Why poverty is rising, and how this can be prevented


1:52 pm - October 11th 2011

by Don Paskini    


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The shocking findings of IFS research about rising levels of poverty is a prediction about how things will get worse in the future. But it is not inevitable that poverty has to rise over the next decade.

The IFS found that rising poverty is a direct result of policy changes which are planned by the Conservatives and Liberal Democrats. There is an alternative, which is fully costed and which draws only on policies supported by these parties, which would mean that government policies do not lead to any rise in levels of poverty.

Here it is.

Firstly, let’s look at how the IFS estimates that government policies are causing poverty:

• The coalition government’s reforms act to increase poverty slightly in 2012. Those reforms increase relative child poverty by about 100,000, absolute child poverty by about 200,000, and absolute poverty among working-age adults without dependent children by about 100,000 (before housing costs).

• In 2013, our projections suggest that coalition reforms increase both relative and absolute poverty by about 300,000 children and 100,000 working-age adults without dependent children (before housing costs). The reforms explain virtually all of the predicted rise in absolute poverty between 2012 and 2013.

• Beyond 2013, reforms introduced by the coalition have a slightly smaller overall effect on relative child poverty, though we estimate there will be 200,000 more children in relative poverty in 2014, 2015 and 2020 than there would have been without the government’s reforms. This is because the introduction of Universal Credit, which significantly reduces relative poverty, is offset by the continued CPI-uprating of benefits.

The coalition government’s reforms to Local Housing Allowance are a significant component of the effect of the current government’s reforms on poverty in 2015 – without these changes, relative and absolute child poverty would be at the same level as they would have been without any of the government’s changes, and these reforms account for at least half of the effect of the current government’s policies on relative and absolute poverty among those of working age without children.

* * * * * *

There is no need for the government consciously and deliberately to increase the number of people living in poverty. They could adopt the “first, do no harm” principle, and scrap their poverty-increasing policies on uprating of benefits, Local Housing Allowance, time-limiting of Disability Living Allowance and so on.

Reversing these policy changes would cost around £13bn/year by 2014/15. As an alternative, the government could raise this revenue by introducing reforms to capital gains tax (£1.9bn), a tax on properties worth over £2 million (£1.7bn), restricting pension tax breaks for higher earners (£5.5bn), and reducing tax avoidance (£3.9bn). This package of measures would raise £13bn/year.

This fully costed alternative, which would cut the number of people living in poverty by hundreds of thousands, is drawn from a document called “the Liberal Democrat election manifesto 2010″.

There is a danger that the kind of research which the IFS has published creates a sense of helplessness, that nothing can be done to stop things getting worse for many years to come.

So it is worth being absolutely and totally clear that increases in poverty are a result of decisions made by politicians, and that even within the very restrictive limits of “policies which these politicians have supported during the past eighteen months”, there is an alternative which would prevent these increases in poverty.

Reversing the decisions to increase poverty, and instead asking those with the broadest shoulders to contribute a little more, is not a panacea and won’t solve all the problems which the IFS report shows that the UK faces. But the principle of “first, do not harm” is an important first step, and one which current government policies fail.

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About the author
Don Paskini is deputy-editor of LC. He also blogs at donpaskini. He is on twitter as @donpaskini
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Story Filed Under: Blog ,Economy ,Housing

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Reader comments


“The Liberal Democrat election manifesto 2010″ is a document that Don Paskini campaigned against in 2010, but is now campaigning for in 2011. It is a document that only 23% of voters backed, meaning there isn’t a mandate to enact the manifesto in full.

If you want the Lib Dem manifesto to have stronger mandate in the future, you need to vote to make it so.

2. Leon Wolfson

Gee, it’s almost like people have been saying this SINCE THIS SOCIAL CLEANSING WAS PROPOSED.

What did you do about it then? It’s in place now. You’re a year late and trying to score political points by bringing it up now.

““It is a document that only 23% of voters backed, meaning there isn’t a mandate to enact the manifesto in full.”

Whereas there is a mandate to increase the number of people living in poverty by hundreds of thousands, despite both Tories and Lib Dems having signed up to ending child poverty by 2020?

