gordon Brown, Labour’s Treasury chief for a decade (1997-2007), via a pensioner tax credit had made a difference to poverty in old age.

The SMC had set its definition of relative poverty at 55 percent of a three year median of total household resources—a broader definition than the 60 percent of median household income formula.

All students of poverty are confronted with apparent paradoxes. The decline—from 13.9 percent to 12.2 percent—in national income taken by the top 1 percent (26.4 percent to 24.4 percent among the top 5 percent), according to UK tax officials, is little consolation to the poor. Society’s top quartile still makes more than the other 75 percent combined. What’s more, so the SMC report confirmed, the changing nature of work—low and insecure pay and casual “zero hours” contracts for the unskilled or over-qualified graduates with student loans to pay off—means that having a job is no longer a guaranteed way of avoiding the poverty trap.

If it sounds familiar to American ears, it should. So often, contemporary Britain metaphorically sits in the mid-Atlantic, halfway between the highly deregulated US labour market and the more interventionist and protected traditions of European states accustomed to Social Democratic or (slightly less so) Christian Democratic welfare models. Pensions, family, and unemployment benefits are generally higher in much of the EU, but so is unemployment, eye-wateringly so among those under twenty-five. In countries like France the unemployment rate for this group is 21 percent (almost double the UK’s rate) and in Italy it peaked at 42 percent in 2014. Under Rome’s left-right populist coalition (think: Trump in office with Bernie Sanders), Italy has slipped back into recession. France’s President Macron struggles against “gilets jaunes,” a protest to remove costly rigidities. Germany may also slip toward recession.

Britain’s high employment levels are generally attributed to a flexible labour market, more open to the legendary “Polish plumber,” cheaper and less bureaucratic than France where state jobless benefits at up to €6,100 per month can be paid for three years. But fear of immigration stoked Brexit votes (“they’re stealing our jobs and driving down wages”), especially in non-migrant regions. Island dwellers don’t need a wall, but UK ministers have grappled ineffectually for 30 years to manage net inward migration in a humane way that balances access to public services and benefits with market efficiency and affordability. “Should the Polish plumber – or banker – be able to claim child benefits for his kids in Warsaw?’’ is a question that fuelled public resentment. Since the Brexit vote, net annual EU migration has dropped sharply to around 75,000, but those arriving from beyond the EU topped 280,000 in 2018.

Here was the perfect hurricane: resilient migration, an ageing population, spending squeezes and an uncertain economic future accentuated by Brexit’s protest vote against them all. Wider societal changes heightened the stress. As elsewhere, rising property prices pushed young people and families into costly and precarious rental markets. As with student debt—around £40,000 for fees and maintenance for a three year degree—the contrast between the “Haves” and “Have Nots” was obvious. As with France’s “gilets jaunes,” the friction was partly rural-small-town versus city and partly inter-generational, though the poverty gap within elderly cohorts is as great as among children and the young. As a result, some middle-aged families must support both their parents and their adult children.

Given all of the above, little wonder why the radical “Bernie Sanders politics” of Labour’s Mr. Corbyn have struck an emotional chord with many voters. Though Brits already enjoy much of the welfare to which Vermont’s senior senator aspires, those who feel insecure in their job, home, and health care are bound to be fearful for their children’s uncertain future.

Michael White is a former political editor and Washington correspondent of the London-based Guardian newspaper. He currently writes for the anti-Brexit weekly, The New European.