4 December 2019

Tinkering at the margins is no way to help Britain’s poorest people

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It was impossible to not be moved while watching Channel 4’s Dispatches documentary on Monday evening. The show highlighted the plight of families living in poverty in different parts of the UK. It certainly wasn’t an easy watch and contained a few shocking moments, including a pale young boy saying: ‘We try not to eat a lot in one day, even though most of us are really hungry, we have to be careful with our food’.

It was also, in a way, refreshing. The way in which working class people are usually represented in the media is completely different. TV shows tend to focus on some colourful characters who have never worked and are happy to spend their days lounging around, spending their benefit money on booze and fags. The popularity of such ‘poverty porn’ shows casts working class people as lazy, feckless, and sometimes criminal. This is the image of working class people in the minds of many people around the country, and plays a part in the debate over welfare reform.

As someone who grew up on a council estate in the North of England, I can confirm that there certainly are some people like that. However, what the documentary showed was that most working class people are hard working and are doing their best to provide for themselves and their families.

Although all the major parties claim to want to tackle poverty, their manifestos have few policies which would.

Labour’s commitment to scrapping the benefits cap, the two-child limit, and the five week wait to receive benefits will make some difference, as will its pledge to ensure there are telephone and in-person services so that vulnerable people can access welfare. What’s mystifying for a supposedly progressive party is how much public money they are willing to throw at policies that primarily help the middle classes, such as free tuition fees, lower rail fares and free broadband. The party may have promised to put £6,700 in everyone’s pocket, but the figures they base that claim on fall apart under even cursory inspection.

As for the Tories, it is encouraging that they are raising the threshold for national insurance so that the lowest earners will be able to keep more of their own money, but there’s not much else on offer in what is a supremely cautious set of policies.

The Lib Dems have, according to the IFS, the most redistributive policies, but again nothing to really tackle poverty. Part of the problem is how poor people are portrayed in the media as discussed earlier. As they have been so demonised as workshy scroungers, no party will want to risk suggesting real and workable solutions.

Both the Tories and Labour have also promised to raise the minimum wage. Although it’s obviously important to ensure that work always pays, such a policy is fraught with danger as it risks both lower employment and higher prices.

So, what should be done? First, the next government should be bold: that means scrapping universal credit and replacing it with a universal basic income. Under the current system where people have to wait weeks to receive benefits and are at risk of having their payments stopped, it is far too easy for people to fall into poverty. A guaranteed income – no questions asked – for every citizen would remove this problem.

It would also ensure that people would be better off in work. At the moment, people on benefits who would like to work or take on more hours, risk ending up worse off because of the withdrawal of benefits. A guaranteed income would eliminate this problem. Nor would it be gifting money to the already well off, as UBI payments to the rich could be clawed back in full through the tax system.

A further benefit would be that it would help people to move to higher paying jobs or to retrain. Under the current system, changing jobs or leaving work in order to retrain brings considerable risks. A universal basic income would ensure that a person won’t fall into poverty while they look for a new job or acquire the new skills which will eventually increase their salary.

This would undoubtedly be a hard sell to the electorate – the idea of ‘free money’ without obligations does not sit well with a lot of voters. However, it would be a way to ensure that people do not fall through the cracks of the welfare system, ensure that people are always better off in work and also shrink the size of the state by reducing the amount of administration and counter-productive complexity in the welfare system.

We also need to look at our education system, given that academic achievement remains one of the main determinants of a child’s future earnings. Bringing back grammar schools has long been a preoccupation of some Conservatives. However, as I’ve written on this site before, this would be a mistake. A much better option would be to introduce education vouchers. That would give children from poorer backgrounds the opportunity to access private schools while also ensuring that competition is introduced in the education system, raising standards across the board.

These are bold reforms which would require innovation and bravery on the part of the next government and would probably take several years to implement. However, there are numerous other policies which could be introduced fairly quickly.

Take housing. If the government simply scrapped stamp duty and relaxed the rules about what can be built where (while maintaining safety standards), then developers would be able to build the homes the country needs. Given that housing costs are generally the biggest expenditure faced by households, this would make a huge difference to the poorest people in the country – and reduce the housing benefit bill over the long term.

Then there is the tax system. Taxes which take money out of their paypackets of low earners makes it harder for workers to escape poverty. There are also taxes on holidays, alcohol, cigarettes, and also on some everyday items. These all increase the cost of living and exacerbate poverty. The next government should merge national insurance contributions with income tax into a single tax on income. It should also lower the rate of some duties that disproportionately hurt the poorest people.

The Dispatches documentary has rightly highlighted the plight of the poorest people in the UK. Rather than simply tinkering with welfare or promising free services to the better off, the next government needs to be genuinely radical. It should introduce a universal basic income and education vouchers while reforming the planning and tax systems – that’s the way to truly tackle poverty.

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Ben Ramanauskas is a research economist at Oxford University