No one is asking for the full implementation of the manifesto, just the bit where millionaires pay a bit more so that people aren’t driven into debt and destitution by savage cuts.

@ 2:

“Social cleansing”?

“What did you do about it then? It’s in place now. You’re a year late and trying to score political points by bringing it up now.”

Leon, I’ve been writing about this for years (and been an equal opps critic of Labour as well as the Tories and Lib Dems). Here’s a few examples from last year:

http://liberalconspiracy.org/2010/06/23/new-government-housing-policy-make-people-homeless/

http://liberalconspiracy.org/2010/05/20/lessons-on-reducing-poverty/

http://liberalconspiracy.org/2010/03/25/how-these-housing-benefit-reforms-hurt-poor-families/

6. Leon Wolfson

@4 – Yes. That is what is amounts to.

@3 – No, let’s be clear what the LHA changes will cause – People turning utilities off. People not being able to afford basic foods. People having to relocate to ever-cheaper (in an absolute sense, not a relative one) housing. Most of the country’s rented accommodation becoming unaffordable for poorer people, including basically ALL of London and so on, shifting voting demographics sharply in the Torys favour…

7. Leon Wolfson

@5 – Yes, so why again now? These are not new figures. Indeed, they’re less than other figures I’ve seen.

And you’re stuck on funding a reverse. Why not come up with other ways to achieve the same goal? i.e. Rent boards with rent caps, and a tax on unoccupied houses and unused brownfield sites.

…reducing tax avoidance (£3.9bn)…

I love the spurious precision of this figure, combined with the marvellous vagueness of what is proposed and why it would work.

Can someone explain how the Coalition’s policy of capping benefits at 100% of median wage increases poverty (defined as receiving < 2/3rds median)?

Just askin…

“Yes, so why again now?”

Because the IFS published a report today, which sets out which policy changes will lead to increasing levels of poverty, which also showed that some claims made by government about the impact on child poverty were inaccurate.

“Why not come up with other ways to achieve the same goal? i.e. Rent boards with rent caps, and a tax on unoccupied houses and unused brownfield sites.”

I think it’s worth noting that even within the narrow confines of “policies supported by MPs in the current government”, there are fully costed alternatives which don’t increase poverty.

I agree that there are other interesting alternatives worth looking at, and that reversing the cuts is not the only way of addressing the problems. It’s about changing the debate from “poverty is rising because of the economic situation, and there’s nothing much that politicians can do about this” to “poverty is rising because of particular policy changes made by politicians, so what should they do instead”.

@ 6:

“Yes. That is what is amounts to.”

And how, exactly, does it amount to that?

A rough translation of the whole is: “we could maintain spending if we just raised taxes”.

Well, yes, sure, you could. Not exactly enlightening though is it?

“I love the spurious precision of this figure, combined with the marvellous vagueness of what is proposed and why it would work.”

I confess that I changed this figure – the Lib Dems estimated that they could raise £4.6bn, so I’m sure Nick Clegg and Vince Cable would be able to figure out a way to raise £3.9bn…

“Can someone explain how the Coalition’s policy of capping benefits at 100% of median wage increases poverty (defined as receiving < 2/3rds median)?"

The Coalition's policy of capping benefits affects a small number of large families in high housing cost areas. The main driver of poverty from housing benefit changes is setting Local Housing Allowance so it covers the bottom 30% of properties in an area rather than the bottom half.

14. Leon Wolfson

@11 – Oh, so forcing massive amounts of people to move away from their communities is acceptable?

@9 – Different policy. THAT one encourages breaking up families and increasing institutional care.

15. Leon Wolfson

It’s not even 30%. As you noted in a previous article, they have already excluded many of the highest value properties from the calculation. And it’s now linked to CPI, which explicitly EXCLUDES housing costs.

Given rents have been increasing above RPI, and the previous linkage was with actual housing costs, the actual 25% or so allowed is going to fall. Rapidly.

“It’s not even 30%. As you noted in a previous article, they have already excluded many of the highest value properties from the calculation. And it’s now linked to CPI, which explicitly EXCLUDES housing costs.

Given rents have been increasing above RPI, and the previous linkage was with actual housing costs, the actual 25% or so allowed is going to fall. Rapidly.”

Indeed. Local Housing Allowance also covers Broad Market Rental areas, which means that there will be whole towns where none of the properties are covered by LHA, and people will be sent to the areas with the poorest transport links, furthest away from the jobs.

17. Leon Wolfson

So we agree. But, well, sorry but I don’t see how another confirmation is news-worthy on a blog. The people who need to be covering this are the mainstream media, and they don’t /care/. We *tried* when this was announced.

@ 14:

“Oh, so forcing massive amounts of people to move away from their communities is acceptable?”

That’s unlikely to be the case. The housing benefit cap is, after all, still pretty high — higher than most people earn in a year — and landlords are unlikely to evict people unless they’re reasonably confident that they can find a new tennant within a relatively short period of time. This would only be the case for a large number of landlords if there were an equally large number of people who wanted to move in and who were prepared to pay over £30,000 p/a for the privilege. If this is the case, then (a) why haven’t we seen any evidence for the existence of a large number of such people, and (b) why is it right that the State effectively prices them out of the areas in which they want to live?

19. Leon Wolfson

@18 – You’re wilfully ignoring what’s happening. You’re focusing on one minor element, the family cap, rather than the massive across-the-board slash in the value of housing benefit, and it’s unlinking from real rents!

Selective reading on your part.

@18

“The housing benefit cap is, after all, still pretty high — higher than most people earn in a year”

A cap of the 30th percentile of local housing is certainly not ‘higher than most people earn in a year”. Don’t be profoundly absurd, if you can help it.

…and even if your rent is low enough to be entirely covered by LHA, you’ll still only get a percentage of the cost given to you. You’ll probably still have to contribute out of other benefits you may recieve, which are also being cut.

22. Leon Wolfson
23. Paul Newman

The communities people are being forced to move away from are communities the people paying for their leisure cannot afford to move into
and as such have already been socially cleansed . Of course ,not being able to afford as nice a house as I would like is a phenomenon which many will be surprised is virtually the same as genocide.
Does anyone imagine that these changes would really net the revenue to the exchequer those scamps the Lib Dems are pretending or …ooo could it just be some old cock they came up with to garnish their cake and eat it politics. Tough one eh. Close loop holes ..gasp why did we not think of that before ..

24. Paul Newman

Hey Don what about the contribution to the housing shortage your open door immigration policies have made ? Care to comment …

25. Leon Wolfson

@23 – Really? You’re saying that working people who make the maximum housing benefit in under two days, even in London, on the minimum wage, can’t afford to live somewhere?

Being able to live in an much of the country PERIOD is what’s at stake. It’s not just large houses which will become affordable, it’s EVERYWHERE. The shared house rate has been disproportionally hit even, thanks to the large quantities of shared housing which us unfit for human habitation, but is still counted.

(And if you live in a smaller house, you get the smaller rate. That was NEVER allowed. But no, more propaganda from a social darwinist!)

“Close loop holes ..gasp why did we not think of that before”

For starters, you didn’t. Your buddies have also shifted people AWAY from working on collecting the tax due, and fired other people working on it. You’re quite HAPPY with punishing the poor, as you’re making quite plain.

Never mind the OTHER suggestions which wouldn’t cost the government a penny either.

26. Leon Wolfson

@24 – The trends say you’re…spouting MORE social darwinistic far-right propaganda. The gap is largely because Thatcher DECIMATED the social housing stock.

But please go ahead and defend that. Oh, and the little genius of raising even council house rents unaffordably above housing benefits within a few years. So if you lose your job for ANY reason, you’re out!

27. Paul Newman

@23 – Really? You’re saying that working people who make the maximum housing benefit in under two days, even in London, on the minimum wage, can’t afford to live somewhere?

OK Leon, explain to me, and I am genuinely curious, why I live on an Estate, which is quite pricey, but not as pricey as various Council houses on the adjoining estate would be, occupied by people who do not work? Why precisely am I about to go to work when they are not and why is it that I spend a portion of my day buying them a standard of living I cannot afford despite endless sacrifice and endeavour.
Explain how that reality, plus their crappy anti social habits and scum bag children fits your picture of heartless fob watch twirling “business men” and Victorian waifs. They seem to have plenty of money for trainers scooters , cars , flat screen TVs and sun tans.

That is what I see .

“That is what I see .”

But do you know for sure that your perception is based on facts?

There are plenty of families like you describe near me, with children running around with the latest trainers, flat screens etc. If you go and talk to them it turns out the father is never around because he is working 60 hour weeks as a security guard so his kids can have the best stuff.

The DWP now have benefits checkers so there is no excuse for innacuuracy over the actual levels of benefit people get. here is a challenge for you – go on the DWP website and enter all your details in a benefit checker – pretending you have lost your job (you’ll also need to visit your local authority to find out what LHA in your area is). Report back and tell us what you would be entitled to, and whether you think you could live on it.

Don

The main driver of poverty from housing benefit changes is setting Local Housing Allowance so it covers the bottom 30% of properties in an area rather than the bottom half.

There are 5.8 million people claiming housing benefit. One would expect that most of them are already living in council/social/affordable housing.

Is it so outrageous to expect someone claiming effectively free housing to confine himself to the cheaper end of the private rental market?

Who is expected to live in the cheapest 30% of housing, if not benefits claimants?

….. out of curiosity I just used the DWP calculator to see what housing benefit my family would get if we claimed.

The resulting figure was >£400 per month MORE than I pay for my mortgage currently.

Which goes some way to explaining perhaps why many middle-class home owners think it’s high time the housing benefits racket was reformed.

The opening of the piece doesn’t quite reflect all that the IFS has said, because they are explicitly not saying “rising child poverty” = “blame the Coalition”. In fact, what they’ve said is “IFS projections also show that even without the change in government, it is likely that child poverty would have increased to 2020″ (http://www.libdemvoice.org/the-independent-view-lib-dems-need-to-champion-new-ideas-for-tackling-child-poverty-25563.html)

Aaarh, sorry posted that before editing to correct an error. The quote is about what the IFS has said but is from someone at the IPPR; sorry about that.

33. Leon Wolfson

@27 – No, you’ve invented that wholesale to try and justify your nonsense. And yes, I can also see. That you’re a far right xenophobe who is quick to label anyone you don’t approve of as inferior. Thanks for that.

@30 – Really? Care to post your BRMA and how many adults and children are in your household? Because you’ve probably done it wrong. You’re NOT entitled to, for starters, as many bedrooms as your house has.

And no, most of the claimants of housing benefit are NOT living in affordable housing, which is generally SOLD, or in council housing. They live in private properties and have to pay full rates, which is precisely why millions are being driven out of their homes by the ConDems.

“They seem to have plenty of money for trainers scooters , cars , flat screen TVs and sun tans.”

Yet you don’t know how they got these things, whether they chose to go on finance, how much the things they bought actually cost, whether they’re second hand or not.

Also I *hate* people saying that having a flat screen TV is some kind of indicator of having too much money. Can you even buy a non-flat screen TV these days? Do you not understand how cheap a flat screen TV can be?

It’s a nasty place, Paul, when what you desire is for people that are in their situation to not only be in relative poverty, but also absolute poverty, and to deprive them of anything that keeps them in step with the rest of society out of some selfish and vindictive spite.

35. Chaise Guevara

@ 34

…Not to mention that the whole statement seems to be based on “My impressions of a small group of people who I assumed to be claiming benefits”.

(Someone really ought to send out a memo pointing out that sun tans can, in fact, be gained for free.)

30
I would imagine that most middle-class home owners are aware that, as time goes by, costs increase, consequently those who purchased their homes in the 1990s and took a 25 year mortgage, which is probably tiny compared to those who purchased in the mid 2000.
Not only that, as the social housing stock decreases private rental increases due to demand, time for a look at a rental ceiling which, of course, would be followed by reduced housing benefit claims.

“time for a look at a rental ceiling which,”

Err, why not just reduce the cost of building a house?

The largest part of the price of a house at present is the planning permission allowing you to build a house. So, why not issue more planning permissions and reduce this part of the cost?

The actual production cost of a nice 3 bed house, including the land it sits on, is around £120,000 in the south of England. All of the rest of the price is the scarcity value of the planning permission.

So, get the government to say that local authorities have to issue lots more planning permissions, the price of houses comes down and so do rents. What’s wrong with this picture?

Ooops, silly me. That *is* what the government is doing and everyone’s shouting at them because they’re doing it, aren’t they?

37
Not a bad idea, we might also build more social housing on the freed-up land.

Leon Wolfson is displaying a peculiar lack of understanding, as well as mendacious demonology.
“The gap is largely because Thatcher DECIMATED the social housing stock.”
The rise in rents in the last few years above the level in the late -90s can have nothing to do with existing tenants buying their homes in the 1980s which did *nothing*, repeat *nothing* to alter the demand/supply balance in housing. It is a result of the failure to build enough houses in the last decade to match the increased demand (including that from hundreds of thousands of East Europeans coming over here to do jobs while British workers moved onto incapacity benefit) and the reduction in the amount of social housing under the party (what was its name again?) ruling between 1997 and 2010.
Changing the rules on Council Tax on second homes might ease the shortage of houses to rent in Cornwall but the main cause is the poor housebuilding record in the past dozen years, with net immigration a secondary factor.


Reactions: Twitter, blogs
  1. Mark

    Don't believe Tory line that recession causing the big rise in child poverty. IFS say its slashing of housing benefits http://t.co/wOieQNq3

  2. anne maclachlan

    Don't believe Tory line that recession causing the big rise in child poverty. IFS say its slashing of housing benefits http://t.co/wOieQNq3

  3. TheCreativeCrip

    Don't believe Tory line that recession causing the big rise in child poverty. IFS say its slashing of housing benefits http://t.co/wOieQNq3

  4. Teresa Sharp

    Don't believe Tory line that recession causing the big rise in child poverty. IFS say its slashing of housing benefits http://t.co/wOieQNq3

  5. Catherine Brunton

    Don't believe Tory line that recession causing the big rise in child poverty. IFS say its slashing of housing benefits http://t.co/wOieQNq3

  6. Alex Preston

    Don't believe Tory line that recession causing the big rise in child poverty. IFS say its slashing of housing benefits http://t.co/wOieQNq3

  7. Chris Gravell

    Don't believe Tory line that recession causing the big rise in child poverty. IFS say its slashing of housing benefits http://t.co/wOieQNq3

  8. Stuart White

    Rising poverty is a political choice not an inevitability – excellent points from @donpaskini http://t.co/ILaVoM5X via @libcon

  9. Amanda Wilkinson

    Don't believe Tory line that recession causing the big rise in child poverty. IFS say its slashing of housing benefits http://t.co/wOieQNq3

  10. Shalim

    Don't believe Tory line that recession causing the big rise in child poverty. IFS say its slashing of housing benefits http://t.co/wOieQNq3

  11. James Grant

    Why poverty is rising, and how this can be prevented | Liberal Conspiracy http://t.co/LxESk5oa via @libcon

  12. Abigail Scott Paul

    Why poverty is rising, and how this can be prevented | Liberal Conspiracy http://t.co/LxESk5oa via @libcon

  13. David Davies

    Why poverty is rising, and how this can be prevented ~ http://t.co/7Ddq34bH

  14. Jane

    Don't believe Tory line that recession causing the big rise in child poverty. IFS say its slashing of housing benefits http://t.co/wOieQNq3

  15. John Edginton

    Don't believe Tory line that recession causing the big rise in child poverty. IFS say its slashing of housing benefits http://t.co/wOieQNq3

  16. Pink Politika

    RT – Why poverty is rising & how this can be prevented |LiberalConspiracy http://t.co/NeNShyq6 >Cut no. ppl in poverty: 'First, DO NO HARM'

  17. Spir.Sotiropoulou

    Why poverty is rising, and how this can be prevented | Liberal Conspiracy http://t.co/aTnTECxt via @libcon

  18. Adrian Thompson

    Why poverty is rising, and how this can be prevented | Liberal … http://t.co/6jaDDcbB





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